BMI remains optimistic about the outlook for the Philippines autos market, despite a cumulative 1.9% yo- y decline in new vehicle sales in the market, to 131,242 units, during the first eleven months of 2011. Vehicle sales during 2011 were mostly affected by reduced availability of models in the domestic market owing to the recent flooding in Thailand.
We maintain that private consumption growth, which makes up the mainstay, or around 80% of the economy, is on the whole likely to remain strong in the coming quarters, boosted by supportive domestic economic conditions and our expectation of continued growth in remittance inflows. BMI, accordingly forecasts vehicle sales to reach 255,400 units by the end of the forecast period, growing by an average of 9% y-o-y between 2012 and 2016.
Although the market is dominated by Japanese brands, the competitive landscape is still far from saturated by carmakers and the market therefore provides ample opportunities for new entrants. In December 2011, Chinese automaker Foton Motor's subsidiary Foton Motors Philippines signed a lease contract with state-owned Clark Development (CDC) to acquire land in Manila for a new plant, according to CDC's President Felipe Antonio B Remollo. He added that Foton will spend US$20mn on the facility, which will produce passenger and commercial vehicles to meet local demand and export, primarily to Asian markets, said Remollo. Meanwhile, South Korean automaker Hyundai is considering the construction of a production facility in the Philippines.
A major downside risk to these developments, however, could be the ongoing delay in finalising the Motor Vehicle Development Programme (MVDP). BMI has long held that the uncertainty could put off potential investors from investing in the country. Similar concerns were highlighted by Michinobu Sugata, the president of Toyota Motor, in August 2011, who revealed that said the delay in finalising the MVDP, which was originally scheduled to be signed off by the end of 2010, is affecting the carmaker's planning for the next 10 years.
In terms of its ranking in BMI’s Business Environment Rankings table for the Asian auto industry, the Philippines has moved up to seventh, although its overall score is down marginally from 54.6, to 54.0. However, whether or not The Philippines is able to maintain this score will depend on its ability to maintain all the production-related commitments which could be in jeopardy if it continues to delay the finalisation of the MVDP.
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