If you've been looking at getting a brand new pick-up truck in the next few years, then you may want to be open to bump up your purchase a bit earlier.
According to one of our contacts in the Philippine auto industry, the government is looking to make some revisions to the excise tax schedule on automobiles under the tax reform law. Specifically, there is talk about bringing back excise taxes for pick-up truck models.
We verified with other contacts in the industry, and based on what we gather it is the Department of Trade and Industry (DTI) that is exploring the possibility of recommending to the Department of Finance (DOF) to levy an excise tax on pick-up trucks.
The insider information is still preliminary, and there are no specifics yet as to what rates and timeline the DTI are looking at. What we can extrapolate is that if a pick-up truck excise is pursued and implemented, it could significantly increase prices of such models in the Philippines, affecting the sales and the industry as a whole.
The mulling of an excise tax on pick-up trucks could be part of a wider plan to tax CBU imported vehicles as a whole which is also being explored by the DTI, an overwhelming majority of which are imported from Thailand. The proposal to impose more taxes on vehicles could also be related to the ongoing dispute that the Philippines has with Thailand regarding the taxes on Philippine cigarette products imposed by Thai customs authorities. Thailand, after all, is also single largest Asian manufacturing country for the light truck class that includes the Ranger, Hilux, Navara, Strada, D-Max and Colorado.
Thailand is also the major manufacturing hub for automakers that are present in South East Asia for all kinds of vehicles, and exported to ASEAN countries to take advantage of AFTA, or the ASEAN Free Trade Area.
If you remember, the Tax Reform for Acceleration and INclusion Act (TRAIN Law) completely revised the excise tax schedules for a manner of automobiles in 2018. Standard automobiles like SUVs, passenger cars, vans and the like got a new excise tax table, but the law also removed or reduced excise taxes on certain types of vehicles.
Hybrid vehicles were only subjected to 50% of standard ad valorem excise tax while full electric vehicles (EVs) were fully exempted from excise taxes. Like EVs, pick-up trucks regardless of type (double cab, single cab, etc.) were also fully exempted from excise taxes when the law came into effect in 2018. The logic is that pick-ups are used as workhorses and should be helping small business owners and professionals in their duties.
The result of the exemption was a widespread reduction in prices of pick-up trucks of many (if not all) of the major car manufacturers in the Philippines in 2018 compared to 2017. In that period, Toyota reduced prices of the Hilux by PhP 55,000 for the base version up to PhP 145,000 for the 4x4 automatic. Ford was able to reduce prices of the Ranger by PhP 41,000 for the base single cab truck model all the way up to a reduction of PhP 141,000 for the Wildtrak 3.2 at the time. Nissan was also able to cut Navara prices by as little as PhP 44,000 for the base variant all the way up to PhP 196,000 less for the Sport model that they were selling at the time.
This reduction in price has driven the increased sales in the pick-up truck class in the last two years. While every manufacturer has had good success with their pick-up models from 2018 to 2019, the growth in sales is most significant with Toyota. In 2017 when the Hilux still had taxes, Toyota sold 14,688 Hilux units. In 2018, Hilux sales increased significantly to 18,237 units. In 2019, Toyota sold a whopping 20,842 Hilux units. That's good enough to make it the second best selling vehicle in the country despite being a CBU import.
The 2019 sales of the Hilux also put it behind only the Vios at 33,181 units and ahead of the Innova of which 20,794 were sold. Both of those vehicles are built in Sta. Rosa, Laguna.