Auto Industry Keeps Modest Forecast for 2009
January 3, 2009 by Tsikot
After major foreign auto markets experienced large-scale downturn due to recessions caused by the recent global economic crisis, the Philippine auto sector remained cautiously optimistic projecting a two percent conservative growth prospect for next year.
Chamber of Automotive Manufacturers of the Philippines Inc. president Elizabeth H. Lee told The FREEMAN in a statement that they are forecasting only a two percent uptick from 2008 as they are looking at huge possibilities for downturn.
“Growth prospects will slow down; however, it is nonetheless a growth. The conservative growth is dependent on a stable financing environment and relatively strong remittance inflow. It is hoped that the worst case scenario for the industry is a flat growth but this would still be relatively better compared to the devastating effects of the global turndown on the US auto market,” Lee’s statement reads.
Lee discussed that developed markets like the US and developing markets like our country has differences as opportunities for demand growth are present.
She said that the people to cars ratio in the Philippines is low at only 22 cars per 100 people versus that of the 800 cars to 1000 people in the US market and buyers in such saturated auto markets like the US will more likely to postpone their car purchases.
“The good news is that oil prices have come down significantly and the issue of inflation is in the back burner at this time. This will have a better translation on prices of goods which should help sustain consumption,” said Lee.
She also said that so far, car prices are still within acceptable range although it has been unfortunate that foreign exchange (forex) fluctuations on currencies such as the Yen, Euro, Dollar to Peso rates have negated the benefits of lower oil prices.
“Still, to the benefit of car buyers, players continue to offer vehicles at very competitive prices until the year end. Buyers have become more scrutinizing although with the availability of credit in the market, buyers continue to purchase vehicles according to their needs. Competition however, remains stiff,” she added.
Lee stressed that perhaps no country may be left “unscathed” by the current global crisis but the difference would be the degree at which countries would be affected.
However to make sure the auto market continues to expand in the Philippines, Lee urged the industry players to put proper cash flow management on top priority as well as manage inventories to match sales, offer packages that can help make the cost of ownership lower during these times, and sustain competitive prices within a tenable price band.
“Well-managed auto firms opposed to cash-strapped firms will be able to weather the current uncertain environment of slower demand and thinning margins,” she said.
As for the government, Lee stressed the need to maintain enough liquidity in the market, manage the crisis through confidence building to support investor confidence, create aggressive support for SMEs and entrepreneurs as well as to ensure proper management of foreign exchange.
“The declines in oil and raw material prices were offset by the depreciation of the peso. Steps should be taken to increase spending such as social services, and infrastructure to boost consumer demand as the prime engine for growth and this in turn could improve the business climate and create jobs that could offset job losses,” said Lee.
Last year, CAMPI accomplished the successful staging of the 2nd Philippine International Motor Show (PIMS) last August 2008 which attracted a record number of exhibitors, new vehicle models, concept cars and visitors.
by Rhia de Pablo, The Freeman
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