PH passenger car sales to post ‘mild recovery’

Credit to Author: LISBET K. ESMAEL| Date: Thu, 06 Dec 2018 16:22:16 +0000

Passenger car sales in the Philippines could post a slight rebound next year but inflation and a weak peso will continue to dampen consumer spending, a Fitch Group unit said Thursday.

In a report, Fitch Solutions said it expected a “mild recovery” in 2019 with sales likely to inch up by 3.2 percent or around 120,000 units.

“While … households and businesses will have adjusted to the higher vehicle excise taxes imposed under the Philippines’ Tax Reform for Acceleration and Inclusion (Train) law in 2019 … we believe that unfavorable economic conditions in the form of high interest rates, elevated inflation and a still weak peso will see car sales remain under pressure,” it added.

Overall vehicle sales have been dropping since February and latest data from the Chamber of Automotive Manufacturers of the Philippines Inc. or Campi show a year-to-date drop of 13.3 percent to 294,207 units as of end-October.

Passenger car sales totaled 90,522 units, down 20.1 percent from a year earlier.

Next year’s expected rebound, Fitch Solutions said, could extend further as it forecast annual growth of 6.5 percent for 2019-2027.

Amid an expected cooling of oil and food prices, it projected inflation to remain elevated next year, averaging 5.2 percent. The local peso will also continue to weaken “but at a more gradual pace.”

“Given that around 60 percent of new cars sold in the Philippines are imported, a weak peso will place upside pressure on the cost of these vehicles,” the report read.

The industry will also be affected if the Bangko Sentral ng Pilipinas continues hiking policy rates next year, it added.

“As a result, the cost of borrowing in the country will rise, which will in turn weigh on the consumer’s ability to take on financing in order to make new car purchases,” Fitch Solutions said.

“We expect these unfavorable macroeconomic conditions to act as a drag on consumer confidence, and in turn growth in big-ticket item purchases,” it added.

Noting the Bangko Sentral ng Pilipinas’ third quarter Consumer Expectations Survey, it said that issues revolving “high prices of goods, low salary income and a rise in expenditures” had driven Filipino consumers to be “less positive.”

“This pessimistic outlook by consumers for the next 12 months will therefore not bode well for their intentions to buy new vehicles,” Fitch Solutions said.

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