Passenger car sales in the Philippines will recover slightly next year, by around 3.2 percent or 120,000 units by end-2019, according to projections of Fitch Solutions Macro Research.
This will be a turnaround after passenger car sales this year declined by 20 percent to 90,522 units as of end-October 2018, from 113,341 units the industry sold in the same period in 2017, according to the Chamber of Automotive Manufacturers of the Philippines.
Declining sales in passenger car segment was also seen in another industry group, the Association of Vehicle Importers and Distributors, which reported that sales of passenger cars from January to September 2018 dropped by 20 percent to 23,531 units, from 29,266 units in the same period a year ago.
“In 2019, we expect a mild recovery in the Philippines’ new passenger car market, and forecast sales to grow by 3.2 percent, reaching a total of around 120,000 units by year-end,” Fitch Solutions said.
It attributed the slow recovery in the sales of passenger car segment to “unfavorable economic conditions in the form of higher interest rates, elevated inflation, and a still weak peso.”
Fitch Solutions said the sustained high inflation will continue to affect consumers’ decision to purchase new car in 2019.
In November inflation remained elevated at 6 percent, although lower than the 6.7-percent inflation in September and October, and at 6.4 percent in August.
Elevated price pressures this year prompted the Bangko Sentral ng Pilipinas (BSP) to tighten monetary policy, making the cost of borrowing in the country to rise.
“As a result, the cost of borrowing in the country will rise, which will in turn weigh on the consumer’s ability to take financing in order to make new car purchases,” Fitch Solutions said.
Moreover, it noted that the weak local currency will place upside pressure on the cost of imported vehicles, which have a 60-percent share of the new cars sold in the country.
But after 2019, Fitch Solutions projects passenger car sales to grow annually by 6.5 percent until 2027, reaching the 205,000-unit mark.
Image credits: Nonie Reyes