FRIDAY, DECEMBER 2, 2016
CURIOUSLY FAST Auto sales zooming but no signs of overheating
By Othel V. Campos
HERE’S no slowing down for the country’s automotive industry. In the last 3 to 4 years , auto sales have been hitting record highs, month-after-month, year-after year.
Based on the ofﬁcial ﬁgures released by the Chamber of Automotive Manufacturers of the Philippines. Inc. and the Association of Vehicle Importers and Distributors , combined sales of these two groups have reached 330,116 units , 40,000 units shy of the industry target of 370,000 units for the nine-month period
of the year. CAMPI and the truck makers group, the Truck Manufacturers Association, alone chalked up 261,370 units while AVID sales of imported vehicles reached 68,746 units. Industry leaders Toyota Motor Philippines Corporation and Mitsubishi Mo-
tors Philippines Corporation say their 2016 target is achievable and may even surpass expectations as the holidays draw near. “Third quarter sales remained strong. We expect sustained growth as we enter the fourth quarter,” said CAMPI president Rommel Gutierrez. Turn to F2
FRIDAY, DECEMBER 2, 2016
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SHAPE OF THINGS TO COME 2
016 HAS been as much about trying to solve consumers’ mobility issues as it has been about trying to sell people new cars. And as technological innovations continue to come thick and fast and urban areas become even more crowded, this could well prove to be the shape of automotive things to come with car companies reinventing themselves as transport service providers.
In September, when Ford set out its future business plan, President and CEO, Mark Fields said: “The world is moving from simply owning vehicles to owning and sharing them. That’s why we are expanding to sell more vehicles and provide transportation services at the same time.” And the Blue Oval is by no means alone. From MercedesBenz and BMW to Audi and Toyota, 2016 signaled a concerted effort to move simply from building cars to solving consumers’ mobility issues. In October international Daimler-owned car-sharing company
car2go celebrated attracting its 2 millionth member, eight years after its launch, and GM has spent most of the past 12 months investing in existing ride sharing services like Lyft or buying up the assets of failed ventures. Yet as a percentage of the average person’s salary a new car has never been cheaper to own, so why are the world’s biggest carmakers looking to change their business model? The simple answer, according to Bosch, is people living in urban environments are falling out of love with the idea of car-ownership. Of being stuck
Motorist puts Google’s driverless car to a test.
in trafﬁc, of never being able to ﬁnd a parking space plus the fact that public transport systems are increasingly efﬁcient and connected -- planning a route is now no more difﬁcult than launching a smartphone app. And, as a result “The car as we know it will soon be history,” said Bosch CEO Dr. Volkmar Denner. “Today you use the internet to book a hotel room; in the future you’ll arrange your mobility on-
CURIOUSLY FAST... From F1 The vehicle importers group led by AVID reported sales in the ﬁrst three quarters grew 77 percent while the third quarter alone is likewise strong, reporting a 27 percent jump in sales to 23,283 units. “As the year 2016 nears its closing, outlook on AVID performance remains upbeat, expected to grow above market expectations due to strong demand and robust macroeconomic fundamentals. And as sales increase, AVID is all the more resolute to reimagine its products and services to provide the constantly-changing Filipino market an ultimate driving experience,” said AVID president Ma. Fe Perez-Agudo. For the month of October, CAMPI sales hit 292,502 units, up 24.5 percent from 234,951 units sold in the same period in 2015. With the recent sales record and the expected output of vehicle importers, the industry is optimistic sales may even go beyond expectations and may hit over 400,000 units in combined sales.
