Chasing that elusive 10% sales growth

Will the Philippine automotive industry post a 10 percent growth in sales this year as forecast by its leaders?

That is a loaded question after the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) and the Truck Manufacturers Association (TMA) jointly announced last week a modest 1.6 percent increase in sales in the first half of this year compared to the same year-ago period, or 174,331 units sold, versus 171,655 units in 2018.

The Association of Vehicle Importers and Distributors, Inc. (AVID) reported an even slighter 1.0 percent increase in the first half sales, versus the same period last year with a total of 43,333 units sold.

But if we were to deduct from AVID’s tabulation the three brands — Ford, Suzuki and Mercedes-Benz or Auto Nations Group (ANG) – that CAMPI also counts as their members, AVID’s total vehicle sales in the first semester would dip to 20,745 units.

That’s because Ford’s sales in the first half, passenger cars (PCs) and light commercial vehicles (LCVs) combined, reached 11,227 units as duly recorded in the CAMPI tabulation (See chart “Top 10 1st Half 2019 Performers Based on Vehicle Sales )

Suzuki sold a total of 10,817 units, as recorded in the above chart, while ANG , according to AVID’s count, sold a total of 544 Mercedes-Benz PCs and LCVs.

Add up the sales of the three brands (11,227 plus 10,817 plus 544), and you get a grand total of 22,588 units.

Subtract 22,588 from 43,333 and you get 20,745, the real number of vehicles sold by AVID.

Add AVID’s 20,745 to CAMPI’s 174,331 units sold, and you get 195,076 as the combined sales of CAMPI and AVID in the first half of 2019.

ONLY 3,024 MORE. Compare this year’s 195,076 to 192,052, the total vehicle sales of the two groups in the first semester of 2018 (see “Optimism Amid the Gloom” PDI Motoring Special Report, July 25, 2018) and you get an improvement of only 3,024 more vehicles sold.

Early this year, CAMPI president Rommel Gutierrez, who is concurrently 1st vice president of Toyota Motor PH, issued a press release titled “Auto Industry Anticipates Better Year Ahead.”

It was a surprisingly bullish statement after the consolidated total sales of CAMPI and AVID had plunged 16 percent to 382,361 units year-to-date (YTD) December 2018, from 448,107 units in 2017.

Nonetheless, Gutierrez, as well as AVID president Ma. Fe Perez-Agudo who concurrently heads HARI, forecast a 10 percent growth for 2019.

The two industry leaders based their optimism for 2019 on the month-to-month positive sales growth in the July-December 2018 period, the strong economy, and the Central Bank’s assurances of a lower inflation rate after it rose to 6.7 percent in September.

They were unfazed when sales posted negative growth in the first quarter despite a 22 percent spike in March 2019, versus February 2019.

MONTH-TO-MONTH GROWTH. In his press release about the first semester this year, the CAMPI president pointed out the month-to-month upward trend in sales in the second quarter: 30,998 units in May 2019, which is 20.2 percent higher than April 2019’s 25,799, as well as 31,949 units in June 2019, which is 8.7 percent higher than the June 2018 sales figure.

Gutierrez traced the dismal sales last year to economic factors such as rising oil prices, the unstable inflation rate and the new, higher excise tax on vehicles imposed by the TRAIN (Tax Reform for Acceleration and Inclusion) law that took effect on January 1, 2018.

“We remain very optimistic that the local auto industry is already on a path of steady growth after we conclude the first half of the year on a steady note,” Gutierrez said.

“The automotive brands’ collective efforts, highlighted by fleet sales, good financing deals, and modest updates and upgrades, show that we have learned to adjust and adapt to market conditions, thus helping consumers acquire new vehicles with fewer hurdles.”

Indeed, buying a brand new car became almost irresistible beginning this year up to now, as the down payment was slashed to below P20,000 for a brand new car.

