Riding the Train

With the Train Law or Republic Act 10963 finally signed and implemented for 2018, car prices will change: most will go up, some will go down.

Interestingly, none of the major car manufacturers, save for Honda Cars Philippines, have released their revised final retail prices, as many claim to still be waiting for the Implementing Rules and Regulations (IRR) or basic guidelines on pricing their new cars.

Going through Honda’s updated pricelist, it seems that the price increase is quite manageable.

The largest price increase in Honda’s prices was that of three variants of the HR-V amounting to P121,000.

It seems a lot, but in the grand scheme of things, it means an additional three to four months of monthly amortizations, or perhaps saving for another three to four months to increase the downpayment to be able to better manage monthly amortizations.

Going back to about a year ago when the news of the excise tax increase first came out, rumor mongers started spewing out incredulously large amounts of overall price increases, pushing many currently affordable cars out of most people’s reach.

I had shared, through my personal social media account, an official Department of Finance sample computation of projected price increases, and many rumor mongers quickly rallied against the DoF computation and claimed it was wishful thinking.

In the end, these rumor mongers from different media outlets were all proven wrong, and crucially, the general public will still be able to afford many of the cars sold today.

What’s interesting is that cars above P3 million had no increase, or even had their retail prices come down by a few hundred thousand pesos.

What comes to mind is the Toyota Land Cruiser, a staple at any posh subdivision, office carpark as well as the parking lot of Senate lawmakers at the GSIS building in Pasay and the House Representatives at the Batasang Pambansa in Commonwealth.

If unofficial pricing currently being circulated by Toyota dealerships is true, the Land Cruiser’s price went down by roughly P400,000, making it more affordable to our politicians.

Many buyers who believed that the Train Law and the tax increase would not be passed before the end of 2017 are now scrambling to secure cars that had been imported under the old tax regime.

And many have met disappointment.

An acquaintance rushed to buy a Volkswagen Jetta because he was afraid he wouldn’t be able to get a unit at the old price since the Jetta and Golf GTS were selling like hotcakes, and the next batch would be priced higher.

Other manufacturers are now preparing a revised price scheme coupled with an aggressive marketing campaign to sustain market demand and growth.

A sales manager of a Japanese car dealership told me last weekend that, “We’re waiting for new prices together with a new special promo campaign to essentially negate the price increase. Our B-segment car should go up in the region of between P35,000 to P50,000, so our importer/distributor is also preparing a special sales promo offering a discount of P30,000-P40,000 so that even when new stocks covered by the excise tax increase arrives, we will still be competitive and get buyers to still pick our cars due to the actual minimal increase.”

Going back to the Toyota Land Cruiser, it’s amusing to note that initial price estimates saw the Land Cruiser going up to as much as P7 million once the new excise tax took effect.

People rushed to buy. I even saw people signing for heavily accessorized brand new ones at almost P6 million from the dealership, while others rushed to buy gray market imports.

In the end, with the price going down, people who gave in to fear had bought these cars at a significant premium.

Surprisingly, the dealership says it still has no stocks of these impressive yet expensive premium SUV.

This means that gray market importers will still have an opportunity to sell theirs simply due to demand, albeit at far lower margins than they were anticipating.

Rumors had been circulating as early as six months ago of gray market importers stockpiling on Land Cruisers, most of which were coming from Dubai.

They were hoping to flood the market once the new excise tax was approved at the projected price tag of P6.5 million to P7 million.

I guess these gray market importers are probably scratching their heads as their expected windfall profits have vanished.

It is, however, the fuel price increase post excise tax increase that should be more shocking to the market.

The average increase will be around P3 per liter for gasoline and diesel, and as per the Department of Energy’s s statement, the increase isn’t expected to happen until around January 15 (next week) when the minimum 15-days stock inventory that fuel companies carry is consumed.

The 15-day inventory regulation by the DOE is meant to keep fuel prices stable over a period of two weeks or longer.

In my case, I drive a Toyota FJ Cruiser, and my 80 or so liters of fuel which lasts around 8 to 9 days costs me around P4,000 per full tank.

With the increase in prices, I’ll be adding roughly P320 per tank up, or the equivalent of paying for an extra 6 liters, without actually getting it.

After three fill-ups in a month, I’d have spent an additional P1,000 for fuel. Now, that is harsh, and it will affect not just new car buyers, but everyone.

All the more reason for the government to find a way to reduce traffic in Metro Manila and help get my gas-guzzling SUV to stretch its fuel mileage.

If it’s any consolation, I’m quite happy that the price increase for new cars will be manageable for most average income earners.

Some new car buyers will probably delay their decisions by as much as six months. Ironically, those set on buying higher valued vehicles will find their dream cars slightly more affordable.

I just pray that the additional funds generated by the Train Law will really be put into the Duterte Administration’s #buildbuildbuild program, and not into the pockets of corrupt politicians.