automotive industry is expected to hit sales of half a billion units by 2022, but recent estimates showed, that the rising demand for mobility, automotive sales may hit the target 500,000 units two years earlier or by 2020. “More or less, next year we will be able assess if there is a need to change the 500,000 units (target sales). The demand is high because we now have improved purchasing power,” Gutierrez said. He added that the industry may choose to import the anticipated volume but the need to build an Resurgence Based on the government-craft- independent automotive industry ed incentives scheme CARS, the and generate jobs are more para-
mount than the mere whim of deriving proﬁts from selling. At present, the ratio of imported cars against locally-manufactured cars is at 70:30, in favor of imported vehicles. “The chance of reversing this trend is near impossible. But the local industry can always strive to achieve 50:50 ratio,” said Gutierrez. The industry’s Vision 2020 projected the sale of 500,000 units in the next four years guided by the growing automotive demand that is fueled by steady growth in income. The industry noted that the
line as well.” And if carmakers don’t move quickly to address this change in behavior then any number of tech startups could instead. “Cities globally are dealing with increased congestion, a growing middle class and environmental issues -- all of which can be alleviated by developing mobility solutions ﬁne-tuned to the unique challenges of each location,” said Jim Hackett, chair-
strong domestic market potential is evidenced by the fact that nearly half of the Filipino households or 47 percent are car-less. Just recently, CAMPI revised industry sales forecast for the year to 370,000 units from 360,000 units, after ﬁrst semester sales accounted for than half the target volume. In 2015, actual sales went beyond the forecast of 272,000 units. The automotive industry account for 12 percent of the industrial output and 4 percent of the total gross domestic product (GDP) during the previous administration, according to government statistics. The industry intends to increase the share of the manufacturing sector to 30 percent of the country’ gross domestic product (GDP) from 23 percent and increase employment by 15 percent from 9 percent. The automotive industry remains one of the major drivers of the country’s industrial sector with sales totaling about P250 billion in the last 3 years.
While the industry is bent on pushing sales to new heights and contributing more to the economy, the proposed tax reform may undo gains achieved in the recent
man, Ford Smart Mobility LLC.
Gateway to more services
Over the next ﬁve years, the global market for connected mobility is expected to grow by 25% annually. With every year that passes the technology underpinning it will get more powerful, more intuitive and more connected. This in turn will open the doors to even
years. The pending proposal to increase excise tax, speciﬁcally ad valorem, based on graduated rates and on automotive models and categories, may earn additional taxes for the government but may slowdown the trajectory for growth of the industry. Recent developments showed efforts of the local automotive industry in pushing for the exemption of vehicles registered under CARS from a proposal to expand tax revenues. CAMPI vice president and MMPC corporate secretary and ﬁrst vice president Dante Santos said the Trade Department is backing the industry position. “We will be asking for lower rates for the entire automotive sector. We have to protect the local industry, the CARS program and the requirement of the industry, as well. CARS is supposedly the vehicle for the masses, if that will be compromised, then all is gone,” he said. Based on initial estimates, the increase in unit price may range from P100,000 to P200,000 per unit depending on the unit/model category. The industry recently met with the Finance Department to apprise the government of the senti-
more potential services. Take parcel deliveries for instance. Smart and Volvo are both already testing services where couriers can deliver a package to a person’s car, using their phone to unlock the vehicle and send a ‘package arrived’ message. “Alongside the home and the ofﬁce, the car will become the third living environment,” explains Denner. The car is becoming a major hub within the internet of things: BMWs can now communicate with Amazon’s Echo home assistant and any Mercedes with the right options can remotely tell a Nest thermostat that its owner’s stuck in trafﬁc so the heating doesn’t need to come on yet. And as they connect to the IoT, they will also connect with the wider transport infrastructure, public and private. “In a few years, mobility will be seamlessly connected,” said Denner. And at that point, the concept of a privately owned car could be usurped by the idea of a publicly shared vehicle that’s yours when you need it. AFP
ments of the industry. A position paper will be submitted soon to formalize the industry’s stand on the proposed tax increases. CAMPI is currently ﬁnalizing a study that will support the industry’s initial claim of slower sales and the detrimental effects to government incentive programs like CARS and the Motor Vehicle Development Program (MVDP). The study will also determine the value of increases per gradation or category and the volume of sales lost if the tax proposal is approved in its original text. Apart from tax hurdles, the unstable foreign exchange is also impairing the viability of vehicle pricing. The industry, Santos said, will be forced to impose upward price adjustment by December or January 2017. “This is the forex level during the ASEAN ﬁnancial crisis. The rates haven’t settled down yet and it keeps on increasing. Our (MMPC) current costing in based on $45 (to a peso). It has been awhile since we adjusted due to forex rates,” he explained.
