Cebu auto dealers bullish despite new tax scheme

By Brian Mikhael J. Ochoa |January 08,2018 - 10:20 PM

The spacious stockyard of the Toyota Mabolo dealership is filled with different Toyota vehicles. Cebu dealers are confident that vehicle sales will be good this year despite the implementation of the new tax scheme on automobiles. cdn file

Cebu’s car dealers are confident sales will remain good this year despite the implementation of the new tax scheme on automobiles.

According to some of Cebu’s auto executives, Cebuanos by now would have been already prepared for the tax increase as it has been a hot topic since late last year.

“Everybody saw this coming. People have been talking about this for months. So I guess the market is ready for its implementation,” said Roy Silverio, general manager of the Sakura Autoworld Group which handles Suzuki Auto South Cebu in Mambaling, Cebu City.

President Rodrigo Duterte signed into law Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (Train) bill last December 19. The Train Law reduces personal income tax but imposes higher tax on fuel, tobacco, cosmetic surgery, tobacco, some sweetened beverages, and automobiles.

The new law applies a four-tier tax scheme for automobiles: four percent for up to P600,000; 10 percent for over P600,000 to P1 million; 20 percent for over P1 million up to P4 million; and 50 percent for 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.

Silverio is confident Cebuanos will still continue to purchase vehicles, although the choices may be more practical this time.

“Even with the new tax scheme, Cebuanos will continue to buy cars. The choices may become different, though. Cebuano buyers, for a certain period, may put aesthetics aside in favor of the practicality and versatility,” he said.

Honda Cars Cebu, Inc. (HCCI) general manager Alec Bucao thinks there might be a dip in sales for a short period but believes the public will learn to adapt to the new tax system.

“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.

Toyota Mabolo EVP and general manager Joseph Lo also believes that the new system will be good for the public.

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

New models

Another factor that dealers are banking on to cope with the new tax system is the new models that were introduced in late 2017 and the ones coming out in 2018.

With the new models coming out, local auto executives are optimistic that a 15 to 18 percent growth can still be achieved this year.

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. “Normally, one year is a good timeline for people to keep on buying the CR-V and the cycle would usually taper off. And by the time it tapers off, we believe customers will get to adjust to the new norm and get used to the new prices.”

Lo, on the other hand, is pinning his hopes on his state-of-the-art Toyota dealership in Mabolo that just opened October of 2017 and new Toyota models in 2018 to keep sales going amid the new tax system.

“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 dealerships bread and butter in 2018.

Toyota is the country’s top selling brand.

For Suzuki, Silverio is banking on the Ertiga and the newly launched all-new Vitara crossover to sell well this year because of its versatility.

Although confident that the Cebuano motorists will continue to purchase cars, the dealers admitted it will be difficult to match sales in 2017.

Part of the reason is because the public went on a buying spree in 2017 to avoid the hike. This led to a breakout year for some dealers, such as HCCI, which saw a 33 percent increase in sales in 2017. Sakura Autoworld Inc. also grew by almost 30 percent versus the past year. /with a report from Jonas Panerio

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