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Biz Buzz: Happy problem

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Biz Buzz: Happy problem

/ 12:54 AM May 19, 2017

Dealers of luxury vehicles in the Philippines are currently struggling with a problem. It’s not exactly a crisis—at least, not yet—but it is testing the mettle and abilities of their local managers just the same.

That’s because the local market for high-end automobiles and sport utility vehicles has experienced a surge in demand from Filipino buyers, especially in recent months after the Department of Finance’s plan to raise excise taxes on vehicles started to crystallize.

In other words, buyers from across the country’s economic strata have been rushing to buy their cars and SUVs (pickup trucks are exempted) before the government slaps more taxes on them.

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This “happy problem” has been especially challenging (in a good way) for Lexus Manila, the local dealer of Toyota’s premium marque.

Lexus officials tell Biz Buzz that they, like other vendors of luxury vehicles, have seen a sharp spike in purchases in recent weeks, and the rise continues. That’s because the progressive nature of the proposed tax hike will mean that more expensive vehicles will be slapped with higher tax rates.

For Lexus’ entire range of highly coveted cars and SUVs, that would translate to an increase in excise taxes of between 60 percent for “entry level vehicles” (you could call a P2.7-million IS350 sedan “entry level”) to 120 percent for top end LX570 SUVs which come at almost P8 million.

Buyers want to buy whether they can afford the IS sedan or the LX SUV (or the equally pricey LS limousines).

“We are currently experiencing increased demand for Lexus vehicles across the entire model range,” said Lexus Manila’s marketing chief Spencer Yu, explaining that this phenomenon was an offshoot of the looming tax increases.

The problem now is that the distributor’s inventory has been nearly wiped out by buyers.

Not to worry. The Philippines being relatively close to Lexus’ Japan manufacturing facilities means waiting time for any buyer stands at “only” around three weeks, compared to possibly months for some high-end European brands.

The real problem for the luxury car industry will come once the tax hikes take effect. For now, however, it’s a happy problem to have—the sort people tend to “humble-brag” about. —DAXIM L. LUCAS

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Makati settles tax row

Another bit of good news for Makati residents: Mayor Abby Binay has finally settled a long-festering legal battle with the Bureau of Internal Revenue (BIR).

The neophyte mayor and Revenue Commissioner Caesar Dulay recently struck a win-win settlement where the city government paid the tax agency P300 million to fully settle the P904 million it owes the BIR. In turn, the tax agency waived P554.7 million in penalties and surcharges — a windfall for Makati.

Makati was earlier slapped a P1.5-billion deficiency assessment by the BIR for the years 1999 to 2004. But the case dragged on for more than 15 years and remained unresolved even during the respective terms of Mayor Abby’s father, former Vice President Jejomar Binay and her brother, Junjun. From 2005 to 2011, the city managed to pay only P600 million.

The amicable settlement is a positive development for Makati. Aside from the lengthy and costly litigation, the case has been a sore point between two government agencies. With the BIR waiving P554.7 million in penalties and surcharges, the city government could spend the amount to feed an estimated 85,000 pupils per year or for other badly needed health and social services. Not bad. Not bad at all. —Daxim L. Lucas

Selling Boracay resort

Tourism may be an in-thing but the resort business is something that the Consunjis may give up. Operating the 500-room Alta Vista De Boracay resort, for instance, is a profitable venture but DMCI Holdings feels that this business isn’t something that should take up much of DMCI Homes’ management time.

The idea of selling Alta Vista De Boracay, which was developed at the height of the Wall Street-epicentered global financial crisis of 2008, came about as a Chinese tour operator, which frequently brings tourists to this resort in Barangay Yapak, Boracay, made an offer to buy rooms in the resort to have better control of accommodations given that there’s a steady inflow of Chinese tourists to the island.

In the future, DMCI Holdings president Isidro Consunji believes the influx of Chinese tourists will continue while China grows as an economic superpower. Thus, DMCI is willing to sell the resort to the Chinese tour operator which, however, might buy it in phases. The first phase will likely be 100 rooms. But the deal will have to be structured while considering the constitutional prohibition on foreign ownership of land.

But while DMCI Homes is shying away from the hotel/resort business, it’s rethinking its business model to embark on larger-scale mixed-use developments, optimizing its construction and engineering expertise. Embarking on larger estate or mixed-use developments, according to Consunji, is a better and more efficient model than pursuing one pocket development at a time. —Doris Dumlao-Abadilla

Toll roads to Tagaytay

Big conglomerates are seeing better toll road opportunities linking Metro Manila and Tagaytay City, a popular weekend getaway for those living in the capital district.

In line with this, it seems there are now two toll road proposals seeking to do just that, perhaps much to the annoyance of some Tagaytay residents seeking solitude.

There is Metro Pacific Investments Corp.’s plan to submit next month an unsolicited offer to the Department of Public Works and Highways for what it dubbed the Cavite-Tagaytay-Batangas Expressway.

The P25-billion project would span about 46-kilometers and would provide motorists from Cavite Expressway easy access to Tagaytay and Nasugbu, Batangas using Cavitex and the yet to be built Cavite-Laguna Expressway starting in Silang, Cavite.

It gets interesting because conglomerate San Miguel Corp. has another proposal. Its project is the Tanauan-Tagaytay Expressway, which spans about 29-km and would cost about P26 billion. This road will cross Tanauan, Silang, Amadeo and Indang in Cavite until Tagaytay through the Tagaytay-Nasugbu Highway.

This was submitted to the Department of Transportation on Feb. 27 since it was an extension of the South Luzon Expressway project, which SMC operates.

So two potentially competing tollroads are up for the government to evaluate (not the first time it’s happened, by the way). We’ll keep tabs on this one, folks.—Miguel R. Camus

PEP House

After buying into stock brokerage house Philippine Equity Partners Inc. (PEP) and becoming its nominee and managing director, it seems that veteran stock broker Lorenzo Andres “Randy” Roxas wants to be more active in the capital market by organizing a new stand-alone investment house. The investment house will of course focus on equity deals, given that this is the expertise of Roxas and his partners at PEP.

The stockholders of PEP thought that going into this new business was worth considering given that corporate relations with PEP is already there. This is also indicates bright prospects for equity deals in corporate Philippines, including initial public offerings.

PEP is an institutional brokerage house that executes trades for Bank of America Merrill Lynch and issues co-branded research with it.

If and when Roxas and partners create a new investment house, this means that if Merrill Lynch would become more active in IPO deals, the new house will be able to get some business on the domestic underwriting side and it could also originate deals that it could feed to Merrill Lynch. —Doris Dumlao-Abadilla

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