Philippines Autos Report Q2 2012

Calls for a supportive government policy towards vehicle and components production are gathering pace. In March 2012, the chief regional officer for Toyota Motor Asia Pacific, Takahiro Iwase, appealed to the government to implement supportive policies to develop a vehicle and components production hub. Philippines autos association CAMPI had earlier urged the government to push ahead with a clear policy to help the sector remain competitive among its ASEAN peers, particularly before all tariffs are withdrawn under the ASEAN Free Trade Agreement. However, the ongoing delays in finalising the Motor Vehicle Development Programme (MVDP) risks putting off potential investors from investing in the country.
The International Organization of Motor Vehicle Manufacturers (OICA) estimates that total vehicle production in Philippines decreased by more than 21% y-o-y, to 51,730 units, in 2011. BMI believes sharp declines in 2011 will make way for some recover in production in 2012, but we see little scope for any substantial increase in auto production in the country anytime during the forecast period unless more concrete plans come to the fore. As such, after a close to 16% y-o-y growth in autos production to 59,800 units in 2012, we limit our forecast to a rather subdued 4.6% y-o-y growth on average between 2013 and 2016.
Things look more promising for the demand segment on the other hand. Two months into 2012, there have been mixed results in the Philippines new vehicle market as importers mostly capitalised on the ongoing supply shortages hindering local producers. CAMPI announced that combined sales in the first two months of 2012 reached 18,977 units, down 15.7% year-on-year (y-o-y). For the industry as a whole this is a positive sign that demand exists in the market.
Indeed, private consumption growth, which makes up the mainstay, or around 80%, of the economy is on the whole likely to remain strong in the coming quarters, boosted by supportive domestic economic conditions and our expectation of continued growth in remittance inflows. BMI accordingly forecasts vehicle sales to reach 255,400 units by the end of 2016, growing by an average of 9% per annum between 2012 and 2016.
With the view to cash in on this growth, Filipino car dealer Autostrada Motore is looking to bring the Ferrari and Maserati brands to the country. Meanwhile, General Motors Company's (GM) Chevrolet brand is banking on the government's most recent infrastructure programme to help drive autos growth and enable Chevrolet to offer the 'right products to the market'. These announcements testify BMI’s view that the competitive landscape in the country is still far from saturated by carmakers and the market therefore provides ample opportunities for new entrants.