Rolando G. Estabillo Publisher
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Ad Solutions Manager
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By July Rada
ERHAPS the biggest problem that has been confronting the car insurance industry, like the other sectors in society, is fraud.
Data from the Philippine Insurers and Reinsurers Association showed that the estimated amount of fraud associated with vehicle insurance reaches as much as P1 billion every year. This, according to the association, has been committed by individuals and organized groups alike. The group said this type of fraud includes false car crashes, repairs and car thefts. PIRA chairman on technical committee on motor car insurance Arturo Reyes said during the ﬁrst car insurance summit in Pasay City in July that fraud involves deception, betrayal and lies. He said these kinds of activities are done in secret, either by individuals or organized groups. Reyes, however, sad that PIRA has yet to conduct a study on the actual state of fraud in the Philippines. Reyes said fraud accounted for more than 10 percent of the entire losses in motor car insurance. “ But this only accounts for those insurance companies paid for but did not know to be fraudulent. It still does not include those detected as fraudulent and were not paid. As you know, our laws do not recognize attempted fraud. Although we catch a lot, we could not do anything against these fraudsters,” Reyes said. For her part, Insurance deputy commissioner Vida Chiong said insurance fraud was victimizing both
FRIDAY, DECEMBER 2, 2016
Fraud-proofing CAR INSURANCE
claimants and insurance providers. She said the Insurance Commission was recognizing the growing problem of fraud and issued a circular ordering all companies to formulate anti-fraud plans. The Highway Patrol Group of the Philippine National Police have covered 74 different instances of vehicle motor insurance fraud from 2014 and 2016. Because of this alarming numbers, former chief of the Land Transportation Ofﬁce Alberto Suansing earlier urged stakeholders of the insurance industry to police their own ranks. Suansing said the third-party liability insurance scheme for motor vehicles is a major source of corruption. He added that unscrupulous and dishonest insurance agents and companies as well have taken advantage of this scheme. Like a two-way street, it takes at least two to commit fraud. Roger Opalla said that unscrupulous individuals from government agencies and even insurance companies and car buyers themselves could be “Conniving” to commit the crime. Alliedbankers has been very careful when it comes to doing transactions with walk-in clients Opalla said. The company always sees to it that the needed documents are complete before dealing with potential clients.
The ascension into power by President Rodrigo Duterte middle of this year and his intense campaign against all forms of criminality also resulted in a decline of carnapping cases in the country. The Highway Patrol Group earlier reported a sharp decline in the number of cases of carnapping in the metropolis. Opalla said car jackers are never choosy. They pick any model-- be it Land Cruiser or Fortuner down to the locally-manufactured Toyota Vios. “ Probably, some taxi operators are involved here because Vios models are usually not expensive and could be chop-chopped and its parts could be ﬁtted to other cars,” he said. On the other hand, he said the carnapping of Land Cruisers and Fortuners is historically high during election campaign period. He said more car insurance claims deplete the proﬁtability of an insurance company. “Fortunately, Alliedbankers usually records a net income of around 20 to 30 percent growth annually,” he said. Car insurance 101 In the Philippines, the law requires a vehicle owner to purchase a compulsory third-party liability insurance policy. PIRA said that this policy ensures that compensation is provided to the third
