Tito F. Hermoso / | November 28, 2011 19:43
Momentum lost: through the looking glass
The nation's main Pipeline is again flowing and contractual obligations on toll fees are finally honored. By all accounts, auto sales should have zoomed skyward, but... irony of ironies. In 2009 and against the backdrop of the first dip in the World's Recession, it took the floods of typhoon Ondoy to boost automobile sales to record volumes in 2010. In 2011, the floods of the Tsunami that hit northeastern Japan in the Spring and the floods that inundated Thailand's factories in the Fall seriously impaired the flow of car parts supplies to the world's automotive conglomerates, thus throttling further growth in local car sales. You simply cannot blame that on President B. S. Aquino.
You can say what you want about this government, but at least it resisted the temptation to impose catastrophic price controls when all the upheavals in North Africa and Gulf States kept oil prices on the boil. Credit again is due the government for resisting the temptation to subsidize and create an Ethanol industry, at the cost of higher pump prices. Again, kudos to the government for saying no to that cheeky offer to buy Petron's refinery if only to be saddled with the costs and brickbats of trying to keep oil prices down.
The government will always claim that what prods growth in investment and consumption is a matter of perception. Without a doubt, the perception that matters most is not the musings and sound bites of a handful of tycoons that many treat as oracles of prediction or economic forecasts. It is the the perception of the hard-working, traffic-suffering, credit-hungry, tax-burdened, media-influenced, materially aspiring Middle Class that determine how big ticket game changing economic goods are consumed.
But then, some of our economic managers have the habit of shooting themselves in the foot. Instead of building upon or at least sustaining the momentum of robust economic growth and consumption spending at the election year that ended the Arroyo administration in 2010, the new administration went on hunting for cases of tax evasion, plunder and corruption. This had the unfortunate side effect of throttling public spending and undermining business confidence. Zeal was further zapped when what was meant to be a well intentioned anti-corrupt practices refinement of BOT statutes, turned into the muddle that has been known as the PPP. It would appear that the delay in the IRR [Implementing Rules and Regulations] of E.O. 877-A, the E.O. which claims to address the incentives of producing more cars and car parts locally, has also turned into a PPP-like muddle.
Perhaps the biggest news for 2011 is why Beth Lee left Universal Motors, the country's first distributor of Mercedes Benz, which, incidentally celebrated 60 years in the Philippines. The biggest non-news of the year is the entry/non-entry of Volkswagen into the Philippine market. Now in embroiled in arbitration with Osamu Suzuki, CEO of erstwhile joint venture partner Suzuki, VW's ambitions have relatively quieted down. What gives? Is no one in the Pacific good enough for VW or is it the other way around? If VW wasn't good enough for the Malaysians of Proton, what more here?
Nevertheless, there are still a few bright spots as we do produce world class vehicles that are priced cheaper than tariff free imports from our trade partners. These are the Toyota Vios and Innova, Honda City and Civic, Isuzu Crosswind, Mitsubishi Lancer and Adventure, Nissan X-trail and Livina, Mazda3, Ford Focus and Escape. At one time, Ford Santa Rosa exported 4 different models in both left and right hand drive, though that is history. On the other hand, Toyota exported parts modules that are the dollar equivalent of 80,000 compact cars.
It is a testament to a brand's sturdy reputation that despite hell [the million unit worldwide recalls] and high water [floods that hit parts suppliers in Japan and Thailand], Toyota continues to be number one in this market. Celebrating its 74th year in the automotive business, Toyota sailed through 2011 without launching any new-from-the-ground up model, save for the Lexus CT200 hybrid and the very exclusive LF-A. As always, Toyota is good at incremental change that enhances the overall consumer perception of reliable value for money. Thus slight tweaking for the sales leading Vios and Innova continue to corral newbies to the brands. Tweaks to the Altis, Hi-Lux and Fortuner keep them in the top of the sales charts. Even news of a totally new Camry for the 2012 model year have not dented the current Camry's dominance. On the Commercial vehicle front, Toyota has quietly regained ground as supplies of Hi-Lux and Hi-Ace Grandias were restored. Toyota's big engined models like the Alphard, Land Cruiser and Prado, along with the Lexus line were definitely benefitted by lower prices from the staged introduction of tariff reforms under JEPEPA, though the competition is lobbying for a slowdown in JEPEPA implementation. Nevertheless, Lexus continues to hold its own against new model launches by the European luxury marques. On the other hand, the Avanza, perhaps for the lack of a diesel variant, has not gained the popularity it deserves despite the popularity of Multi-cab sized Utility vehicles. There are whispers of the impending arrival of the GT-86, the first rear wheel drive Toyota GT in a long while. Plus the MPV version of the Prius hybrid.
