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Auto industry execs concerned over Peso exchange rates

Auto industry execs concerned over Peso exchange rates image

AutoIndustriya.com / AutoIndustriya.com | February 12, 2018 09:55

Weaker Peso could affect car prices later on

Several high ranking executives in the Philippine auto industry and the regional offices have expressed their concern regarding the weakining of the Philippine Peso (PHP) against foreign currencies such as the British Pound (GBP), Euro (EUR), Japanese Yen (JPY), and US Dollar (USD). 

The Peso's performance towards the end of 2017 was particularly strong, ending the year below PHP 50 per USD. But in the last month alone, the Dollar to Peso rate took a dip of about 2 Peso on the backdrop of a weaker USD due to political and economic concerns in the US. On January 5, 2018 the Peso was trading at 49.7689 per U.S. Dollar. By February 4, 2018, the Peso was at 51.7785 per U.S. Dollar.

One executive of a multi-brand automotive distributor in the Philippines was particularly alarmed with the exchange rates given that his company imports all their inventory from abroad; so much so that the favorable effect of the excise tax on luxury vehicles was dampened.

Another executive, this time the head of a major automotive manufacturer in the ASEAN region, was also very concerned at the effect of the exchange rate of the Philippine Peso versus other currencies, particularly the U.S. dollar.

Analyst reports indicate that the Peso is weakening due to the increased interest rates of the U.S. Federal Reserve and a resurgence of the U.S. economy. As early as August 2017, DBS analysts have stated that the Peso will weaken until the first half of 2018 due to a current account deficit with more foreign currency going out of the country rather than coming in.

The steady trend of the Dollar getting stronger vis-a-vis the Peso means that many companies -particularly automotive companies- dependent on imports will pay more for inventory. The Peso also took a dip when compared to currencies such as the Japanese Yen, the Thai Baht, among others.

With the currency weakening, there may be a possibility that car prices -among others- could be re-adjusted later in the year in a way unrelated to the new tax law.