Second Semester Recovery in 2009 for Auto Sector Seen
Local car makers are likely to sell fewer cars in the first half compared with a year earlier as a slowing economy and tighter credit cuts into demand.
But local consumer confidence remains fairly high and the industry is expected to recover from the slump in the second semester, Ford Group Philippines President Richard C. Baker told a briefing on Friday.
Asked to comment, the local umbrella group of automakers and distributors – of which Ford is not a member – declined to provide a detailed forecast for the year.“Maybe that just applies to them. We’re just starting the year now and we had just ended with a 6% growth in 2008,” Chamber of Automotive Manufacturers of the Philippines (CAMPI) President Elizabeth H. Lee said in a telephone interview.
She had said on Thursday, however, that the industry expects the global crisis’ impact to be “relatively less” this year.
“It will be dependent on the financing environment, as I earlier said,” Ms. Lee said yesterday.
CAMPI on Thursday announced 2008 sales growth of 124,449 units, up 6% from a year ago but still short of target. The result bucked a global downtrend in sales but a December slump could be an indicator of what lies ahead in 2009.
Ford Phils. said it gained 3.5% last year and captured 6% of the market, which is dominated by Toyota Motors Phils. Corp. at some 37%.
Mr. Baker said Ford was “cautiously optimistic” and hopes to match the sector’s 2-4% sales growth target this year. The company can maintain flat growth this year at the very least, he added.
“Clearly, 2009 is going to be a very exciting year. Nobody really knows what’s going to happen. We’re cautiously optimistic,” Mr. Baker said, noting that the Philippine car market remains relatively resilient.
He said the local economy was sound, with inflation appearing to be slowing down, the peso stabilizing against the dollar, and fuel prices now almost back at their pre-surge levels.
“The Philippines looks pretty good, that’s why we remain cautiously optimistic. We hope to maintain a stable [sales] level at least, but I don’t think we expect significant growth under the circumstances.”
While local banks remain stable and the level of bad loans continues to go down, financial institutions appear to be adopting more stringent lending terms. This could affect car demand, since 80% of buyers finance their purchase with borrowings.
Mr. Baker ruled out price cuts similar to the ones introduced in the US, saying the local sector was concerned not so much with consumer demand but more with financing availability.
“Since October, bank lending has become more stringent. That has affected vehicle sales. If there is a way to loosen up financing, that will be good for the domestic auto industry,’ he said.
CAMPI’s Ms. Lee agreed with Mr. Baker on the pricing outlook, saying “There is not going to be marked price fluctuations as there is no basis, given current … relatively okay demand.”
Ford Phils., meanwhile, is putting off any expansion plans and would rather maximize its annual capacity, now at 36,000 units.
The local unit, whose export business is bigger than what it produces for local consumption, has shipped 58,000 vehicles abroad since it started production at its Sta. Rosa, Laguna factory in 2002.
“There are no plans to change production at this time. We’re pretty well set in terms of orders,” Mr. Baker said.
Ford has two manufacturing plants in Southeast Asia, one in the Philippines and another in Thailand. Mr. Baker said the region was expected to have bucked the global car sales decline by selling about two million vehicles last year.
US parent Ford Motor Co. – said to be the least vulnerable of the Big Three automakers which have sought financial assistance from Washington – has said it was braced for initial sales results this year to extend a weakening that swept through the US car industry for most of 2008.
Mr. Baker said the parent company had implemented a plan to restructure and reinvent its business as early as 2006, which involved selling noncore assets and borrowing money when the market was still good.
“We’re using that money now to transform the company by investing on products and retooling our plants,” he claimed.
by Norman P. Aquino with a report from Jessica Anne D. Hermoso, Business World Online
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