Welcome to Inquirer Mobility

By Tessa R. Salazar

Six weeks since the start of the enhanced community quarantine on March 15 that aimed to quell the spread of the deadly CoViD-19 outbreak, the auto industry is now feeling the painful collateral damage the measure has wrought. Each car dealer—depending on its size and brand—has been losing between P3 million and P10 million a month since operations were halted.

For the estimated 600 dealerships nationwide, the combined losses of all dealers in the country now runs from P2.7 billion to P9 billion for the past one-and-a-half months.

This was estimated by a Metro Manila-based executive who handles 50 dealerships of multiple brands nationwide. The executive refused to be named due to the sensitivity of his position in his organization.

Asked how he came up with the estimated number of dealerships, he explained, “Just imagine the top 12 brands nationwide. The top 7 brands would average 40 dealers per brand, then the top 5 more than 60 per brand. So our total estimate is around 600 nationwide, ranging from small to large dealerships.”

Two other dealers of multiple brands—one in Metro Manila and the other in Cebu—also revealed their running losses. Both dealers also refused to be named.

“Normally, with a dealer selling around 130 units, which has since closed for a month already, (losses should be) around P7 million or more. That’s the operating expenses, including interest and depreciation of one dealer in a month. With a dealer selling 50 units, losses could be P2 million or more,” said the Metro Manila-based dealer executive. He further estimated that a small dealership would have been losing an average of up to P5 million; a medium-sized dealer would be losing up to P8 million, while a large dealership would be bleeding up to P12 million or more. Then there is the depreciation of the dealership’s buildings, equipment, test drive vehicles, furniture and fixtures.

A Cebu-based executive who owns 36 dealerships across the country agrees with the figures cited by the Metro Manila based dealer executive. Asked his own plans for his network, he said: “It will depend on the situation per area, but once ECQ is lifted, we will go back to skeleton operations. But it varies, because of the different dealer locations.”

Another Metro Manila-based dealer, who owns 10 dealerships ranging from small to big brands—revealed that he has been losing up to P15 million a month in one dealership alone.

“That loss is before taxes but net of expenses already. It depends on the dealer’s inventory level. Interest cost and payroll are the biggest expenses. Big dealers are suffering more than small dealers. Small dealers are not so much in debt, nor do they have as many employees, but of course, this is relative,” he said. “We have medium and small dealerships in the Metro and in provinces. I am not considered very large. I basically operate one brand. Mega dealers or very large ones are those with multi-brands. Those are the ones that are in most pain because most of them do not own their property and they carry huge inventories,” he explained.

He summarized his next moves in five words: “Cost cutting. Redo business model.”

He added that he has had a crisis plan prepared for years. “My team just had to fit it into the type of crisis, and fine tune the plan. It would be painful to implement them. A lot will lose their jobs, especially on the sales side. A lot of adjustments will be done.”

Appeal rejected

On April 16, 2020 the Philippine Automotive Dealers Association (Pada) sent a letter of appeal, signed by, among others, its president Willy Tee Ten, to the Department of Trade and Industry Secretary Ramon M. Lopez. The group of more than 200 auto dealerships across the country asked DTI to allow them to open by April 20 on a limited engagement, reasoning that the group aims to ensure that private transport is maintained and readily available for use in emergency situations and purchasing essential needs.

On April 22, the DTI responded that the automotive sector was not included in the list of essential products, thus, not mandated to resume operations before the lifting of the ECQ.

“In response to the concerns raised by Pada, we would like to clarify that the directives of the Inter-Agency Task Force against Emerging Infectious Disease and the Department of Trade and Industry’s Memorandum Circular 20-08 pertain to the permitted manufacturing of basic food and essential products and its related value chain.

“Unfortunately, the list does not include the automotive sector. This is mainly due to the urgent need to limit the movement of people to stop the spread of Covid-19, which is the essence of having ECQ,” the DTI response, signed by Lopez, further stated.

Inquirer Motoring asked Tee Ten’s comment this Monday.

“We have no choice but to follow the government,” he responded.

