How premium cars performed in Q1 2017

The Philippines may be in the first stage of motorization, but that doesn’t mean that only mass market cars are selling well here.

The availability of nameplates like Rolls-Royce, Ferrari and Lamborghini in Metro Manila indicates that their brand principals are bullish about a growing niche market in this nation.

Recently, however, the optimism of premium car distributors was dented by the tax reform bill filed by the Department of Finance in Congress that would hike the excise taxes on new car purchases as well as on fuel.

The importers/distributors of higher-priced vehicles will be the hardest hit. Cars retailed at P2.1 million and above will be levied 60 percent of net manufacturer’s price/importer’s selling price instead of the current rate of P512,000 plus the value in excess of P2.1 million.

Now, whether or not the impending tax hike had anything to do with it, the automotive industry is abuzz about unusual happenings in the premium car market.

Astounding News

First, there was the astounding news early this year that taipan (and car collector) Ramon S. Ang (San Miguel Corp., Petron, Philippine Air Lines, etc.) has formed a partnership with or acquired the BMW business from Palawan Gov. Jose Ch. Alvarez, the auto industry mogul who also distributes Kia, Peugeot and Mahindra vehicles.

BMW led premium car sales for years until the first quarter this year, when sales plunged due to inadequate stock (see Table 1).

Second, Marc Soong, the executive director of Jaguar/Land Rover (JLR), confirmed on Facebook that JLR is closing down after selling cars in the Philippines since 1997.

However, Marc and his father Wellington Soong will continue marketing Ferrari and Maserati cars through Autostrada Motore Inc. in Bonifacio Global City. The Soongs also distribute Aston Martin, the British super sports car brand.

Question: Did the pending excise tax increase have anything to do with the sale of BMW or the closure of Jaguar/Land Rover PH?

While we try to figure that one out, here are sales figures showing how European/premium car brands performed in the first quarter, culled from the 1st quarter report of the Association of Vehicle Importers and Distributors and some of the car companies themselves.

PDI Motoring was unable to obtain the per model sales of the Auto Nation Group, PGA Cars, British United Automobiles Inc. and of course, Jaguar/Land Rover, Autostrada Motore and DBPhils. These companies strictly adhere to a policy of their brand principals to never disclose their per model sales figures in a country or territory, only their global sales figures.

*Excluding Jaguar PH, Land Rover, Autostrada Motore Inc. (Ferrari, Maserati) and DBPhils Motorsports (Aston Martin) due to unavailable data.

You may object that Volkswagen and Peugeot are not really premium brands. But they are European brands, right? In this neck of the woods, when you mention a European brand, people immediately jump to the conclusion that it is more expensive than an American, Japanese or Korean brand.

Volkswagen and Peugeot being considered mass market brands in Europe, logically they are priced lower than BMW or Porsche. This partly explains why Volkswagen (2nd place) outsold Lexus, Toyota’s premium brand (3rd place) and Peugeot (4th) outsold BMW (5th).

Another explanation could be that Automobile Central Enterprise Inc., the importer/distributor of Volkswagen, is part of the Ayala Group of companies and the Jetta was offered as a company car to Ayala Group midlevel executives at a discounted price.

No wonder the Jetta was the best-selling Volks in Q1 2017 with 84 units sold versus only three in Q1 2016.

In the Peugeot lineup, the best-sellers in January-March 2017 were the 308 midsize hatchback (37 units) and the 9-seater Expert Tepee people carrier (35 units).

As for Mercedes-Benz capturing pole position in sales, it is possible that Auto Nation Group counted Mercedes heavy duty trucks as well as cars and SUVs in their year-to-date sales.

The third place position of Lexus was expected since vehicles made in Japan with 3.0-liter engines and above are imported tax-free, thanks to the Japan-Philippines Economic Partnership Agreement (JPEPA). In fact, it was surprising that Lexus wasn’t No. 1.

But let’s not quibble. Kudos to the importers/distributors that made it to the top 10 via hard work and smart marketing.

Finally, here are the top seven premium SUVs/crossovers, minimum retail price P4.0 million, in the first quarter this year versus the same period last year.

*Excluding Mercedes-Benz, Audi, Bentley, Land Rover and Porsche SUVs due to unavailable data.

Looking for the Ford Explorer and Nissan Patrol Safari? They don’t qualify as premium because they cost less than four million bucks each.

Once again, Toyota and its luxury sibling Lexus snapped up the top three spots, helped in no small way by the aforementioned JPEPA.

The Suburban is the only American nameplate that made it to the top seven. Many of us fancy being whisked from the airport to the White House in a black Suburban with impenetrably black tinted windows, protected by the US Secret Service just like in the movies.

On a more serious note, the lowest priced SUVs in this list are the Lexus RX 350 (P4,068,000-P5,978,000) and Volkswagen Touareg (P4,090,000) while the priciest could be the Lexus LX 570 (P7,718,000).

Summing Up

As of this writing, exotic cars like the Rolls-Royce, Ferrari and Lambo are still being sold in the Philippines. But the exit of Jaguar/Land Rover makes you wonder how many premium car distributors will still remain in business after the tax reform bill becomes law.