AUTO INDUSTRY NEWS

Proposed vehicle excise tax hike expected to slow down auto sales

Proposed vehicle excise tax hike expected to slow down auto sales image

Text: Eric Tipan / Photos: AutoIndustriya.com | posted October 14, 2016 16:00

New taxes expected to dampen current car market conditions

It is only a proposal for now but the market is bracing for what could be ill effects of an increase in the excise tax of automobiles.

As previously reported, the Duterte administration is proposing a tax reform package to be effected by the Department of Finance (DOF) that will raise the prices of automobiles and its related products.

Executives from various automakers have voiced their view on, if implemented, how this will affect the current auto market conditions.

“Upon implementation, it will come out, and everybody will have to recalibrate -- the inventory, ordering, even the banks will have to recalibrate everything. So all of this recalibration will create the natural slowing down of the speed of buying. Any change in structure of pricing affects the demand. Even market acceptance will actually refocus. Acceptability of the pricing will have to be look into. It takes time to adjust,” said Mitsubishi Motors Philippines Corp. (MMPC) First Vice President Dante Santos.

The DOF expects to implement a 5-percent increase in the price of automobiles priced at Php 600,000 and below; 20-percent for vehicles priced between Php 600,000 to Php 1.1 million; 40-percent for units priced between Php 1.1 million to Php 2.1 million and 60-percent for autos priced at Php 2.1 million and above.

Buses, trucks, cargo vans, jeepneys, jeepney substitutes, single cab chassis, and special purpose vehicles are exempted from the proposed tax hike.

With a looming price increase if the tax reform program is applied, market conditions are expected to change though one executive expects it to be temporary because of the high demand for automobiles.

“The [increase] in excise tax will have big impact but it will be temporary. Whether we like it or not, when we have economic expansion, the need for additional transportation is increasing,” said Isuzu Philippines Corp. (IPC) Senior Vice President Arthur Balmadrid.