vehicles will continue to increase. As a ﬁnancial provider, we will see to it that those demands are From F4 met. We are committed to support the dream of the Filipino of owning their dream car through afford“Inherent in the lending business is the credit able ﬁnancing means,” she said. risk or the risk of client defaulting on the loan. Auto sales up What is important is to balance the risk against the The auto industry is indeed continuously growrewards. In EastWest Bank, our processes and policies are such that we are able to discern the right ing as the latest joint data from the Chamber of credit risk and are able to balance our portfolio Automotive Manufacturers of the Philippines Inc. and Truck Manufacturers Association showed that quite well,” she said. Fernandez sees car ﬁnancing to grow parallel sales in the ﬁrst nine months of 2016 hit a record 261,370 units, 26.7 percent higher than the 206,284 with the growth of the car industry. “We see a tremendous growth in the auto indus- sold a year ago. A Consumer Expectations Survey conducted try as a whole. With more new model introductions and improved purchasing power, the demand for by Bangko Sentral ng Pilipinas in July showed
party in the event of an accident. The comprehensive coverage, on the other hand, is not required by law but advised by experts to be availed of by car buyers to cover all the damage to the car in different situations. For example, if somebody throws a stone to your car and it breaks your windshield, you need not worry if you have a comprehensive coverage. This also covers some other call “ acts of Nature” or “ acts of God,” or damages caused by calamities such as typhoons, ﬂoods, volcano eruption etc. Collision coverage covers the damage that is most obviously expected of an auto insurance policy. The insurance company will pay for repair of a car if it is involved in an accident. The Philippine Insurers and Reinsurers Association advises car owners to observe the proper procedure in case they ﬁgure in an accident and want to ﬁle claims with insurance companies. First is to notify the loss or damage to company immediately by telephone, fax, e-mail or letter with full particular details such as nature of loss, date of loss, estimated loss, contact person and telephone number for ocular inspection. Also, every demand letter, claim, writ, summons and process shall be forwarded to company immediately on receipt. Second, in case of theft or other crim-
that the purchase of motor vehicles is one of the priorities of households receiving remittances from a relative working abroad. Majority of OFW households allocated part of their remittances received for education (67.6 percent), medical expenses (55.2 percent), purchase of house (10.2 percent), purchase of motor vehicles (6.4 percent) and investment (3.8 percent). Money sent home by overseas Filipinos in September rose to a nine-month high of $2.383 billion, 6.7 percent higher than the $2.234 billion a year ago. The September data was the highest since the $2.47 billion in December 2015. This brought cash remittances in the first nine months to $20 billion, up 4.8 percent from
inal act which may give rise to the loss or damage, the insured shall give immediate notice to the police or any authorities and cooperate with company in securing the conviction of the offender. Third, car owners must cooperate with company appointed adjusters or surveyors to conduct an investigations; and fourth, car owners must submit the duly accomplished claim form together with requested documents. The documents needed to ﬁle a claim are: completed claim form; police report; afﬁdavit; photographs of the damaged portion and full view of vehicle showing plate number; estimate of repair; photocopy of driver’s license identity card with O.R.; and photocopy of car registration. In case of carnapped vehicles or total loss, car owners must also submit an original copy of complaint sheet from TMG (theft loss); original copy of alarm sheet from TMG (theft loss); original copy of Certiﬁcate of Non-Recovery from TMG (theft loss); full set of keys to vehicle; original copy of Insurance Policy; letter of release from ﬁnancial institution (if applicable); original copy of cancellation of chattel mortgage (if applicable); and secretary certiﬁcate authorizing the person who will sign in Deed of Absolute Sale and Release of Claim (for corporation only).
$19 billion a year ago. Analysts believe that the strong domestic economy and sustained remittances from overseas working Filipinos are just two of the factors that could fuel consumption in the months ahead, purchasing a car included. The economy grew 7.1 percent in the third quarter, higher than the 7 percent a quarter ago, bringing the ﬁrst three quarters’ average to 7 percent, which is already the upper bound of the Duterte administration’s target range of 6 to 7 percent this year. But of course, everything comes with a price. With all these projections for better sales and sustained growth of car loans of domestic lenders, this could mean trafﬁc congestions especially in Metro Manila.
