Consumer reaction to rising inflation, tax reform blamed for drop in vehicle sales

Vehicle sales fell 21.7 percent for the fifth month in a row in June.

This was blamed mainly on the consumers’ reaction to a rising inflation and the tax reform program that made most vehicles more expensive.

Sales reached only 29,350 units in June, down from the 37,479 units in the same month last year, according to the joint data of the Chamber of Automotive Manufacturers of the Philippines Inc. (Campi) and Truck Manufacturers Association (TMA).

This brought the first semester sales down by 12.5 percent to 171,352 units from 195,772 units in the same period in 2017.

In a statement, Campi president Rommel Gutierrez blamed the decline in vehicles sales mainly on how consumers prioritize buying basic goods and services more, as opposed to buying motor vehicles, given the rising inflation.

The prices of basic goods have been on the rise for the past few months, but this was the first time that Campi had admitted that inflation played a large role in the decline of vehicle sales.

“However, we remain optimistic that our sales will recover in the coming months,” Gutierrez added.

In a previous interview, he said the industry expected to post flat growth at the end of the year, mainly due to the effects of the TRAIN law.

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

Because of the TRAIN’s higher excise tax rates, prices of most vehicles rose. However, the law lowered the tax rates on cars in the luxury segment.

Both the commercial vehicles and passenger cars segments sold less units year-on-year and year-to-date.

The passenger car segment sold 7,766 units in June, a 42.6-percent drop from 13,525 units in the same month last year. In the first six months of the year, this segment registered a 16.5-percent sales decline to 55,746 units from 66,788 units a year ago.

Commercial vehicles, on the other hand, saw a 9.9-percent drop in sales for June alone. Sales reached 21,584 units, down from 23,954 units sold in the same month last year.

Year-to-date, this translates to a 10.4-percent decrease to 115,606 units from 128,984 units sold in the same first six months of 2017.

Toyota Motor Philippines Corp. remained the market leader in the first semester with a market share of 42.68 percent despite a 14.7-percent drop in sales.

It was followed by Mitsubishi Motors Philippines Corp. whose sales dropped 3 percent, with a share of 19.5 percent.