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The automotive industry announced good news at the end of the third quarter last September. The Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) and Truck Manufacturers’ Association (TMA) jointly reported 37% growth from the 17,500 units sold in August to 24,523 in September.

 Meanwhile, the Association of Vehicle Importers and Distributors, Inc. (AVID) posted a 212% jump in sales from 4,955 units sold in the second quarter to 15,471 units sold in the third quarter.

CAMPI/TMA’s 37% growth caused lawyer Rommel Gutierrez, the president of CAMPI, to express optimism that “the automotive sector will recover until the end of the year amid the new normal environment. Demand for new cars posted double-digit growth on all vehicle categories except trucks and buses.”

 “We aim to sustain this momentum till the last quarter of the year as we continue to reinvent ourselves, innovate, and capture our customers’ imagination,” AVID president Ma. Fe Perez-Agudo said.  “This will put us in a great position as we start afresh in 2021.”

The two industry leaders may have spoken too soon.  Last month, the joint report of CAMPI and TMA showed 2% growth in October as total sales slid to 25,023 units, only 770 units more than the 24,523 sold in September.  AVID posted a 9% increase in sales in October or a total of 6,120 units sold versus the 5,594 units sold the previous month.

POSITIVE PROGRESS.  Nonetheless, Gutierrez still saw positive progress for the industry in the 2% month-to-month growth.  He pointed out that CAMPI achieved its highest sales volume in October since the start of the pandemic despite the overall negative consumer and business confidence outlook for the fourth quarter.

 “We are on track to achieve our revised sales forecast of 240,000 units – the baseline for our medium-term recovery plan,” the CAMPI chief said.

 But Gutierrez remained cautious about CAMPI’s outlook in view of the proposed taxes  on imported motor vehicles being studied by the Department of Trade and Industry: “The industry is in a very vulnerable state right now and the imposition of safeguard measures will only limit our ability to navigate the crisis.”

 AVID president Agudo said: “We are off to a good start in the last quarter of the year and we aim to continue this revival.  Businesses are reopening and travel and tourism are resuming.  These activities require mobility and a strong and healthy auto industry will set the course for economic recovery.”

SEESAWING SALES FIGURES.  Compared to 2019, when total vehicle sales reached 403,704 units, Pandemic Year 2020 has been a nightmare with sales figures seesawing from one month to the next.

Although 2019 was not as good a year as 2017 when the industry posted a high of 448,107 total vehicle sales, it still created optimism for continued growth in 2020.

Then COVID-19 struck. No one was prepared for the coronavirus outbreak that forced the government to impose a Luzon-wide Enhanced Community Quarantine (ECQ) lockdown starting on March 16, 2020.  The shutdown of all economic activity resulted in a 24.4% dip in CAMPI/TMA’s first quarter sales to 64,542 units versus the same year-ago period.  AVID reported a 34.4% decline in first quarter sales amid the lockdown.

In a negative economic environment exacerbated by 2.2 million people losing their jobs by the first week of April, a steep decline in dollar remittances as tens of thousands of overseas Filipino workers came home after losing their jobs abroad, the efforts of the tourism, retail and hospitality industries as well as small and medium-scale enterprises to survive – who would want, or could afford, to buy a new car?

The auto industry was confronted with a drastic change in consumer behavior.  In PDI Marketing last June, innovation strategist Josiah Go advised businesses to acknowledge the new consumer behavior, which he described as “increased mindfulness of safety, greater attention to health and wellness, preference for work from home, better eating, time spent with family, fewer nonessentials, frugality, review of life’s purpose and digital acceleration.”

ADJUSTING.  Industry players scrambled to adjust to “the new normal” of consumer behavior with a transition to contact-free digital solutions for marketing, retailing, and servicing cars.  Car companies created attractive virtual showrooms to make car-shopping a safe, stay-at-home experience.

To jumpstart sales, dealers resorted to innovative marketing gimmicks and began offering no down payment, low down payment, low monthly amortization options, hefty discounts for cash purchases, lucrative raffle prizes, free car accessories, free and/or longer Periodic Maintenance Service warranties.

Despite all these, however, CAMPI/TMA posted a 51.2% decline in sales in the first half of 2020 with 85,041 units sold compared to the first half of 2019.  During the first semester this year, AVID sales slid by 54.8% with 19,455 units sold compared to 43,082 in the same period in 2019.

CAMPI’s October 2020 figures show a 27.3% decline from the 34,397 units sold in October 2019. Year-to-date October 2020, the industry has sold a total of 173,035 units according to CAMPI.

AVID reported that overall, YTD October 2020 sales fell by nearly 43% versus the same year-ago period.

MARKET SHIFTING.  The market, while slowing down, is shifting toward entry-level segments and commercial vehicles because of the need for personal mobility and the movement of essential goods.  More people are considering buying cars within their budget due to the overcrowded and unreliable public transportation system where social distancing and other safety measures are nearly impossible to observe.  

Some industry players – Toyota, Kia, Honda, Mazda, Lexus, Geely — defied the sales slump by launching new or refreshed models on the market.  Changan, one of the “Big Four” Chinese automobile brands, was relaunched locally under new management.

While remaining cautiously optimistic that sales will hit the 240,000 target, industry leaders admit that consumer spending is still below pre-pandemic levels. With MECQ in place until year-end, the number of coronavirus infections in the country approaching half a million, and a COVID vaccine months away, a timeline for the auto industry’s recovery is unclear.

As AVID president Agudo noted last October, “When this pandemic started, we all asked: ‘How long?’ And as the situation developed, we began asking ourselves, ‘What next?’  Which led us to do a strategic overhaul of our respective businesses. ..  We are redefining the Industry’s new normal – call it a better normal.   Even if the customer journey has radically changed, one thing remains constant for us: the commitment to give our customers the premium value, care, and attention that they deserve, in and beyond pandemic times.”

Meanwhile, industry players are hoping for a surge in sales as the Christmas shopping season peaks and consumers, after months of staying home and scrimping, may celebrate and reward themselves by splurging on a brand-new car.

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