Dim outlook hounds car industry in 2nd sem

Published August 5, 2018, 12:00 AM

by manilabulletin_admin

By Bernie Cahiles-Magkilat

The domestic motor vehicle industry is currently reviewing its second semester sales growth target as initial numbers show a discouraging demand outlook for the rest of the year given the upward movement in interest rate, weak peso and higher prices, a top ranking official said.

Dante Santos, president of Truck Manufacturers Association (TMA), told reporters that the executive committee of the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) and the Truck Manufacturers Association (TMA) has “not been happy” with the initial figures that will be the basis whether or not they will have to announce a new sales growth target for the second semester this year.

According to Santos, senior members of CAMPI-TMA board have asked for a review of the preliminary figures before they can come up with a decision. Given the market uncertainty in the first half of the year, CAMPI-TMA had set a flat or a little bit higher growth in sales this year.

As of the first semester this year, sales slumped by an ominous 12.5 percent to 171,362 units as against 195,772 units in the first half of 2017.

“It is time for review,” Santos said. The group always conducts a mid-year assessment of target. This time, however, the industry is not confident of an upward adjustment as the horizon in the second semester remains dim.

Santos, who is also first vice-president of the country’s second largest car company Mitsubishi Motors Philippines Corp. (MMPC), said the industry is also reviewing their pricing scheme for all their brands as interest rate is starting to move up and peso has remained weak.

“We’re trying to observe (financial environment) because we felt the interest rates are starting to move and if there is movement the market will adjust,” he said.

In addition, the industry, which is more than 60 percent reliant of CBU imports, is taking a hit from the foreign currency fluctuation.

Santos noted that there has been no let up in the peso depreciation, now hitting more than P53 to the US dollar.

“Our assumption is it should not hit P54,” he added.

What is working favorably though is that the structure of the economy is strong and stable.

“But if you have to analyze deeply, you will realize that not all are moving at par. Some are stable, some are just waiting for the right move to go up,” Santos noted.
These are cost pressures to raise prices, he pointed out.

The elements of pricing are foreign exchange, interest rate and other peripheral cost that even if the transfer price of CBU imports are stable, there are local matters that affect pricing.

Santos stressed that any adjustment in the second semester would stem from the fact that the parameters in the first semester may no longer be applicable in the second semester although the last quarter of the year is also historically posting the highest sales in any quarter.

He likewise said they are not comfortable with a slowdown because this will affect their investments and employment.

In the case of MMPC, this would be the first time this year that they will hike prices if ever their review will show the need to raise prices.

Santos, however, said they are trying to protect the price of Mirage, a locally produced model under the Comprehensive Automotive Resurgence Strategy program.

For Mirage, MMPC is committed to produce 33,000 units a year over the next six years to reach 200,000 unit volume of production. At present, Mirage has a 28.5 percent local content, which it expects to hit 50 percent to comply with its CARS commitment.

“Mirage is in the most affordable segment of the market so we’re trying to protect that people’s price,” said Santos.