BMW head warns against proposed tax measures on auto industry

ACC president Maricar Cristobal-Parco and marketing director Karl Magsuci during the launch of the new BMW 5 series

Asian Carmakers Corp. (ACC), the country’s official BMW importer, warned against the proposed increases in the excise tax on automobiles, cautioning that even the watered-down rates in the final house bill would “curtail the growth of the luxury car segment.”

Company president Maricar Cristobal-Parco told reporters on Tuesday that they were appealing to the members of Congress for a “considerate increase” in excise tax, noting that the current rates being suggested still fall outside the figures that ACC was comfortable with.

“We feel that is too drastic. We are afraid that if that happens, it will curtail the growth in the luxury [car] segment,” she said on the sidelines of the launch of the new BMW 5 series.

This developed as ACC observed a flat growth in 2016 after selling around a thousand units, she said.

While the top official said that BMW has been enjoying a “temporary surge” in sales with consumers anticipating a hike in excise tax, there is still no telling how sales will fare once the new rates kick in.

House Bill 5636, which contains the administration’s first package under its comprehensive tax reform program, proposes a heavy tax on the luxury car segment, although the rates were lower from what was initially proposed.

“We feel that those who really believe in the product and can really afford the vehicle will continue to do so. But those who aspire the vehicle and have been aspiring it would most likely have a harder time, and most likely settle for a non-European brand. Then, if that is the case, we can’t also contribute more to the taxes because our sales are also lower,” she said.

Under House Bill 4774, which served as the first package before being revised to HB 5636, cars with a net manufacturing price of more than P2.1 million would be charged 200 percent in excess of that value, on top of an additional assessment of P1.2 million.

HB 5636 has been passed in the Lower House, but its counterpart bill in the Senate retained the original high rate of 200 percent.

This might be a problem for potential BMW consumers, especially since the lowest price point of BMW’s product was P2.1 million and thus could reach as high as P9 to 12 million, said Parco.

“Based on the original, the computation that we have under the price simulation is an increase from 18 percent to as high as 54 percent. It is going to be very big. So for the P8.9 million BMW 7 series, we will most likely retail at around P12 million. But for the BMW 3 series, which is currently retailing at P3 to P3.3 million, we expect that closer to the P4 million range,” she said.

ACC is part of the Chamber of Automotive Manufacturers of the Philippines Inc. (Campi), which, together with the Association of Vehicle Importers and Distributors Inc. (AVID), filed a position paper against the proposed hike earlier this year.

In the position paper, brackets exceeding the net value of P2.1 million should be charged within the range of 80 to 90 percent.

Under HB 5636, the hike in excise tax would be implemented within a two-year period, with the rates starting to escalate in 2018.

Under the bill, the net manufacturing prices of cars belonging to tax brackets above P2.1 million would be charged a rate of 80 percent and 90 percent in 2018, then 100 and 120 percent in 2019.