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The recent announcement of the Yuchengco Group of Companies’ House of Investments that it is closing five of its car dealerships—four Honda and one Isuzu—beginning June 2 has sent shockwaves to the local auto industry.

Industry insiders now fear that this might just be the start of an outbreak of auto dealership closures. The “vaccine” for this, however, might need to come from several sources.

On Monday, Yuchengco-led House of Investments (HI) announced that it is shutting down five car dealership units in Metro Manila – four Honda and one Isuzu outlets – effective June 2 as part of measures to ensure “overall greater efficiency” in its automotive business. In a disclosure to the Philippine Stock Exchange, HI said it had decided to close Honda Fairview, Honda Marikina, Honda Marcos Highway, Honda Kalookan and Isuzu Greenhills.

Willy Tee Ten, Philippine Automotive Dealers Association president, said that in order for the other dealers to sustain operations, three factors must prevail:

“1) Banks should approve more loans to both car buyers and to dealerships and lower interest rates; 2) Malls should offer free rent to their tenants, government should tell landlords (of the lots where dealerships stand) to waive rents until a vaccine (for CoViD-19) is discovered; and 3) The ‘new normal’ (needs minimal showroom space), since walk-ins have gone down tremendously.”

Tee Ten predicted, “If the things mentioned will not be practiced, there might be more dealers that will close.”

All five auto dealerships of YGC were located in Metro Manila: The Honda dealerships in Fairview, Marikina, Marcos Highway, Kalookan, and Isuzu Greenhills.

Early in May, Tee Ten told Inquirer Motoring that banks would play a “very big part in the success or failure of the automotive industry.”

In reaction to the dealership closures, Association of Vehicle Importers and Distributors president Ma. Fe Perez-Agudo told Inquirer Motoring: “Rationalization is happening across many industries. This is to be expected given the extraordinary situation that triggered the shutdown of many businesses for almost three months.”

Asked by Inquirer Motoring if the closures were just the beginning of a series of dealership closures or labor layoffs, Agudo said, “The pandemic has forced everyone to take a long and hard look at our business models and to quickly adapt to the new reality. This means looking for more operating efficiencies, focusing on our core strengths, and importantly, innovating to reach customers whose behaviors have radically changed. Many, as we in AVID, are still on survival mode but are optimistic that we will steadily recover and be poised for a stronger rebound with support from government through various stimulus and incentives. We are all in this together when it comes to overall economic recovery.”

Asked the same question, Rommel Gutierrez, Chamber of Automotive Manufacturers of the Philippines Inc president said, “I don’t think so. Sure, there’ll be lots of adjustments with the new normal. Rationalizing operations is just one of them which may take in many forms.”

“(It’s a) chain reaction,” quipped Gutierrez when asked about dealers’ fear of more closures due to strict loans, inflexible landlords and decreased showroom visits.

Auto dealer George Blaylock said that the shutdowns were bound to happen.

“It’s sad, but it will happen. Banks are not approving, and most clients are not buying. Recovery will be next year. Service and parts will continue, though. Banks also are just opening up so they also are in a phase-in situation, so this is another reason why there will be a slowdown of bank approvals,” he explained.

A Metro Manila dealer who refused to be named quipped: “Imagine a big group like Yuchengco whose partners are Honda Cars Philippines Inc and Ayala Corp, but they still thought of closing.”

Another dealer, who owns three medium-sized dealerships in Metro Manila, disclosed in an interview last May 21 that she would focus on improving aftersales revenues by offering other services such as ceramic coating and accessorizing vehicles, among others.

That dealer said she has 300 people in her employ.

Would she have to resort to retrenchments?  She replied, “If the 50-percent decline in projected sales happens, we will have no choice but to retrench. We started operations last May 18. Online inquiries and walk-ins are very low.

“Banks have been strict in granting approvals,” she said, adding that one of her managers said a lot of overseas Filipino workers applying for car loans had been rejected or declined by the banks, and resorted to buying used cars instead. Meanwhile, businessmen who had been planning to buy new cars are holding on to their old ones, and holding off previous plans to replace them.

On April 29, Inquirer Motoring wrote about the combined losses of all 600 or so dealers in the country after six weeks of extended community quarantines, which ran from P2.7 billion to P9 billion as estimated by a top executive who handles 50 dealerships. In that story, it was estimated that each car dealer could have been losing between P3 million and P10 million a month since operations were halted.

Another dealer who chose to be anonymous revealed, “A lot of front liners who want to buy a car of their own due to the lack of public transportation have been rejected by banks, while walk-ins have been minimal.”

The easing of travel and quarantine restrictions to GCQ status is seen to not help the dealers’ situation. “After the lockdown, we expect inquiries to decrease in both our showrooms and social media,” said the dealer. With a report from Doris Dumlao-Abadilla