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FRIDAY, DECEMBER 2, 2016
By July Rada
ITH car sales surging, several downstream industries have grown optimistic about the uptrend. Banks in particular are raking it in with the steady growth in auto loans this year, buoyed by sustained expansion in remittances sent by Filipinos overseas. Auto loans comprise a signiﬁcant portion of banks’ total loan portfolio every year. For this reason, banks try to outdo each other by putting in place marketing strategies that will attract more clients to avail of car ﬁnancing. BDO Unibank Inc., the country’s biggest lender in terms of assets and controlled by retail magnate Henry Sy, probably has been actively pursuing a share of the market in its bid to be a major player in the Asean region. Antonio Pena, BDO senior vice president and auto loan business head of the Consumer Lending Group, said the bank offers year-round promotions for prospective car buyers. Two of its major and recurring campaigns are the BDO Deals on Wheels and Free Gas Promo. “BDO Deals on Wheels is a pioneering one-stop shop car showcase held at least twice a year in different malls nationwide. The last BDO Deals on Wheels was held l Oct. 6-23, 2016. In the Free Gas Promo, on the other hand, successful BDO Auto Loan applicants get
Zooming sales, FINANCING BOOM network of branches. The Bank of the Philippine Islands’ Auto Loan boasts faster process turnaround time, with low interest rates, low mortgage fees and a more personalized service. The clients get the best deal in terms of price and discounts. Application for car ﬁnancing in BPI Auto Loan also comes easy. Applicants can apply via the internet; at more than 800 BPI/BPI Family Savings Bank branches nationwide; or at more than 300 partner auto dealerships nationwide.
free gas up to P10,000 with their new car when they apply online. The promo duration was held Aug. 1-31, 2016,” Pena said. “Apart from these two tentpole programs, BDO Auto Loan likewise participates in various car showcases nationwide throughout the year,” he said. He said BDO’s success in luring potential car buyers lies on its competitive rates and fast loan processing. He said loan processing can be ﬁnished as fast as 24 hours for loan applicants with
complete requirements. “Applicants can also apply online or through SMS,” he said. Bank’s data showed that of the total consumer loans, auto loans accounted for around 22 percent as of the ﬁrst nine months of 2016. Consumer loans comprise 20 percent of BDO’s total loan portfolio during the period. With the robust domestic economy and improving purchasing power of Filipinos, Pena is conﬁdent of auto loans’ growth prospects.
“The outlook for BDO Auto Loan remains optimistic, and this is vis-a-vis to the growing auto industry. With the growth in the auto industry, requirement for ﬁnancing usually follows,” he said. He said other factors that contribute to the growth of auto loans will be the availability of new car models, affordability of car ownership, and ease and convenience of securing auto loan ﬁnancing packages. He said transactions done online are very good alternative channels apart from banks’
Tie-ups matter For its part, EastWest Bank, the ﬁnancial services subsidiary of the Filinvest Group, not only rolls out year-round events but also partners with leading car distributors and known personalities in the showbiz industry to bring its message clear to potential car buyers. “We have an ongoing promo of low rate and free one year car insurance for our store clients. We have also rolled out year-round events, partnering with some of the top auto brand dealers to display some of their newest vehicles, each carrying attractive exclusive ﬁnancing packages. We recently held one in Trinoma, some malls in Visayas and one dealership,” EastWest executive vice president and consumer lending head Jackie Fernandez told Manila Standard. She said to promote these
promos, EastWest have recently launched its new Auto and Personal Loans ambassador, actor/ singer/triathlete Matteo Guidicelli. She said Guidicelli represents the hard-working and driven individuals who EastWest Bank supports. Fernandez said EastWest is currently one of the top preferred ﬁnancing providers in the auto industry. She said processing and approval of complete applications for car loans also take less than one day. She said this immediate response to the growing demand in the auto industry has enabled EastWest to have a fair market share. “As the auto sales have grown by 26 percent from same period last year, EastWest was able to outpace the industry growth by registering a 69-percent growth from same period last year. In fact for the last ﬁve years, EastWest Bank has grown 45 percent year-on-year as we continue to leverage on the growth of our stores and the solid partnership we have developed with auto car dealers nationwide,” she said. Fernandez said the auto loans business is now the biggest consumer loan in the bank and accounts for 30 percent of the bank’s total loan portfolio. Despite the positive outlook for auto loans, Fernandez admits there are indeed risks associated with this business, ﬁrst and foremost is the possibility of their clients defaulting on the loans. Turn to F3