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Vietnam-Philippine auto market in 2018

Source:Ringier Metalworking

Date Published:4/13/2018 05:04:38 PM

Frost & Sullivan's forecast of the?Vietnam?and Philippine automotive markets finds strong economic prospects and policies supporting the automobile industry. ?
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Vietnam: New car sales volume in 2018 is expected to grow to 256,000 units, up 6.8% from the previous year
According to Frost & Sullivan's forecast,?Vietnam's?new car sales (passenger cars and commercial vehicles) will grow by 6.8% to 256,191 vehicles year-on-year. Due to increasing domestic consumption and expanding exports of electronics and clothing items, the?Vietnam?economy is expected to grow 6-7% over the next five years, which will have a positive impact on the growth of the automobile industry in 2018. With the car ownership rate in?Vietnamat about 20 units per 1,000 people, the domestic automotive market has great potential for further growth, driven by consumption-oriented, middle-income households.

In addition, the gradual elimination of tariffs for passenger cars through free trade agreements (FTA) like the Trans Pacific Partnership (TPP) and with the European Union (EU) will have positive impacts on the automotive market in 2018. Also, demand for commercial vehicles is expected to increase due to infrastructure development projects focused on road traffic. Expected increases in VAT, consumption, and environmental protection taxes for 2019 should also boost demand in 2018.

On the other hand, Decree No. 116, promulgated by the Vietnamese government, requires imported finished cars to acquire certificates issued by other governments. It will be the main restraint for new car sales growth in 2018. "While Decree No. 116 brings uncertainty to the automotive market due to marked expansion of consumer credit and increased demand for local production models, positive growth is expected in the automobile market as a whole in 2018," said?Paulo Jose Mutuc, senior consultant, Mobility, Frost & Sullivan.

Philippines: New car sales volume in 2018 is forecast to grow to 576,000 units, up 11.5% from the previous year
According to Frost & Sullivan's forecast, the number of new car sales in?the Philippines?(passenger cars and commercial vehicles) in 2018 will grow 11.5% to 576,959 units from the previous year. The Philippine economy in 2018 is expected to grow by 6-7% over the next five years due to consumer expenditure and investment, with new car sales supported by strong economic growth. The manufacturing industry in?the Philippines?has grown by over 7% since 2010, and Toyota Motor Corporation and Mitsubishi Motors' overseas subsidiary participating in the automotive industry revitalization program (CARS program) will increase local production capacity. The expansion of local production is expected to boost new car sales. New models planned for 2018 are also expected to boost the growth of the automobile market.

Government policies are expected to grow the commercial vehicle market in 2018. The Public Working Vehicle (PUV) Modernization Program under the Department of Transportation (DOTr), in particular, will create switching demand, as it requires about 200,000 Philippine-type bus "Jeepneys" to change to new models equipped with engines compatible with?Euro 4emissions standards. In addition, 61 of the 75 important projects of the national infrastructure development plan ("Build Build Build") are related to the automotive/ transportation sector and also expected to stimulate demand for commercial vehicles.

On the other hand, the Land Transport Franchise and Regulatory Board (LTFRB, the regulator of public transport vehicle businesses) is prohibiting the use of small cars (mostly sedans) and compact cars in ride-sharing services, which may reduce the demand for these vehicles. There is also concern that the new tax reform law (RA 10963) approved in?December 2017will significantly raise car and fuel prices, and the cost of other goods. But while that tax reform raises prices of entry-level models, it excludes pickup trucks and lowers personal income taxes, so there should be no big reduction in the number of new car sales in total, according to Mutuc.

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