2012's Mid-year Slide

2012's Mid-year Slide image

Text: Tito F. Hermoso / Photos: | posted June 06, 2012 16:32

Auto Industry 2012

Nice guys finish first

Being a nice guy goes a long way. That seemed to be the prevailing sentiment when Noynoy Aquino became our 15th president last June 2010. Almost all business sectors were upbeat and people were celebrating. And spending. That's our culture. We like being amused by the people we look up to. That's why, whether covertly or blatantly, we demand our leaders to entertain us, tell us good news that we want to hear.

Amused and befuddled

If one reads the kind of press that the Palace prefers, our country should be the next emerging market. What with spikes in the stock market, inflows of "hot money" and a good amount of too-ing and fro-ing abroad with promises of and all kinds of business opportunities. Yes, even with comically handled scrapes with Superpowers, consequences be damned, we still come out amused. Anti-corruption groups in favor of People Power style extra-legal measures are giddily cheering Pres. Aquino's crusades. The PCCI is lauding breakthroughs in cutting red tape. Tax collections have overtaken GDP growth even as First Quarter Economic Growth for 2012 surpassed NEDA's target. Government agencies will soon begin raising agency fees, free of too much oversight. But if the market economy were an unemotional robot that could speak, it would have not changed its tune ever since all that 2010 election spending money dried up. And what does that tune say? “It does not compute”.

Wide eyed optimism

As they say, numbers don't lie. Track the performance of the Auto industry, which has always been a barometer for rich folk's spending, which, in turn, is subjectively influenced by their business confidence in open opportunities on a level playing field. In sympathy with the 2008 Global Recession, it was supposed to dip in 2009, but it didn't. Typhoon Ondoy made sure that new car spending even grew to record volumes in 2010. With so much optimism in the New Aquino administration, 2011 turned out to be a damp squib. Blame it on the Tohoku Tsunami and floods that sank 65 of Thailand's 77 provinces. Shows how dependent we are on Thailand and Japan to produce the bulk of the cars we buy. Onward to economic growth.

Depression succession

But as Professor Benjamin Diokno's research data and analysis never fails to remind us, the failure of the new administration to keep up Government spending to push the economy within its first few months, preferring instead to witch hunt every contract and appointment of the previous administration as tainted with corruption, dumped the economic momentum into the doldrums. Diokno points that the 2012 1st quarter growth is a result of government spending and its resulting imports trying to catch up with one and half years of squeezing government spending because of the witch hunt. Moreover, domestic production is still weak. This growth is not sustainable as all that studying and rebidding for stalled infrastructure projects are not going to happen in the next year or so. No Media hype will ever convince businessmen that business is as good as what the self congratulatory hype meisters and apologists say. Bloodsport entertainment, like hospital imprisonment and impeachment of foes took center stage, instilling fear among those caught in the Palace's moral vendetta. Even as pro-governance groups cheer, the fear of the-end-justifies-the-means “justice” saps business confidence from the business/middle class, injecting creeping pessimism to the mood of listlessness. The hard-working, traffic-suffering, credit-hungry, tax-burdened, media-influenced, materially aspiring Middle/Business Class does not feel confident that what were shovel ready infrastructure projects in 2010 will take off earlier than 2013 because of the delays caused by the witch hunt. Pessimism begets Depression, both the economic and psychic kind.


What is more worrying is how the monied class is spending. Or not spending. The first semester of 2012 saw normally recession proof luxury car sales fall. Remember, sales for this rich man's sector is driven more by subjective perceptions of near term prosperity. One brand even saw a 48% drop in year-on-year sales and its not because new car and new brand launches continue.

Glitzy Global

And yet, the Fort Global City is awash with glitzy showrooms. Willie Soong bagged Ferrari and is hyping the latest Range Rover Evoque, without prejudice to his staple Jaguar XJ's and various Maserati. PGA continues to stock R-8's, various tuned Audi's, new Porsches and Lamborghini's. CATS Motor's Mercedes Benz and Chrysler continue to be up to date with new product launches. ACC-BMW brought in its latest bread winner, the pricey new 3-series.

The spending motive

Lexus Manila has practically revamped its entire model line up. Volvo continues to roll out their City Safe automatic braking programs across its new model range. Niche huggers Subaru and MINI keep enthusiasts tantalized with their latest new models too. On a more voluminous level, Toyota launched a new from the ground up Camry and even plucky Suzuki, better known for small 4WDs, mini cars and motorcycles, have introduced the Kizashi executive car at a Suzuki price. Still sales are not climbing. If the monied classes are not spending to feel good, how does one expect them to put in more money in business, whatever the minimum wage is?

Doing lunch

Caution is beginning to show. New car launches are staged at lunch instead of dinner, which only means sorry media folks, no all night “open bar” for now. At least Toyota and Isuzu manage to evoke a “let the good times roll” feeling. Such is the consistent high standard of Toyota and Isuzu press events, car launches and multi-itinerary countryside tours. Toyota's comprehensive and lavish launches of the new Avanza, Camry, Innova, Fortuner and Hi-Lux kept to the script of all the previous years. Toyota even did a cheeky pre-launch caravan-sneak preview of the enthusiast's long awaited Toyota 86.

