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Encouraging signs from the auto sector

June 19, 2019

THE country’s two vehicle manufacturers’ and distributors’ groups published their monthly sales data for May this week, and in doing so provided some very good news about the economy, although in a way that might not be immediately obvious.

The Chamber of Automotive Manufacturers of the Philippines Inc. (Campi) and the Truck Manufacturers Association (TMA) reported that vehicle sales rose to 30,988 units in May, up 20.2 percent from the 25,799 vehicles sold in April. On a year-on-year basis, sales increased by 1.2 percent from 30,620 in May 2018.

The month-on-month jump in sales looks big, but only because the comparative April sales figure is always rather low due to the end of the school year and the annual tax filing deadline. The more significant comparison is the year-on-year increase, which indicates that the automotive industry, an important industrial sector for the Philippines, is not only healthy, but is growing in a healthy way.

The positive indicators are found in the distribution of the overall sales numbers described above. Of the total vehicles sold in May, more than 70 percent were commercial vehicles, mostly trucks. The 21,945 sold in May showed 3.4 percent growth from a year earlier. The smaller passenger car market, however, declined by 3.7 percent to 9,053 sold last month from 9,401 sold in May last year.

These figures indicate that first of all, the biggest part of the local automotive sector is growing. While some of the commercial vehicles purchased in May were probably replacements for older vehicles, the increase in sales still indicates that business activity is growing across the economy as a whole.

The decline in passenger car sales is also a positive indicator, but in a more indirect way. It has become painfully obvious over the past couple of years that the real solution to chronic traffic congestion is to reduce the number of private cars on the nation’s roads. This is one of the secondary objectives of the higher vehicle excise tax imposed in 2017. However, implementing aggressive measures to reduce the number of private cars would cause more problems than they would solve.

The automotive sector provides thousands of jobs and supports extensive networks of related local businesses; even relatively mild constrictions like the higher excise tax cause a great deal of collateral damage. Thus, the most prudent way to reduce the number of private cars is to do it gradually, letting market forces guide a shift away from passenger car manufacturing toward more commercial vehicle production. With a gradual shift, manufacturers and the web of businesses they support can adapt without suffering serious disruptions.

The latest figures provided by Campi and TMA show that process has begun; growth in the passenger car segment has reversed. Of course, one month’s data is not a trend, but with planned future increases in the excise tax and other measures such as the “no garage, no car” regulation that could be implemented, the trend may be established.

The May data indicates that the automotive sector is headed in the right direction; the data in the coming months will show whether it is actually moving that way.

Credit belongs to : www.manilatimes.net

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