The local vehicle industry is heading to its worst sales decline since the financial crisis of 1998 as manufacturers expect deliveries to fall by as much as 15 percent this year.
The industry was not expecting such dismal showing for 2018, according to Rommel Gutierrez, president of the Chamber of Automotive Manufacturers of the Philippines Inc.
He said the industry earlier expected sales to decline in the first semester due to the Tax Reform for Acceleration and Inclusion (TRAIN) Act, the tax package which made most cars more expensive by hiking excise taxes.
However, it did not anticipate the surge in inflation in recent months that hurt the consumer appetite for new vehicles, he noted.
Nine months in, official data showed that the industry continued suffer from falling sales despite earlier assurances that the market would finally see the light at the end of the tunnel.
He told reporters on the sidelines of the 7th Philippine International Motor Show on Wednesday that the year-end forecast for 2018 would be equivalent to a decline of 10 to 15 percent.
A drop within that range would mark the lowest yearend industry sales in two decades.
The latest forecast falls way below the industry’s target of ending the year with flat growth. Gutierrez attributed this to a “combination of many factors,” with the TRAIN law playing a key role.
“At that time, we were saying it would only be a flat growth [for this year]. [Sales have] been going up every year [before this],” he said. “The fact that we didn’t project an increase [then and instead only projected flat], that in itself is [already] sort of a decrease.”
Back in 1998, vehicle sales dropped 43.76 percent to 81,231 units from 144,435 units in 1997, according to data collated by the Japan External Trade Organization.
It took the industry around 14 years for it to recover its lost momentum.
In 1996, a year before the financial crisis hit East Asia, the industry sold 162,095 units, data showed. Only in 2010 did the industry breach that record with 168,490 units sold.
From 2011 onwards, Gutierrez said the industry has been growing at an average of 16 percent annually, until its yearly sale breached its 450,000 sales target in 2017.