FOR SURE, there was quite a bit of rejoicing (as well as a sigh of relief) over the three consecutive months of growth registered by the auto industry following that infamous April when member companies of the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) and Truck Manufacturers Association (TMA) sold a combined 133 units — an all-time low.
Although the figures were nowhere near the pre-pandemic vigor of the industry, the May, June and July totals of 4,788, 15,578 and 20,542, respectively, had been a breath of fresh air for an industry reeling on account of the quarantine lockdown necessitated by the pandemic. Last year, the two organizations jointly accounted for sales of almost 370,000 units. This year, the “recalibrated” target is down to 240,000.
But now, even that modest figure may be in jeopardy as the momentum appears to have been stymied by a speed bump. August CAMPI/TMA sales dropped by 12.8% month on month to 17,906 units.
In a release, CAMPI President Atty. Rommel Gutierrez attributed the decrease to lowered business and consumer confidence amid the general economic slowdown. “Spending remains a challenge, especially for big-ticket items such as cars,” he said. “This has resulted in another auto sales decline.”
Toyota Motor Philippines Corp. (TMP) continued to lead total vehicle sales with 8,044 units sold, cornering 44.92% of the market. Still, this figure represents a 8.9% dip month on month, as TMP had sold 8,833 units in July. Compared to the August 2019 sum (13,083), TMP sales last month were down 38.5%. Completing the top five overall in August 2020 (in order) are: Mitsubishi Motors Philippines Corp. (2,621 units [down 16.8%], 14.64% share); Nissan Philippines, Inc. (1,881 units [down 11%], 10.5% share); Suzuki Philippines, Inc. (1,345 units [down 24.4%], 7.51% share); and Ford Motor Company Philippines, Inc. (1,233 units [down 3.5%], 6.89% share).
Year-on-year industry sales slipped by 39.5% from 29,599 units sold in August last year; year-to-date total is 123,489 — a 47.6% drop versus the same period in 2019.
“Economic recovery can be a gauge of the industry’s future performance, but it also depends on the policy environment. Restrictive policies such as safeguard duty will only limit the industry’s capability to navigate the current crisis,” added Atty. Gutierrez.
The auto group’s head is referring to the Department of Trade and Industry’s (DTI) “safeguard investigation on imported automobiles following a petition filed by the Philippine Metalworkers Association (PMA) that pre-dates the COVID-19 pandemic,” yet Atty. Gutierrez expressed confidence that the government agency “will consider the impact of the pandemic on auto industry recovery.” Last year, the PMA asked the DTI to rule on whether “a surge in automotive imports is causing injury to the domestic industry,” according to a BusinessWorld report.
I reached out to the CAMPI head, who expressed hope amid the setback. “Despite the August decline, we are still maintaining the revised target.” He stressed though that the DTI’s “safeguard measure may not be appropriate at this time as this will disrupt our recovery efforts.”
Meanwhile, in a separate interview with “Velocity,” Philippine Automotive Dealers Association (PADA) President Willy Tee Ten said that the sales drop in August was caused in part by the implementation of the two-week modified enhanced community quarantine (MECQ) from Aug. 4 to 18. If you recall, the stricter quarantine level was lobbied by the country’s medical community, already (and is still) reeling from the number of COVID-19 patients.
Mr. Tee Ten, also the head of the Autohub Group which handles more than 30 automotive brands, added that the industry “is scrambling right now,” evidenced in promos and other measures to spur sales.
Nonetheless, easy-payment schemes and all the freebies in the world will not be able to close a sale without, well, car loans. He reiterated something that many other auto executives I have had the chance to talk to over the last months chorused: The role of banks in the industry’s recovery cannot be overstated — especially since up to 80% of car purchases are enabled by financial instruments.
This is understandable as, owing to the economic disruption, banks have become very wary about approving loans in general. Car loans appear to be hit especially hard. From a high 50%-60% pre-pandemic approval rate, it’s now down to only 10%-20%, shared a source. In fact, some banks reportedly aren’t giving out car loans at all.
Another hurdle facing auto dealerships in particular is literally the ground upon which these are built. Not all landowners have been sympathetic to their lessees in terms of expecting the same and regular rent, and the marked decrease in business has left many struggling, said Mr. Tee Ten. The situation is thankfully much better in the provinces, he noted, where rents and salaries are lower — not to mention that competition is much less than in urban areas.
On another front, PADA wants to talk to the government with hopes of offering up its dealership facilities to host the Motor Vehicle Inspection System (MVIS) activities of the Land Transportation Office (LTO) — effectively easing the burden of car owners who have to go through the mandatory testing prior to registration. Opening this process to dealerships will definitely relieve the bottleneck.
All told, Mr. Tee Ten said he would be happy to see 220,000 units in sales for 2020, and he’s crossing his fingers that no more hard lockdowns are forthcoming. Frankly, if that happens, the industry will be hard-pressed to reach even that figure.