MANILA, Philippines – Perhaps the end of 2009 couldn’t have come sooner as it did – putting behind a year of reeling from Ondoy and the lingering effects of the nefarious sub-prime bubble burst of 2007 – the latter truly a shot heard around the world.
Truth be told, however, signs of recovery were being felt in key markets. There were indications, after all, that the much-lamented global crisis wasn’t all gloom and doom as naysayers wanted us to believe. Pragmatic, if not optimistic economists pointed to heartening numbers. They correctly posited that a country’s population was directly proportional to its relative immunity to recession brought about by the Wall Street crash. That’s possibly what saved the Philippines with its 90 million-plus people from the brunt of the crisis’ ill effects.
Domestic spending, after all, will continue to be robust. We also cannot also discount our huge OFW base that remits major amounts from wherever our compatriots are.
Still, 2009 was widely perceived to be a year where people generally kept their wallets closed – shunning big-ticket expenses for necessities.
Sustained Growth
Or so we thought, for there was a bit of news that caught local industry experts by surprise. Not only did car sales reach its highest monthly figure in a decade (13,596 units sold in December), but 2009 closed out with 132,444 total sales – 6.4 percent higher than 2008’s 124,449. If we go back further, even in 2007 – while auto sales in developed countries such as the US and Japan plunged by double-digit percentage points – ours grew by 17 percent.
Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI) president Elizabeth Lee is not one to complain. In an exclusive interview with The Philippine STAR, she said, “Although December sales are expected to be seasonally higher, the stronger spike in sales is a welcome result. This augurs well for 2010. The strong sales result for the year has indeed exceeded expectations with the industry’s original forecast at the start of 2009 with only a high of four-percent growth and a flat growth as a worst-case scenario.”
Continued Lee, “In 2007, auto sales plunged by double digits in most countries, particularly developed ones like the US, Japan, and other ASEAN nations. Our own Philippine auto industry however, did relatively well with 18 percent growth in 2007, followed by another 5.5 percent growth in 2008, and an additional 6.4 percent growth in 2009.”
Lee, confirmed that “stronger than expected growth in OFW remittances” helped boost sales, coupled with “aggressive financing packages – which fueled consumption resulting in high vehicle sales.”
Other factors, said Lee, included the continued growth in the entrepreneurial trend, aggressive financing packages offered to buyers, and new models available in the market.
All told, “The second half of year more than made up for the slow sales seen in the first half,” Lee continued.
CAMPI figures break down the year-on-year growth. Passenger car (PC) sales in 2009 grew by 4.1 percent to 46,228 vehicles, and commercial vehicle (CV) sales improved by 7.7 percent to 82,216 units. This hefty CV total represents 65 percent of total nationwide vehicle sales.
“The increase in overall sales for the CV segment reflects the Filipino buyer’s preference for dual-purpose vehicles,” said Lee. She pointed specifically to vigorous sales of light commercial vehicles (LCV) which registered double-digit growth of 15.8 percent – with sales of 52,700 units nationwide. LCVs are comprised of popular AUVs, pickup trucks, vans, compact wagons.
A Strong Start In 2010
CAMPI has more good news to report in 2010. “The auto industry starts the year off with high sales of 11,763 units for month of January. That’s 33.8-percent growth compared to the same period last year,” shared Lee. Units sold in January surpassed the monthly average for 2009 (11,073) – basically besting all around figures for the same period last year. PC sales grew 14.3 percent while CV sales jumped 46 percent.
The good start is expected to be sustained. Said Lee, “(We anticipate) increased spending as a result of bullish OFW remittances, projected as high as eight percent or exceeding $18 billion; an increased appetite for investment and business expansion; continued liquidity in the market; ease in taking out loans and availability of loans serving buyers needs.”
She added quickly, “Not to mention this is an election year as well.”
As with other industry observers, Elizabeth Lee inferred that “strong vehicle sales is reflective of a stronger economic environment.”
AUV and light commercial vehicle sales, particularly, are accurate indicators of the growth of an entrepreneurial class. “They are used not just by the family, but businesses as well. Filipinos, therefore, now show more aggressiveness in either starting a business, or expanding their current one,” Lee said.
When asked about the impact of fluctuating gas prices to auto sales, Lee said, “Year 2008 saw record-high oil prices with $145.29 per barrel. But despite high oil prices which were reflected to an extent in the local market, auto sales remained resilient, ending the year 2008 with a growth of 5.5 percent to the whole year.”
But Lee admitted that pump prices, to a certain extent, do affect sales. “Fluctuations in global oil prices results in a multiplier effect which can affect logistics costs, raw materials, and supply. If oil prices fluctuate much and the increases go beyond a certain level of tolerance, vehicle sales will be negatively affected. This was apparent in the US where sales were seriously affected, compounded by the credit freeze/crunch.”
RP Strengths
As for the auto industry as an employer, Lee predicted that jobs are likely to be “sustained especially with a positive outlook for 2010.”
And if the new Motor Vehicle Development Program can entice increased investments in CKD (complete knock down) assembly in the country, this will not only sustain but create new job opportunities for auto workers.
Compared to other Asian countries, Lee insisted that the Philippines is still an attractive host for car manufacturers. “We have our strengths,” she began. “The future growth in the size of our domestic market is potentially strong in terms of market size and purchasing power.
“In relation to our neighbors and in relation to the world, the Philippines is the 12th largest country in terms of population, with over 90 million people. Using the Human Development Report data on GDP per capita in purchasing power parity of over $5,000 and multiplying that figure by 90 million people you get $465 billion as the size of the Philippine economy – the 23rd largest in the world. Goldman Sachs predicted the Philippine economy will be one of the 20 largest countries of the world by 2050.”
Lee also identified heavy investments in infrastructure as a key pillar to the country’s accelerated growth. “The multiplier effect of one factor alone, the RORO (roll on, roll off), is significant – and that spells growth. This will have an effect on average wages and salaries. From there, it becomes simple mathematics since people with newfound purchasing power will certainly buy cars. And with the low car to people ratio in the Philippines, the potential is indeed great.”
The CAMPI president also listed other advantages: our highly skilled, adaptable, and English-speaking workforce, a capable parts and components industry that is able to produce parts up to global standards, and our position in the ASEAN region vis-à-vis balance of trade issues.
CV As Strong Growth Area
Testaments to the bright prospects for our country are the different brands that have been making forays into our shores. “Chinese brands have also taken a keen interest in the Philippines with several brands already present in the market. Almost all major brands that supply small cars to large trucks are already present in the country,” said Lee.
Once again, domestic sales are expected to piggyback on the CV segment.
CAMPI is not being carried away by the strong 2009 finish and 2010 start. With cautious optimism, “the industry currently projects a conservative four-percent growth for 2010 subject to quarterly review depending on changes in the market,” insisted Lee. “Factors that will affect stronger sales for 2010 include: fleet deliveries to the national and local government, relatively good economic growth forecast of about 4.4 percent growth, improved demand resulting from higher OFW remittances of at least seven percent growth – which, in turn, will likely support the peso.”
Then, again, there’s election spending, aggressive promotions from auto players, and expected new model introductions. All in all, people have a lot to look forward to this year, as our car industry zooms ahead.
“Year 2010 should be an exciting year for us all,” concluded Lee. –Kap Maceda Aguila (The Philippine Star)
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