TRADE Secretary Ramon M. Lopez told car manufacturers and vehicle importers to stand their ground for the immediate impact of higher excise tax on automobile resulting to loss in sales as he assures everything will revert to “normal” come fourth quarter.
Lopez’s statement comes as sales of vehicle importers went down by 2 percent to 22,758 units sold in the first quarter. During the same period last year, the sector recorded sales of 23,317 units. The Association of Vehicle Importers and Distributors Inc. (Avid) attributed the contraction to the Tax Reform for Acceleration and Inclusion (Train), which was recently enacted into law by President Duterte.
Signed last December by Duterte, the law seeks to lower personal income-tax rates while, at the same time, slapping additional taxes on oil and petroleum products, on sugar-sweetened beverages and on automobiles, among others. Under the TRAIN, automobile excise tax is placed at 4 percent for vehicles up to P600,000; 10 percent for those with a tag price of over P600,000 to P1 million; 20 percent for a vehicle priced over P1 million to P4 million; and, 50 percent for hybrid vehicles.
Lopez said the drop in sales is expected since both vehicle manufacturers and car buyers are adjusting to the value of peso under the TRAIN.
“That is an expected impact because of the higher taxes so we really anticipated that to impact on the automobile sector,” the DTI chief told the BusinessMirror.
“Nevertheless, we see that kind of impact to be temporary. As the economy continues to grow, that is the more important thing. They will continue improving on their sales, and people will get used to that kind of pricing. It is just a matter of time,” Lopez added.
According to Avid, sales in passenger cars went on a slight slowdown by 0.63 percent to 9,189 units compared to the 9,247 units sold reported the previous year. Hyundai Asia Resources Inc. weathered the storm by posting a 4-percent increase in sales of passenger cars, accounting for 68 percent of total sales.
On the other hand, sales of light commercial vehicles dropped by 4 percent to 13,569 units sold in the first quarter against 14,070 units sold year-on-year. Ford Group Philippines Inc. recorded the highest sales for this segment with 6,273 units sold.
For Lopez, car manufacturers and vehicle importers will be able to rebound by fourth quarter onward, when “Filipinos are already attuned to the new tax law.”
“Maybe by fourth quarter toward the Christmas, they will be able to regain their sales and that will continue in the next years,” he said.