Japanese carmakers expect sales drop in PH due to tax hike

Kyodo News

Posted at Jan 11 2018 10:02 PM

Visitors look at vehicles on display at the recent Philippine International Motor Show at the World Trade Center. Jonathan Cellona, ABS-CBN News/file photo

Several Japanese carmakers in the Philippines expect sales to slow down this year owing to a recently passed tax reform law that comes with higher excise taxes on automobiles.

The Tax Reform for Acceleration and Inclusion, dubbed TRAIN by the government, is the first package of the comprehensive tax reform program envisioned by the administration of President Rodrigo Duterte. It was signed into law last month.

Toyota Motor Philippines Vice President for Corporate Affairs, Rommel Gutierrez, said that there may be a slowdown in sales during the transition period.

"We are looking at all the models that may be affected by the change in the excise tax rates," Gutierrez said. "We will adjust our sales target based on the passage of the new excise tax rates on vehicles under TRAIN."

Froilan Dytianquin, vice president for sales and marketing at Mitsubishi Motors Philippines, predicts that demand this year may drop by as much as 8 percent compared to last year.

"The slowdown on purchases will be during the first half, as the market adjusts to the new prices brought about by this new excise tax," Dytianquin said.

He said the price increase will range between around P10,000 and P15,000 for Mitsubishi's Mirage and P50,000 to P120,000 for their Montero Sport SUV.

Nora Liquido, corporate communications head of Isuzu Philippines Corp., was more upbeat, saying Isuzu expects demand to hold steady, will sales of 30,000 units targeted this year.

Liquido acknowledged, however, that the tax reforms will still be felt, particularly in the SUV segment.

Jose Marri De Joya Asilo, a sales agent for Toyota, admits some potential buyers have already been put off by the new taxes from purchasing cars this year.

"Now that the TRAIN has been implemented in the automotive industry, even in just the first week and second week of January, we're already getting negative comments from people (about prices)," Asilo said.

He added that the company is trying to offset the price increase with promotion campaigns to make their vehicle lineup more affordable.

According to the Philippines' Department of Finance, the excise tax for vehicles priced up to P600,000 was increased from 2 percent to 4 percent, while for those priced over P600,000 to P1 million, it was raised from 2 percent to 10 percent.

The next two tax tiers targeting luxury cars have been reconfigured. Vehicles priced at above P1 million to P4 million will now be taxed at 20 percent, while those priced above P4 million will be taxed at 50 percent.

Gutierrez, who also serves as the president of the Chamber of Automotive Manufacturers of the Philippines, estimates these new tax rates will lead to flat sales growth for the auto industry this year.

"While CAMPI remains confident that the market will be able to adjust to the new excise tax rates, we are cautious in our sales projection this year," he said.