Asked for his own estimates on his dealerships’ running losses, Tee Ten said, “Dealership losses depend on so many factors. It’s really hard to estimate.”

The Chamber of Automotive Manufacturers of the Philippines (Campi) president Rommel Gutierrez told Inquirer Motoring Tuesday, “Car service is also important to keep motor vehicles running, especially those dedicated to frontliners. I hope we can find solutions.”

On whether Campi’s premier car show the Philippine International Motor Show (PIMS) would be staged this year, he said, “There is no formal decision yet, but members are seriously studying it now.”

AVID 1Q sales drop 34%; 2020 car sales to drop 40% 

In a statement sent to Inquirer Motoring also Tuesday, the Association of Vehicle Importers and Distributors Inc (Avid)—which counts 20 member companies representing 26 global brands—recorded sales of only 14,404 units, a 34.4-percent drop in the first quarter of the year compared to the same period in 2019.

“Most, if not all, dealerships and their accompanying repair and maintenance facilities have been closed since March 16, 2020,” said the statement.

“The local industry is reeling from this invisible enemy as vehicle manufacturing, importation, distribution, and maintenance have stopped completely. Demand has likewise declined as consumers spend on more urgent needs. With this disruption, we estimate that car sales may drop by around 40 percent for the year,” Avid President Ma. Fe Perez-Agudo predicted.

“The industry is no stranger to adversity, but this pandemic will be our toughest challenge yet. We estimate that it would take at least 12 months for the local industry to recover once the ECQ is completely lifted. There will be a ‘new normal’ and we must be quick to adapt since Filipino consumers will be even more prudent and looking for more value in their purchases,” Agudo added.

Avid’s figures include passenger cars (PC) segment declining by 43 percent in the first quarter of 2020 with 4,506 units sold versus the 7,848 units in the same period last year. Hyundai leads this segment with 2,724 units sold, followed by Suzuki with 1,127 units and Ford with 415 units.

In the Light Commercial Vehicles (LCV) segment, year-to-date sales dipped by over 29 percent, with 9,806 units sold. Ford leads this segment with a total of 3,479 units while Hyundai comes in second with 2,797 units closely followed by Suzuki with 2,740 units.

Commercial vehicle (CV) sales declined by 62 percent to just 92 units over the period.

Second quarter sales may dip even further due to the extended ECQ for the whole month of April and at least half of May in major urban areas.

AVID’s free mobility, PPEs for frontliners

Despite the bleak economic outlook, many Avid members have joined the nation’s battle to fight CoViD-19. Some have been providing free mobility, which includes the transport of frontliners, medical supplies, and essential goods across the country. Others have donated personal protective equipment (PPE), masks, and gloves to CoViD-19 facilities. Others are supporting their home communities and LGUs.

“Mobility is the lifeblood that drives the nation’s economy and this has been further underscored by this pandemic. Hospitals, groceries, and other essential establishments rely on mobility for sustained operations. We are working closely with our stakeholders so we can resume our operations, especially our repair and maintenance services, in a manner that protects the health and safety of our workforce and customers, once the ECQs and GCQs are lifted,” Agudo added.

Avid members have used the lockdown to develop CoViD-19-ready processes, structures, and organizations. Health protection and safety strategies are being put in place for employees, business partners, and to meet the emerging needs of the customer in the next normal environment. It added that the industry is very much aware of the protocols on social distancing—wearing of appropriate protective equipment, and additional sanitation measures—which it committed to observe.

As an added layer of protection, some AVID members will be conducting antibody testing prior to the re-entry of its workforce. This will be done as part of Project ARK, a private sector-led initiative to conduct mass testing for the new coronavirus at the community level.

“Avid fully supports the government’s initiatives to combat this pandemic and we remain optimistic and confident in the tried and tested resilience of the Filipino. The timely restart of the automotive sector is of utmost importance to mitigate the impact of this crisis since tens of thousands of Filipinos and their families depend on this sector. There is life after CoViD and we will be there to ensure better journeys ahead,” she said.

Based on government data, the Philippine automotive sector, directly and indirectly, employs 408,000 people.

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