Sluggish car sales in January amid implementation of tax reform law

OFF TO A SLOWER START. Vehicle sales in the Philippines post slower growth in January 2018 in the midst of higher excise tax on automobiles due to the tax reform law. (INQUIRER.net FILE PHOTO)

In its first month under higher excise tax rates, car and truck manufacturers reported slower growth in sales, showing signs that the now more expensive cars have dampened consumer demand.

In a joint data from the Chamber of Automotive Manufacturers of the Philippines, Inc. (Campi) and Truck Manufacturers Association (TMA), car sales of member companies in January grew only four percent to 31,645 units, slightly higher than the 30,425 units sold in January 2017.

The latest growth figures show signs that the industry may already be feeling the impact of the TRAIN law, which was passed in December 2017 and took effect on January 1, 2018.

The tax reform law lowered the personal income tax but imposed higher consumption taxes on goods such as sugary drinks and automobiles.

Because of the TRAIN law’s higher excise tax rates,

Most cars under the TRAIN law, which was aimed at raising more revenues for the government, were priced higher since January 1. However, the measure lowered the tax rates imposed on cars in the luxury segment.

“While this is considerably low compared to the growth rate of January 2017 (27 percent up versus January 2016), we still consider January 2018 sales as satisfactory and a good start for the auto industry.  We will continue our efforts in sustaining the growth momentum of past years,” said CAMPI President Rommel Gutierrez in a statement.

The sale of passenger cars fell 10.9 percent in January 2018 to 9,790 units from 10,984 units in January 2017. Commercial vehicles, which accounted for more than 60 percent of the market, grew 12.4 percent to 21,855 units in January 2018 from 19,441 units in the January 2017.

Industry officials warned last year that higher excise tax rates on most cars would result to a lower consumer demand. This led some to expect that consumers would be making their car purchases in 2017 in order to save up on costs.

In 2017, the industry exceeded its target, growing beyond 450,000 units. CAMPI and TMA accounted for most of these sales, selling 425,673 units last year, 18.4 percent higher than the 359,572 units sold in 2016.

The groups also exceeded their target in 2017, which was pegged at 400,500 units.

Toyota Motors Philippines Corp. was still the market leader as of January this year, in spite of reporting a 9.1 percent decline in sales. Mitsubishi Motors Philippines Corp. placed second, followed by Ford Motor Company Philippines Inc.              /kga