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Sunday, June 16, 2024

The early automotive rundown and what the rest of 2024 promises to be

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A month has already ended as we entered 2024 with another promising banner in the local automotive industry.

The combined report of the Chamber of Automotive Manufacturers of the Philippines, Inc. and the Truck Manufacturers Association shows a 21.9% growth in total sales, with 429,807 units registered for the year 2023. Passenger cars accounted for 24% of total sales, with 109,264 units, while commercial vehicles accounted for 76% of total sales, with 320,543 units. Light commercial vehicles, mainly pickup trucks and sports utility vehicles, accounted for 79% of commercial vehicle sales, with 248,148 units.

CAMPI attributes this impressive performance to sustained consumer demand, easier access to credit, and improved supply conditions across all brands. The market leader in the country is still Toyota, with a 46.5% market share, followed by Mitsubishi Motors Philippines Corp. with 18.2%, Ford Group Philippines with 7.3%, Nissan Philippines Inc. with 6.3%, and Suzuki Philippines Inc. with 4.3%, in that order.

At this early stage, several car manufacturers have already positioned their respective companies for a big battle ahead in their pursuit of bigger sales and customer share for their products. Mitsubishi has already presented its big entry into the burgeoning pickup truck market with the launch of the Mitsubishi Triton, while Jetour unveiled its Dashing Symphony at a recent Media & Friends Thanksgiving Soiree.

Over the next few months, several companies are set to unveil their respective new models as the local auto industry heats up. The Manila International Motor Show and the Philippine International Motor Show are two main car events that are eagerly awaited not only by car enthusiasts but also by various people in the business and industry.

Experts boldly predict a robust 20 percent increase in car sales for 2024, and even top-rated local economists are betting on another banner year for the local auto industry. BPI lead economist Jun Neri boldly predicts that while the worldwide economy may not be favorable this year due to various factors, the Philippine economy can withstand the storm and have a good and robust year.

And that would resonate in the local auto industry, which is expected to be very busy this year as new brands and models are paraded one after the other. One local bank, the Bank of the Philippine Islands (BPI), has been very aggressive in opening and expanding its portfolio in the local industry. There are several others catching up, such as Metrobank, Philippine Savings Bank, Maybank, Security Bank, and many others.

For BPI, senior vice president and head of the retail loans department Dennis Fronda revealed that they are now the bank to extend car loans from the ordinary 5 years to 6 or 7 years at most. This is very welcome news for the younger generation of car buyers. Fronda said BPI had several payment solutions through their new BPI MyKotse promotion, which is slowly being embraced by the new generation of car buyers.

Fronda also revealed that electric vehicles (EVs) already account for 4 percent of their total car loan portfolio in 2023, and 15 percent of these new EVs are of Chinese brands. With the entry of more Chinese vehicles into the local market recently, Fronda said that their current portfolio consists of 16 percent Chinese vehicles and 84 percent vehicles from other foreign brands.

It is interesting to note the different approach taken by these two car manufacturing giants, Japan and China, in terms of dealing with vehicle electrification, which is slowly but surely being felt in the local auto market. While China-made cars are mostly fully electric, most of the Japanese-made vehicles being introduced here are hybrids, meaning they still use an internal combustion engine fueled by fossil fuel to generate electricity to power their batteries.

However, these electric vehicles, whether fully electric or hybrid, need to compete significantly in terms of prices since they are still considered expensive compared to vehicles running on fossil fuels. According to an international report, EV sales are still projected to rise in 2024, although there was a slowdown in 2023. In the U.S., EV sales in 2024 are expected to grow year-on-year by only 16% compared to 64% in 2023. In China, year-on-year growth in 2024 is projected to be 11.1% compared to 36.5% in 2023. Factors such as reduced incentives, limited charging infrastructure, and the saturation of early adopters are significant hurdles. To attract the mass market, they need to lower prices.

While most Japanese car manufacturers prioritize maintaining their dominance in the oil-fed engine vehicle market in the country, they are slowly realizing that they cannot stand by and watch their Chinese rivals slowly eat up market shares for their fully-electric vehicles. Most Chinese car manufacturers are fully aware of how Japanese-made cars dominate the local auto market, which is why they do not directly confront their Japanese rivals where they have a stronghold.

Instead, Chinese car manufacturers, especially those that have made substantial advancements in fully-electric cars, are slowly penetrating the local EV market while quietly introducing their fossil-fueled vehicles on the side.

These two car manufacturing giants dominate the export of cars to various countries in the world. Japan reportedly exported a total of 5.97 million vehicles last year, compared to China’s 5.22 million vehicles. While most of the EVs being introduced in the country are led by Chinese brands, China remains the leading exporter of gasoline-powered vehicles, with new energy vehicle exports growing rapidly. Approximately 70 percent of the 5.22 million vehicles distributed by Chinese companies abroad were gasoline-powered. Many of these gasoline-powered cars went to Russia last year to fill the gap left by auto manufacturers who left Russia when the Russia-Ukraine war started. According to the report, “in the first 11 months of 2023, auto shipments to Russia rose about six times compared to 2022 in value terms.” Mexico was also a major destination for Chinese exports of gasoline-powered cars.

Since Chinese-made EVs have faced challenges entering the US auto market directly, they are slowly penetrating several European and Asian countries where there is a strong call for greener energy.

Therefore, when you attend major local auto shows in the near future, don’t be surprised if there are more electric vehicles, both fully electric and hybrids, than conventional internal combustion engine vehicles.

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