Car sales to taper but …

Excise tax under Train

BUYING a family car had to happen before the end of 2017 for 70-year-old businessman Simplico Tudtud Jr.

Tudtud chose the Isuzu MU-X midsize sports utility vehicle (SUV), which costs roughly P2 million for a top-of-the-line model, for its durability and versatility as it will be used for trips and errands by family members.

Had he waited for 2018, the midsize SUV will have an additional 20 percent or P400,000 on top of what it cost him when he bought the vehicle last November.

This is a result of the Tax Reform for Acceleration and Inclusion (Train) law, which President Rodrigo Duterte signed last December 19, 2017.

The Train law reduces personal income tax but imposes higher tax on fuel, tobacco, cosmetic surgery, some sweetened beverages and automobiles.

This tax reform aims to raise P130 billion in revenues to fund numerous infrastructure projects, and other programs of the current administration.

Under the new law, a four-tier tax scheme for automobiles is applied: four percent for cars worth up to P600,000; 10 percent for cars worth over P600,000 to P1 million; 20 percent for cars worth over P1 million up to P4 million; and 50 percent for cars worth over P4 million.

All pickup trucks and pure electric vehicles would be exempted from additional taxes while hybrid (half petrol/diesel, half electric) cars will see 50 percent of the excise tax rate applied.

“We already had plans of buying a sports utility vehicle in 2017 but we really made sure we got it before the year ends because we wanted to avoid the implementation of the new tax scheme. The price difference would have been big had we waited for 2018,” said Tudtud in an interview with Cebu Daily News.

Couple John Rhey Ejercito Herrero and Rhiz Villar-Herrero tried to beat the 2017 deadline to purchase a brand-new, subcompact sedan.

The Herrero couple was not in a rush until they heard about the excise tax for vehicles.

But the bank has not approved their car loan application so they would have to bear the additional four percent tax or an estimated P24,000 on top of the P600,000 price tag of the car they want.

Optimism

Despite the implementation of the new tax scheme, three automobile executives in Cebu said they remain confident about the 2018 prospects of car sales.

While there might be a slight sales dip in the first quarter of 2018, Honda Cars Cebu, Inc. (HCCI) general manager Alec Bucao said buyers will adapt to the “new norm.”

“At the onset, I think there will be a low volume [of sales] probably for just the first quarter. That’s partly because a lot bought before the excise tax was implemented. But then I think everyone will be able to adapt to the new norm, which is with the new excise tax in effect,” said Bucao.

Roy Silverio, general manager of the Sakura Autoworld Group, which handles Suzuki Auto South Cebu in Barangay Mambaling, said the tax scheme did not come as a surprise.

“Everybody saw this coming. People have been talking about this for months so I guess the market is ready for its implementation,” said Silverio.

Silverio said Cebuanos will continue to buy cars although the choices may be different as buyers will set aesthetics in favor of practical and versatile models.

While it may be a challenge to reconcile the increase in prices on an individual level, Toyota Mabolo executive vice president and general manager Joseph Lo believes that the new system will benefit the public.

“Our local and national government have really been busy in trying to make the quality of the lives of the Filipinos better. 2018 will continue to be a good year as our economy continues to do well,” Lo said.

New models

Another reason why car dealers are optimistic about 2018 car sales involves the release of car models in 2017 and the launch of new models in 2018.
Despite the initial first quarter dip next year, local automobile executives project a 15 to 18 percent growth in 2018.

The 2018 growth will not be as robust as the 2017 sales though as the public went on a buying spree in 2017 to avoid the hike. HCCI has a 33 percent growth in sales in 2017, while Sakura Autoworld Inc. grew by close to 30 percent.

By practice, dealers do not announce in advance the new models which will come out the coming year.

But as electric cars are tax-exempted, there is a high chance for these types to be more available in the market.

For HCCI, Bucao said the newly released diesel variant of the CR-V crossover is expected to cushion the effect of the excise tax implementation.

The CR-V is the first Honda in the country to be equipped with a diesel engine and has gained a lot of following since its arrival in September 2017.

“The good thing about us is that the CR-V diesel variant has come in. This is what people have been waiting for. We feel we will be riding on the strength of the diesel variant of the CR-V,” Bucao said.

Bucao said people would continue to buy the CR-V for a year before the cycle would taper off.

“By the time it tapers off, we believe customers will get to adjust to the new norm and get to used to the new prices,” he said.

Lo is pinning his hope on new Toyota models in 2018 to keep sales up, which will be housed in the state-of-the-art Toyota dealership in Barangay Mabolo, which opened in October 2017.

“2018 will continue to be a wonderful year for [our] customers as we will have new models coming out. Environmentally friendly vehicles will be pushed in 2018. There will also be a totally new model coming that Cebuanos will surely enjoy,” Lo said.

Even with the new vehicles coming out, Lo said the Vios subcompact sedan and the Innova multi-purpose vehicle will still be the dealership’s “bread and butter” in 2018.

Toyota is the country’s top selling brand.

Among the top sellers for the Japanese brand Suzuki last year were its Celerio City car and Ertiga seven-seater MPV.

This year, Silverio said they are banking on the Ertiga and the newly launched Vitara crossover because of its versatility. /With reports from Jonas Panerio and Cris Evert Lato-Ruffolo