The Philippine automobile industry is often considered as a barometer of economic growth in the country.

The industry provides insight about other areas in the economy, with how much parts go into the creation of one vehicle. The central bank even monitors it to understand consumers’ ability and willingness to spend on big purchases.

So, in a recovering economy such as ours at the moment, a surge in new car sales signals a resurgence in business activities

Philippine Markets Newsletter:
The Monday Macro Report
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A lot of materials go into the production of a single car–steel for the body, rubber for the tires, glass for the windshields, and paint for design, among others.

This intricate process involves numerous industries, underscoring the automobile sector’s deep integration within the broader economy.

This complexity in production comes at a cost.

Buying high-priced items such as personal vehicles is a decision people make when they either have enough money saved up or are confident enough about the economy going forward.

During uncertain periods, consumers tend to tighten their belts, reducing discretionary spending and hesitating to invest in a new vehicle.

When we factor in the impact of inflation, which steadily erodes purchasing power, consumers prioritize other immediate expenses over buying a car. This dynamic can significantly depress new car sales.

Conversely, an upswing in car sales serves as a promising sign, indicating a positive economic outlook or even growth.

In an annual perspective, we saw 2022 volumes nearly reach pre-pandemic highs, all while inflation was on a steeper rise.

Let’s see what this looks like on a monthly basis.

In April 2020, vehicle sales plummeted to a mere 133 units due to the height of COVID-19-related lockdowns. This resulted in the lowest annual volumes recorded in nearly a decade.

Now, as outlined in a report by the Chamber of Automotive Manufacturers of the Philippines, Inc. (“CAMPI”) and the Truck Manufacturers Association (“TMA”), overall new vehicle sales for the month of August reached 36,714 units, showcasing a substantial growth of 21.6% compared to the corresponding month in the previous year.

Commercial vehicles took the lead in sales, marking a significant 13.5% increase with 26,620 units sold, compared to the 23,452 units sold in August last year.

However, there was a 1% month-on month decline in vehicle sales compared to July when 37,086 units were sold, and this decline can be attributed to the influence of increasing prices.

Inflation played a significant role in this decline as it surged to 5.3% in August, up from the 4.7% recorded in July. This uptick was primarily driven by the escalating costs of both fuel and food.

Despite these challenges, for the first eight months of 2023, CAMPI-TMA recorded a total of 276,215 units, constituting 70% of the 395,000 sales forecast. This figure signifies the potential for a sustained industry recovery and represents a large increase of 29.8% compared to the 212,872 units sold during the same period the previous year.

Regardless of inflationary pressures, manufacturers remain optimistic for the year, anticipating a growth rate of 10% to 15% and targeting 395,000 unit sales for this year, up from the 352,596 units sold in 2022.

The recovery in the industry, along with other economic indicators, tells us sustained recovery post-pandemic, although at a slower pace because of inflationary pressures, is likely.

About the Philippine Markets Newsletter
“The Monday Macro Report”

When just about anyone can post just about anything online, it gets increasingly difficult for an individual investor to sift through the plethora of information available.

Investors need a tool that will help them cut through any biased or misleading information and dive straight into reliable and useful data.

Every Monday, we publish an interesting chart on the Philippine economy and stock market. We highlight data that investors would normally look at, but through the lens of Uniform Accounting, a powerful tool that gets investors closer to understanding the economic reality of firms.

Understanding what kind of market we are in, what leading indicators we should be looking at, and what market expectations are, will make investing a less monumental task than finding a needle in a haystack.

Hope you’ve found this week’s macro chart interesting and insightful.

Stay tuned for next week’s Monday Macro report!

Regards,

Angelica Lim
Research Director
Philippine Markets Newsletter
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