Over the past few months of the COVID-19 pandemic, we’ve witnessed numerous virtual car launches from the local automotive brands that makes one think: who is going to buy these cars with the economy in the doldrums?
Surprisingly, the industry and the Filipino people have shown impressive resilience as the market has been pushing back hard, with signs of improvement showing in August and September. Thanks to aggressive marketing campaigns, discounts and freebies, buyers understand that a car is an even greater necessity nowadays to help keep them safe, avoid crowds and commuting in public where commuters have little to no control over their environments.
Though the industry will still be down by year-end 2020, towards an expected total sales figure of just shy of 250,000 cars (down from 415,826 units or roughly a 40% drop from 2019’s volume), it’s good to see that we are on track to finish strong for 2020.
But lately, we’ve seen more and more car models with overlapping prices, even within their own respective brands. The Toyota Vios (B-segment), Altis (C-segment) Corolla Cross (compact cross-over) are well-within each other’s sights. The base Corolla Cross is priced at P1.245 million, whereas the Altis G CVT has a starting price of P1.045 million and the top-model Vios weighs in at P1.071 million. If you’re shopping for a car at right around a million pesos, these three very different models are within reach of each other, adding to one’s confusion.
Another example? KIA’s recently launched Stonic, a compact cross-over is priced at P675,000 for the entry level M/T model, whereas the also recently-launched Soluto LX variant (b-segment sedan) is priced at P710,000. And to get things even more confusing, the Rio LX A/T 5-door hatchback is priced at P920,000. Play with the trim levels / variants and the prices get close and closer to each other.
I sought some wisdom to explain the industry’s move to segregate the market further with more niche models and compared them to my experience dealing with car buyers who often ask me what their next car should be.
Vince Socco, chairman of GT Auto Capital, Inc., told me in a recent conversation that despite the diversification of car models even within their own brands, there is and always will be a place for traditional 4-door affordable, entry-level manual transmission equipped sedans in the Philippines, with its conservative market. Fleet buyers usually opt for a sedan as well, and that traditional taxis in particular are only allowed 4-door sedan body styles as mandated by the government.
From my own experience, the typhoon Ondoy of 2009 and the subsequent flooding that ensued almost every year thereafter vastly changed consumer spending habits for many Filipinos. Everyone wanted a tall-riding vehicle that could brave flash floods, or at least improve their chances of getting home should constant rains and the threat of flooding reared its head. While a cross-over isn’t exactly SUV tall, it gave many drivers an added sense of security, allowing them to see just that little bit further ahead on the road.
Another factor is a change of lifestyle for many Filipinos: active outdoorsy adventurers wanted to reach new destinations previously unreachable with a traditional sedan could finally get there even in a cross-over, and a tall-riding vehicle suited their image better. Plus, you can load up more gear I a cross-over thanks to a larger cargo space, and the longer roof meant you can add a roof rack and carry even further items on trips. From a city dweller’s point of view, a cross-over, with its bigger, chunkier tires can easily withstand potholes and bumps on the road which would see wheels and tires of regular sedans damaged, leaving them stranded.
Also to consider is age of the buyers. As the more moneyed buying public age, their physical needs need to be considered. Notice how cars of today are getting taller versus cars from a decade ago? That’s to account for an ageing buyer market that has difficulty bending their neck, back and knees and ‘fall into’ a regular sedan. But there’s a limit as to how tall you can make a sedan before fuel efficiency due to wind resistance, driving dynamics and safety become compromised. Thus, the ageing population will opt for a cross-over because getting in and out feels more natural: you sit in, rather than fall down (in a traditional sedan) or hoist yourself up (like a traditional SUV). Coming from a guy who weighs over 200lbs with bad knees and a bad back, I prefer a cross-over myself especially for daily driving and doing errands on weekends with multiple short trips that require getting in and out of the car repeatedly.
The last consideration is aspirational: people graduating from a traditional sedan want to move up to a higher-priced vehicle of greater perceived ‘prestige image’ that can do more, and the compact cross-over is a perfect entry-point. The footprint isn’t too big of a difference versus traditional 4-door B-segment sedans, meaning the driving experience won’t be too far off their b-segment cars. But these cross-overs offer more room, more versatility, more features (particularly safety features) and thus allows them to simply do more.
So, is the industry confusing us, the buyer with overlapping choices? I think not. Rather, the industry is just trying to cater to more varied and specific needs of a market that is maturing and getting more savvy and sophisticated, vocal about their needs and requirements in a car which can truly help them do more in life.
Lastly, according to Socco, in the Philippines, 60% of the market are first time car buyers, who have little experience or savvy buying cars. They will most likely default to a sedan because that’s what they commonly see. 20% are ‘additional’ buyers, meaning they are buying a second, third or even fourth car to their garage. And the final 20% are replacement buyers, meaning they are buying a new car to replace their old ones. Cross-overs and SUVs will appeal to the 40% composed to the additional and replacement buyers because they already have a traditional sedan, or are coming from one and would like to try something different, and enjoy the added versatility and image attached to them.