The Automotive Industry: Quo Vadis

Published August 30, 2021, 7:00 AM

by Vince Socco

The automotive industry is on a steady path to recovery. In the first seven months of 2021, combined sales of the Chamber of Automotive Manufacturers of the Philippines, Inc (CAMPI) and Association of Vehicle Importers and Distributors (AVID) totalled 162,435 vehicles. This represents a 41.5 percent growth over the same period last year and is quite a significant resurgence. In fact, motor vehicle sales and repairs wascited by the government as one of the drivers that contributed to the 11.8 percent growth in Gross Domestic Product (GDP) in the second quarter.

The recovery of the automotive market augurs very well for the industry. At its peak, the number of Filipinos employedin the motor vehicle industry may very well have exceeded 340,000 – the government count as of 2014. Given the number of jobs lost in 2020, this is very welcome news, indeed.

The top five brands in terms of sales were Toyota, Mitsubishi, Suzuki, Ford and Nissan, in that order. Toyota and Mitsubishi retained the number one and two spots. On the other hand, comparing rankings at the end of 2020 to those from January to July this year,

Suzuki displaced Nissan in third while Ford took over the fourth spot from Hyundai. Five auto makers managed to gain sales shares this year – Toyota, Ford, Suzuki, Kia and Isuzu – on the strength of new model offerings, among others.

Kia reported the most significant growth on a year-to year basis. Sales in the first seven months totalled 2,144 units, an 86 percent bump and already exceeding their sales in the whole of 2020. Ford sales also grew by a significant 75 percent to 11,441 units.

Combined sales of Toyota and Lexus, on the other hand, jumped 67.5 percent to 74,521 units. This resulted to an increase in its market share by 4.6 points. Since the start of the pandemic last year, Toyota has preserved its local production and distribution capacity. This allowed it to fully restore its operations – despite disruptions in automotive supply chains – to meet increasing demand for motor vehicles in the country.

To be sure, the industry had to contend with a number of dampeners to sales. One was the announcement of provisional safeguard duties on imported motor vehicles in January, that took effect in February. The duties ranged from P70,000 to P110,000 per unit and caused transaction prices for motor vehicles to rise by a near-similar amount. Some auto companies started collecting provisional duties to cover the provisional duties. Others increased prices outright.

Another dampener was the imposition of the strictest Enhanced Community Quarantine (ECQ) in late March thru early April. This was followed by another two weeks of Modified ECQ with heightened restrictions. Fortunately, transportationrestraints were not as restrictive, recognizing the essential nature of mobility. Unfortunately, however, this caused consumer confidence to waver in the wake of the significant rise in COVID-19 infections.

In view of these disruptions, the resurgence of the automotive marketis that much more significant.Perhaps, it might have been further along in its recovery by now. As it is, the industry is at around 71 percent of pre-COVID levels but continuing in its upward trajectory.

Earlier in the year, CAMPI projected a 20-25 percent growth in the market with safeguard duties in place. Without the duties, it estimated the market to expand by 30-35 percent to between 310,000 and 325,000. Given the decision of the Department of Trade and Industry (DTI) this August to dismiss the petition for the imposition of definitive safeguard duties, the market could possibly settle at between 300,000 to 310,000 or close to 75 percent of pre-COVID levels in 2019.

The imposition of another two weeks of ECQ in August could pose another drag to the industry. Also, supply chain disruptions brought about by COVID-19 and the global shortage in microchips could weigh negatively on availability of vehicles for sale. And finally, another wave of COVID-19 infections could very well cause extended lockdowns that will impair economic recovery.

On the other hand, there are a number of positive factors that bode well for a strong last quarter. Among others, the ramp up in vaccinations is expected to enable the economy to reopen at a more rapid pace. Overseas Filipino Workers (OFW) remittances are projected to grow, one of the strongest drivers of domestic consumption. In addition, election spending is already starting, thus providing further momentum to consumer spending.As well, the lifting of provisional safeguard duties has resulted to a regularization of car prices. And, of course, the holiday season is just around the corner. All these should lead to a more buoyant automotive market in the remaining months of the year.

The country is raring to resume its economic momentum.Hopefully, the worst of the pandemic is over and the drive to better days ahead will start to pick-up speed.

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