Catch up

Honda used to play catch up with Toyota events in quality and quantity but having been hit badly by Thailand's floods meant it had to scale down as it shed market share. To address supply concerns, Honda had to import its latest Civic and CR-V from high manufacturing cost Japan. So far, Honda's Japan imports do not benefit from JEPEPA tariff reductions, so their prices are not as competitive. At least Santa Rosa's supply of Thai CKD packs of the revamped City and CBU Jazz have resumed. All in all, still an uphill climb for Honda's all new marketing team. Incidentally, Universal Motors-Nissan has a new marketing team too and they've been more engaged with Yulon's NMPI's veterans down in Santa Rosa.

Strike me if you can

In the past, huge labor strikes at Hyundai-Kia's Korean factories were as predictable as the annual summer vacation. But Hyundai-Kia kept a large buffer stock to keep up with their sales momentum. Its not in keeping with the just-in-time inventory fad that is practiced by most global supply chains but the Thai floods and Tsunami have exposed that having limited stock result in shortages that take long to rectify. Strikes or floods notwithstanding, both HARI and Columbian still have difficulty satisfying Philippine demand for crdi versions of hot selling Kia and Hyundai models as crdi engines are still in high demand in the EU market.

Caught styling

Both, by virtue of their catchy styling, have made inroads into the segments held by mainstream Japanese brands. That they have done so without much of a price discount proves the high stature reckoned to both Korean brands. Between the two distributors, Columbian has been selling Kia's since the 80's while HARI only began selling Hyundai's in the early noughties. HARI's considerable financial backing allows it to sell volumes of its all imported models. Although Kia post high year on year sales growth rates their overall volumes are still not in the top four league as Hyundai's.

Eco-car friendly?

Mitsubishi, at a comfortable Number two, is still seeking other segments to dominate. While Nissan, with its March and Honda, with its Brio, have considered our tariff rates for micro cars or eco-cars as not as conducive as Thailand's, Mitsubishi is still open to importing their Thai-made Mirage.


Resumption of Thai factory suppliers have allowed Ford to catch up with Fiesta orders. US supplied Explorer deliveries are still strong and the impending arrival of the EcoBoost engine variant should keep sales on the boil. With EcoBoost, gasoline direct injection engines, once exclusive to Volvo and the German marques, Ford is bringing premium class technology to a mainstream brand's offerings.

Kodo and Skyactiv

Mazda's pretty Mazda3 hatchback and sedan have now replaced the Santa Rosa built old models. Its svelte new CX-5 compact SUV comes with Skyactiv, Mazda's new comprehensive design philosophy that integrates “Kodo” dogma, lightweight construction, green consciousness, efficient manufacture, along with gasoline direct injection and smart automatic transmissions.

Bangkok and Delhi

Ford's Santa Rosa made Escape and Thai made Everest are still strong sellers as the local Ford Focus prepares to make for the new model from Thailand. Ford never misses a chance to haul the local press to Thailand and even India to preview models that will soon be sold in local showrooms. There were plenty of rave reviews of the upcoming new Focus and Ecosport compact SUV.

Isuzu and Chevrolet

Isuzu fans can't wait for the next D-MAX as the new Chevrolet Colorado, which shares its new platform with the next D-MAX, is also on its way here. The new D-MAX is even more voluptuous than its Thai market nemesis, the Toyota Vigo nee Hi Lux. It remains to be seen if the Isuzu i-TEQ engine gives way to GM-DAT's excellent 2.2-liter crdi engine as fitted in the Captiva. Alternatively, there's also the 2.5 and 2.8 liter Duramax diesel engines that power the new Thai-made 7-seat Chevrolet Trailblazer. All sport new 5-speed manual and 6-speed automatic transmissions so its likely that the D-MAX will have them. Meantime, the Crosswind Sportivo gets another upgrade, keeping IPC in the CAMPI top four.


The Covenant Car Company, barely four years old, rolled out the Chevrolet Orlando, the long awaited replacement of the 7-seat Opel Zafira minivan. Coming up is the Sonic sub compact sedan, which replaces the Aveo.


Passing through Central Luzon, one may spot a sprinkling of brand new vehicles from Hama, another big Chinese motor vehicle manufacturer. Based in Angeles City, Hama's bright colored SUV and sedan offerings light up the drab landscape that are still peppered with Port Irene used car imports. As an introductory strategy, its interesting to note that many a cheap and cheerful unknown brand [JAC, Geely, JinBei, Daewoo, etc.] started in the more relaxed regulatory environment of fast growing regions in the islands, like Cebu.

Entertained unto damnation?

As a country, we should manage long term stability and kick out the 6-year habit of discrediting and witch hunting the former administration whenever a new government kicks in. Being entertained by bloodsport spectacle of the full force of Executive and Legislative branches of Government lynching and humiliating the Judiciary, sad to say, introduces the specter of “one-gang” rule. Even if the People Power majority approve, thuggish behavior in the name of victor's justice doesn't engender a level playing field or fair play. What happened to the presumption of innocence, respect for institutions, or even the law? Indeed, just like the perverse final days of the Roman empire, bloodsports can entertain, but by that time, incompetence has already done harm and thus hastened the decline of empire. Do we still want to be amused by people who don't care for the harm that they do?

The Fear factor

If the business elite live in fear of being excluded among the favored ones then “singled out” for a tax audit or SALN investigation, we end up with this self inflicted economic slow down. Next year is an election year so there's still hope that the auto industry's growth will pick up. As for the damage done to the economy the past two years, let's hope that all those promises of catching up by the self congratulatory hype meisters and apologists do come true. That is, if they truly believe that there is catching up to do.