Now Reading
Surge in demand for cars P600k and below seen

Surge in demand for cars P600k and below seen

There is a silver lining in every cloud, they say. Even in the automotive industry where sales are seen to contract to unprecedented levels, some segments are still seen to perform well.

“There will be a significant increase in demand for quality used cars, but I expect that this would be affected by an equally significant decrease in supply since people will tend to hold on to their vehicles.  Eventually this would cause prices in the used car market to rise, and demand will shift to brand new vehicles priced P600,000 and below. Customers are gravitating to this segment where they expect worry-free driving, backed up by warranty and the joy of owning a new vehicle,” said Tey Sornet, chief operating officer for LICA Auto Group.

“In our analysis, the current demand is coming for cars priced P1.2 million or below. Initially, I believe the brands with compact cars priced below P600,000 and below will benefit, but it would expand to include small sedans and small SUVs under this new normal,” he added.

Lawyer Rommel Gutierrez, president of the Chamber of Automotive Manufacturers of the Philippines Inc (Campi), agreed: “It’s a sound prediction. With the challenge of social distancing in public transport, buying a new car could just be the alternative. Whether for first time car buyers or those needing additional vehicles for better mobility, cars priced P600,000 and below will be most practical and affordable.”

Willy Tee Ten, president of Philippine Automotive Dealers Association, told Inquirer Motoring on May 21 that the sales of used cars would also depend on the banks.

“If banks will be very strict with approvals, then used cars sales will not be as good as well. The car industry will really depend on the financing institutions. We dealers are hoping and praying the banks will be as aggressive as they were before this pandemic,” said Tee Ten.

Sornet explained in a recent interview: “Budget-conscious customers usually opt for quality used cars.  However, since there are only a few people trading in or selling their cars, the availability of quality used cars is very low. The good thing for these customers is that they have an option to buy brand-new vehicles not far from the price point they prefer.  With the financing offers we have in our dealerships, owning a brand new vehicle has become more and more accessible.

“There is currently a higher demand for vehicles P600,000 and below.  But there is also demand for vehicles P1.2 million and below by customers who prefer a bigger vehicle and with more features and options,” Sornet added.

George Blaylock, president and general manager of Diamond Autogroup of Companies, said last May 21 that there would be an increase in used car sales because of banks tightening up on new loans.

“I think there will be a surge in small car inquiries because of the fear in riding public, but the rest of the other models will sell only to those who have good credit and are bank clients.” He added that it would be a hard push for (auto loan) approvals now.

Blaylock, in a follow-up interview added: “Actually, there are already inquiries for the Mitsubishi Xpander and some Monteros. When the dust settles and this CoViD issue is over with, there will be an increase in sales. That is, if the banks will approve. Banks are still in the phase-in mode, so they are not approving unless it’s their client.”

Sornet said during a May 25 Inquirer Motoring interview: “As an authorized dealer, we follow the pricing guidance provided by our distributors. From our end, our current strategy is to push online sales to our retail clients by offering exciting financing packages working with our partner banks. There is currently a demand from health-conscious buyers who do not want to use public transport that will greatly help jumpstart the sector. But it cannot move until banks restart their full operations and they can conduct their credit investigations. Since around 70-80 percent of our sales are through financing, the support of the banks financing is very crucial.”

See Also

He added: “Since the start of the GCQ and MECQ, our service operations have resumed and this will greatly contribute in our revenues.  We have started digital activities in our aftersales business and we offer convenience to customers through our appointment system.  We have staggered the arrival of customers to limit the number of people going and waiting in our dealerships. We disinfect our facilities, apply social distancing and strictly follow government regulations to ensure our employees and our valued clients are safe when they enter our premises.”

During the first week of May, Inquirer Motoring asked dealers if they were planning on selling cars at discounted rates to recoup losses and jumpstart the sector.

Car dealer Michael Goho, whose family owns 18 dealerships across the country, replied last May 3: “This will most certainly be the case considering the present abnormal times. Adjustments have to be made to entice the market since there had been a drastic impact on incomes since the beginning of the ECQ.

“We plan to double our efforts once we return back to GCQ which is now the new normal,” Goho added. “The year isn’t over yet, people are excited to get back to work and make up for the economic losses. We ought to stop projecting this perception of just how hopeless the times are, there is still a chance to recover from the earlier losses. We do not anticipate on losing more for the rest of the year.

“We feel that once things normalize, sales will begin to pick up. There are also many reasons to buy a car since people wouldn’t be optimistic about commuting these days. We expect a spike in car sales the same way we saw a boom in Wuhan and America.”