Tax reform law seen to put brakes on PH’s auto sales growth in 2018

Chrisee Dela Paz

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Tax reform law seen to put brakes on PH’s auto sales growth in 2018
With most mass market vehicles costing more because of the tax reform law, the Chamber of Automotive Manufacturers of the Philippines Incorporated (CAMPI) projects flat growth in sales this 2018

MANILA, Philippines – The local auto boom that fueled record monthly sales for the past years is expected to wind down, after the government implemented new excise tax rates that are seen to sap demand.

Most mass market vehicles in the Philippines are now sold at a higher price than last year, as a result of the Tax Reform for Acceleration and Inclusion (TRAIN) law, which took effect Monday, January 1. Because of this, the Chamber of Automotive Manufacturers of the Philippines (CAMPI) expects an initial slowdown in industry sales growth this year.

“As of now, we are still assessing the impact of the new excise tax on the overall vehicle sales. Initially, we are projecting a flat growth for the year compared to last year,” CAMPI president Rommel Gutierrez told Rappler in an e-mail correspondence. (READ: Honda Philippines raises prices for most cars due to tax reform)

In the 10 months to October last year, vehicle sales rose to 16% year on year, after car buyers rushed to make purchases before the higher excise tax kicked in. While CAMPI remains confident that the market will be able to adjust to the new excise tax rates, Gutierrez said the industry remains cautious in its sales projection for 2018.

A sales agent from Toyota Marikina-Sumulong Highway branch said November and December were the best months of last year.

“There were a lot of car buyers last November and December. Most of them rushed to buy in the later months of last year to avoid the higher tax rates,” the agent, who requested anonymity, said in an interview.

Under the TRAIN law, vehicles that are worth P600,000 and below are imposed a 4% excise tax, from the previous 2%. (READ: EXPLAINER: How the tax reform law affects Filipino consumers)

Mass market cars take the hit

Meanwhile, automobiles between P600,000 and P1.1 million are now taxed 10%. This was from the previous P12,000 and 20% in excess of P600,000.

Vehicles that are worth P1 million to P4 million are now taxed 20%. This was from the old rate of P112,000 and 40% of the amount in excess of P1.1 million.

Those automobiles worth P4 million and above are being taxed 50% under the TRAIN law. This was compared to the previous P512,000 and 60% of the amount in excess of P2.1 million.

Pick-up trucks and electric vehicles, meanwhile, are exempt from excise taxes.

“We have yet to see how market will react with the new excise tax on the purchase of vehicles.  There may be a slowdown in sales during the transition period,” Gutierrez said.

He added that his organization’s member companies are looking at all models that may be affected by the change in the excise tax rates. 

Updated price lists of Toyota Philippines and Honda Philippines showed that while prices go up for models below premium levels, rates for some of the more expensive vehicles are either maintained or even slightly lowered.

For instance, the price of a Toyota Hilux 4X4 2.8 G Dsl AT is now P1.592 million, or P145,000 cheaper than last year’s P1.737 million.

Even with the new auto excise taxes, Gutierrez, who is also a first vice president at Toyota Motor Philippines Corporation said the Japanese automaker is maintaining its long-term goal of selling at least 200,000 vehicles by 2022.

“We have updated our price list and discussed with our dealers. We have not changed our long-term goal consistent with our participation in the CARS program,” he said. 

Signed by former President Benigno Aquino III on May 29, 2015, the CARS or Comprehensive Automotive Resurgence Strategy program provides incentives to car makers that locally produce at least 200,000 units of an enrolled model for up to 6 years.

Members of CAMPI include Toyota, Honda, Nissan, Kia, Isuzu, BMW, Mitsubishi Motors, Foton, Daewoo Bus, and Mazda. – Rappler.com

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