Examples: P10,000 down payment for a 2019 Suzuki Ciaz GL MT, P18,000 for a 2019 Suzuki Ciaz GL AT (July 10, 2019 ad in PDI); P12,000 DP for a 2019 Mitsubishi Mirage G4; and P18,000 DP for a 2019 Mitsubishi Xpander (July 12, 2019 ad in PDI); P14,000 DP for a 2019 Honda City (July 15, 2019 ad in PDI).

AVID president Perez- Agudo also chose to call the glass half full instead of half empty by focusing on the increase in sales in the second quarter, compared to last year’s second quarter.

“In the second quarter of 2019 alone, AVID reached a total of 21, 134 units, a 5 percent increase versus Q2 2018,” she emphasized in a press release accompanying the group’s first sem sales report.

“Despite headwinds that include an economic slowdown in the first quarter of 2019, AVID posted a third straight month of positive growth to finish the second quarter strong.

“We believe that this slowdown is temporary since the Philippines is now on a higher growth path and is a leading economy in the ASEAN.

“Given these, we will continue to introduce exciting models and innovative services to give consumers more value for their money.”

CHANGES IN MARKET SHARE

Meanwhile, despite the slight growth in sales posted for the first half of 2019, what stands out is that seven out of the Top 10 brands lost market share (See chart.)

(Incidentally, our Top 10 Sales Performers chart does not include Adventure Cycles PH, Inc., which ranked no. 8, and Hino Motors PH Corp., which ranked no. 10 in the CAMPI-TMA list, because the former markets only two-wheel vehicles or motorcycles, while the latter produces heavy duty Category IV and Category V trucks and buses.)

Even almighty market leader Toyota saw its market share diminish from 40.0 percent in 2018 to 39.5 percent in the first semester this year, while perennial runner-up Mitsubishi’s dropped from 18.3 percent to 16.8 percent.

The three brands that bucked the slump are third placer Nissan, whose market share soared to 11.3 percent from 7.2 percent last year; Hyundai, up at 9.5 percent from 8.8 percent; and Suzuki, which rose to 5.8 percent from 5.2 percent.

According to CAMPI’s number crunchers (without taking into account AVID’s data), Nissan PH, Inc. scored an astounding 59.3 percent leap in sales in the first sem of 2019 versus the same year-ago period.

Nissan thereby widened its lead over Hyundai for third place despite the Korean brand’s 9.1 percent increase in sales this first half compared to last year’s.

At the same time, Suzuki PH, Inc. improved its market share to 14.4 percent, in the process toppling Honda Cars PH, Inc. from sixth place.

Among the Top 10 Performers, Honda sustained the biggest loss in market share at 14.7 percent due to 10,251 units sold this first sem, compared to 12,017 sold in the first sem last year, making it easier for Suzuki to overtake it in ranking.

The other market share losers among the Top 10 in the first half this year are Ford Motor Co. PH, Inc. (from 6.8 percent down to 6.0 percent), Isuzu PH, Inc. (from 4.3 percent down to 3.7 percent), and cellar dweller Chevrolet PH The Covenant Car Company, Inc. or TCCI (from 1.5 percent down to 0.7 percent).

In fact, the distributor of Mazda, Bermaz Auto PH, Inc. almost equaled Chevy’s performance by selling 1,284 vehicles, only 14 units less than the American brand’s 1,308.

Ninth placer Foton Motor PH, Inc. maintained its 1.2 percent market share with 2,247 units sold in the first half this year, versus 2,208 last year.

SUMMING UP. The auto industry’s leaders no longer mention their 10 percent growth projection for this year, given the 16 percent plunge in sales in the year 2018 versus 2017, and the tepid improvement in the first half this year.

Much less is there any reference to Vision 2020, the industry’s ultimate aspiration to sell 500,000 vehicles by 2020 — which happens to be next year already.

But by plodding on steadily with month-to-month growth in sales, interrupted by an occasional hiccup of negative growth, the industry may still achieve their 10 percent growth objective.

Only it’s unlikely to happen this year or next.