Vehicle importers have endured a double-digit sales decline in the first half of the year, but are optimistic they can rebound in the latter half, as they fine-tune their product lineup in light of renewed consumer preferences under the new tax regime.
Members of the Association of Vehicle Importers and Distributors (Avid) reported they sold a total of 43,138 units in the first semester, which was 11 percent lower than the 48,344 units sold during the same period last year.
Apart from the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) law, Avid pointed to the recent spikes in petroleum prices as a major factor for the sales decline. Another reason, the group added, was the indirect impact of higher interest rates that affect buyer preferences and priorities.
Automobile importers also revealed some buyers advanced their purchases in anticipation of higher prices of vehicles this year. The TRAIN law imposed excise taxes of 4 percent for cars up to P600,000; 10 percent for over P600,000 to P1 million; 20 percent for over P1 million to P4 million; and 50 percent for hybrid cars.
“First semester Avid sales reached 43,138 units sold, as consumers are still adjusting to new income and new commodity price levels [under the TRAIN regime]. Nevertheless, we see this as a transitionary period and may soon normalize, as both supply and demand factors stabilize,” Avid President Maria Fe Perez-Agudo said.
Total passenger car sales plunged to 18,176 units from January to June, down by 14 percent from 18,769 units at the same months in the previous year.
On the other hand, sales of light commercial vehicles fell by 10 percent, with the exception of pick-up trucks, which were spared from additional taxes by the new tax law. The segment sold 26,528 units in the first semester as against 29,575 units sold at the same period last year.
Hyundai Asia Resources Inc. drove most of Avid’s passenger car sales, with 10,838 units sold at the six-month period. Ford Group Philippines Inc. dominated yet again the light commercial vehicle segment, as it sold 12,155 units from January to June.
As vehicle importers try to cope with additional duties under the TRAIN law, they are keen on breaking into the emerging market of electric vehicles, which are exempted from any excise taxes under the new tax regime. They also argued the new tax bracket on luxury cars will make the segment more competitive.
Moreover, they said, a demographic sweet spot, composed of young and agile workers, will most likely boost household spending in the second semester. This plays well with the automotive industry, vehicle importers argued, as they rearrange their product lineup in light of evolving consumer preferences spurred by the TRAIN law.