The state of the automotive industry

If you’re into cars, working in the auto industry, drive a lot for work or pleasure, or are just cost-conscious, you know things aren’t looking good for the entire automotive industry. My colleague, Aida Sevilla-Mendoza has written an article in this same issue that shows the sales performance of the automotive industry and it’s quite depressing indeed, especially considering 2017 was the best year ever for the industry.

Personally, I feel the industry was due for some market correction anyway, and this is the day of reckoning for the industry. But I am glad that at least, the industry has matured and is more than capable to brave this storm confidently. With some brands reporting (unofficially, in hushed tones), as much as a 40% drop in sales, they remain confident in the overall prospects for the industry.

But a new threat is emerging for new car sales: government is close to approving legislation requiring a car buyer to show proof of parking space before they can purchase a new car. Personally, I feel this is a good idea as it will reduce the number of vehicles parked on public roads, vehicles that further congest our already bursting thoroughfares. But just like PUV modernization, the masses are simply not ready for this sort of radical change. We can blame over-population particularly in Metro Manila, poor public planning on the part of both local and national government, and the fact that property developers simply do no create adequate parking facilities for residential and commercial use. As an example, I live 10 minutes away from SM Megamall and Shangri-La Mall. I frequent Shangri-La Mall because parking is readily available there. But I haven’t gone to park in SM Megamall in perhaps five to seven years. Even as early as 10 a.m., before the mall opens, the queue to the parking lots are already long. Bonifacio Global City is perhaps an even better example. Have you tried parking there midday to drop by an office? Impossible. Perhaps we do need this sort of radical change, to force more responsible city planning and private developments to happen, reduce parking on public roads and decongest traffic in the long run.

Recently, the aftermarket, particularly the 4×4 community has been very vocal over their displeasure of the government’s strict enforcement of what are ultimately outdated, antiquated and archaic rules governing the automotive aftermarket industry as issued by the LTO. Taken as a whole, the aftermarket represents about a third of the entire Philippine automotive industry in Peso value, which is in the tens of billions. It generates jobs, pays taxes, brings in foreign direct investments to the country, and allows technology transfer. But cars, just like technology evolve, improve, and change over time. Article 2, Section 9, Paragraph B of Republic Act 4136 gives some technical standards by way of dimensions on motor vehicles allowed to ply our roads. A lot of cars sold in the local market exceed the given figures, technically rendering them illegal for road use. The law was made in 1964. We are still following a law from an era long-past, while technology has moved the goalpost so far forward already. RA4136 needs to be repealed / amended immediately. On another tangent, Joint Administrative Order 2014-01 has also some guidelines on certain modifications that are deemed illegal for road-going vehicles. The problem is, there are no specific technical standards, nor implanting rules and regulations, and requires car manufacturers, and / or their respective dealerships to issue a certificate of safety for these modifications and upgrades. Unfortunately, the OEM side has never done any research / study on this matter either. The result? Confusion. My take? We adopt existing laws governing the use of modified vehicles, and the modifications and upgrades considered safe and legal. We as a country lack the technical skillset, facilities and experience testing and dealing with these matters. It’s the perfect, expedient solution to this issue at hand.

Another issue that’s very hot at the moment is the rising foreign exchange rate. Personally, I feel that this is no fault by our government’s fiscal reforms or the economic performance under the current administration. The US economy is strengthening, buoyed by a new-found sense of nationalism under the Trump administration. Hot money is leaving the country and going back to the US. Compared to our other ASEAN neighbours, we are all comparable to one another in terms of FOREX fluctuations with the US Dollar. Unfortunately, our dependency on imported oil is hugely affected. This is further aggravated by political instability in the Middle East, the impending economic embargo on certain oil producing countries, and OPEC’s decision to maintain current production levels from its remaining member states. Supply in the global market is dwindling at the moment. And basic economics tells us that limited supply versus growing demand will only push oil prices up further. Plus, we are approaching winter season, where crude oil prices traditionally increase due to added demand for heating in countries with snow. The government has ordered a price rollback this week for fuel, but I fear it is a short-term boon for the Filipino consumer, as crude oil prices are projected to go up further towards the end of the year.

It seems with so much bad vibes around the automotive industry, it’s difficult not to remain upbeat. I’ve been monitoring the industry since I started writing in 2004, a good 14 years, and I have seen much, a lot of good, but also a lot of bad. Thankfully, the good has always outweighed the bad in the long run. So I remain confident about the automotive industry. We have truly weathered far worse, and we will get back in good form. Resilience has always been a strong Filipino characteristic.