Maintaining Momentum

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The Philippines automotive industry is looking to buck the international trend of lower vehicle production and falling sales brought on by the global economic crisis.



According to a mid-November report issued by the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI), overall vehicle sales remained strong for the first 10 months of the year, and appeared on track to reach the industry's projected target of 125,000 units sold by year's end.



Total sales for the 10 months ending October 31 came in at 104,757 units, a 10% increase on the industry's performance for the same period in 2007.



The country's stable financing system, low car penetration and relatively liquid local economy were expected to drive growth, the CAMPI report said.



According to CAMPI President Elizabeth Lee, the short-term prospects for the Filipino automotive industry continued to be positive, with overall sales expected to climb by 2-4% next year.



"What's happening in the US will not happen here," she said. "The contrasts are stark. The local automotive industry will probably not go into negative territory next year. We still see growth; we still see people buying cars."



While Lee may be optimistic for the coming year, sales figures for October did reveal some cause for concern. Though total sales of passenger vehicles for the first 10 months of the year were up 12.3% compared to the same period in 2007, October saw a 5.5% drop in sales compared to the previous month.



Lee sought to see the silver lining in the growing number of Filipino workers who are returning home as their employment opportunities dry up overseas due to the global economic downturn. According to the CAMPI president, one possible positive effect from expatiate workers re-entering the local economy could be that many will seek to set up their own businesses - enterprises that could further drive commercial vehicle sales.



"Most may choose to become entrepreneurs against the backdrop of declining job opportunities as a result of the crisis," she said. "Bad times could somehow create some good opportunities for entrepreneurs."



Whether or not supported by budding entrepreneurs returning home, the sales of commercial vehicles rose 8.8% in the first 10 months of the year to total 67,184 units, and by 2.7% in October alone. Commercial vehicle sales represented 65% of all automotive sales so far this year.



Daniel Isla, vice president for sales and marketing for Toyota Motor Philippines, expects sales next year to remain at approximate current levels, with at least 60% being commercial vehicles.



"It is going to be similar, although we are not as aggressively forecasting due to the recent economic situation," Isla told the local media on November 24, discussing financial prospects for 2009.



Mel Dizon, vice president of Mitsubishi Philippines, believes that with local banks maintaining their liquidity, credit will remain available, helping to fuel new vehicle sales. However, it is the government's responsibility to maintain both investments and consumer confidence in the coming year to help drive demand, he told local media on November 26.



"The worst thing that we could do is to import the confidence problem in the US to the Philippines," said Dizon.



There is still a wide potential market in the Philippines, with just 22 out of every 1000 citizens owning a vehicle, compared to 800 out of 1000 in the US, according to CAMPI figures.



However, even with the US economy teetering on recession, the income disparity between the two countries is still hugely significant, with average GDP per capita in the US coming in at $47,000, compared to $1900 in the Philippines, according to the International Monetary Fund's World Economic Outlook Database for October 2008.



Though the automotive industry is predicting sales of 130,000 units next year, this will depend on the Philippines economy avoiding recession.



A report issued by the World Bank on November 14 was reassuring, predicting the Philippines' GDP would grow by 3-4% next year. Though the World Bank is slightly less optimistic than the Asian Development Bank (ADB) - which on September 16 projected a 2009 GDP growth rate of 4.7% - there is little suggestion that the country's economy is going off the road, or that the automotive industry is headed for a pothole.
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