Philippines Autos Report 2008

In 2007 sales in the Philippines automotive industry passed 100,000 units for the first time since the 1997 Asian financial crisis. New vehicle sales surpassed the forecasts of both BMI and the Chamber of Automotive Manufacturers of the Philippines (CAMPI), with growth of 18.3% to 117,903 units. Strong economic growth has been cited as one of the contributing factors to this performance and stable economic indicators should support further growth in 2008. However, we are in agreement with CAMPI that sales growth for 2008 will be lower than the 18.3% achieved in the previous year. CAMPI projects growth of between 5% and 7%, while BMI is slightly more optimistic with a forecast of 8% to take sales over 127,000 units.

Although BMI also expects production to rise in 2008, local assembly is under threat from moves to reduce import tariffs, which would erode the competitive advantage of manufacturers producing locally.

Toyota, as one of the firms using the highest level of local content in its vehicles, would be particularly hard hit and has revealed that it is considering the future of its production operations. Newcomers have not been deterred, however, with Chinese carmaker Geely making its debut via imported completely built units (CBUs), to be followed by domestic assembly of kits. The carmaker has revealed plans to build a plant in the Subic Bay Freeport Zone to produce low-cost cars for what it labels the B, C and D income brackets, which account for around 75% of its sales.

The economic growth that has generated such strong demand for new vehicles has also impacted upon BMI's Business Environment Ranking for the automotive industry in the Asia Pacific region. Both the economic and political risk rating have been raised for the Philippines, due to the market's potential for further economic growth and the potential for peace with the rebel Moro Islamic Liberation Front (MILF). The overall score for the Philippines remains the same, however, keeping the market in joint 11th place with Malaysia and Taiwan. The projected output growth of 24% over the next five years is also lower than the regional average, resulting in a low score.

Despite its uncertainty over producing in the Philippines, Toyota retains its dominant market lead with 38% of sales. Indeed, the Japanese giant became the first foreign carmaker to sell over 500,000 units in the Philippines and is now aiming for the 1mn mark by 2017. The Toyota group also plans to build on its market share through the launch of the Lexus premium brand later in 2008. The nearest rival to Toyota is second-placed Honda with 14% of the market from sales of 17,321 units. Mitsubishi was a close third with 12% from sales of 15,005 units.