Ford and Mazda
Upending common perceptions seems to be the common thread for 2011. For many years Ford Group Philippines had the singular and even patriotic reputation of exporting more cars from the Philippines than selling through its domestic showrooms. But as the Escapes, Tributes, Mazda3's and Focus Mark 2 aged, Ford and Mazda's new offerings were finally getting the consumer attention they deserved. The Mazda2 introduced zoom-zoom attributes to lightweight technology to what is usually perceived as the cheap, bread n' butter sub-compact class. The style statement Ford Fiesta delivered on its promise that the common man's car need not drive or look like a common car. Though Ford continues to deliver traditional American car values with the steady supply of E-150's and Expeditions, the new Explorer is showing the Asians that Ford can beat them in the high tech stakes game in a new-wave Crossover-SUV. Ford's Everest continue to be one of its better selling models while the pick up world eagerly awaits the arrival of the new high tech and avant garde Ford Ranger. Our market awaits the arrival of Mazda's much trumpeted Skyactiv direct injection gasoline and diesel engines, while supplies of the CX-7 and CX-9 have begun to normalize. Ford Explorer's upcoming Eco-boost engine now makes Ford share hi-tech company with the small direct injection turbocharged fours like Volvo's 1.6 S60, Audi's TFSi and Mercedes's C-class. But the real value proposition in Ford's line up is not just the aging Escape, but the 4-door sedan TDCi Ford Focus. Now that's a thrifty pocket rocket sheep's clothing. Curiously, just as Ford has exported close to 80,000 CBU's that are made in Santa Rosa, Toyota's parts exports are claimed to be valued at the dollar equivalent of 80,000 CBU's.
In 2011, Honda Fans looking for excitement, looked elsewhere for the CR-Z, sold in other export markets. Or to the streets of Bangkok for the new Brio mini-compact [uncompetitively priced if imported to the Philippines due to tariff rates] or the Freed 7-passenger minivan built on the Jazz floorpan [undecided for export to left hand drive markets]. Supplies were affected by the Sendai Tsunami but CKD part supplies for Philippine manufactured Cities and Civics were even more severely affected by the Autumn floods in Thailand. Honda fans, however are looking forward to the New Civic and CR-V. Though both all new, they carry on with the green and family-centric values of the current Civic and CR-V. Talk of the hybrid Honda Insight, remains as talk. For the moment. Despite the inroads of other car importers offering a wider range of models, Honda still holds on to a very large and very loyal fan base.
Its been the quiet of the content over at Mitsubishi save for a quick resolution of some rumors spreading about sudden floor mat induced acceleration on the still popular Mitsubishi Montero Sport. And the deferment of a welcome party in the early part of the year in deference to the Tsunami disaster in Japan. The Montero Sport continues to do a Fortuner, clinging to dominance, longer than the Fortuner ever did. The Montero Sport now outsells many popular family sedans, further proof of how "Pajero-ed" this country is. With Honda's Civic being more like a mainstream Altis rival, Mitsubishi has niched its Lancer MX as a Subaru Impreza alternative. If you think this is mere marketing hype, then look no further than the endless comparos in local car magazines between the Mitsubishi EVO X vs. the Subaru WRX-Sti. MMPC never fails to fly the flag as the lesser Lancers are now made in Cainta, where the Adventure and the immortal L-300 Versa vans continue to be assembled. Meantime, Mitsubishi continues to prod the imagination of the SUV-crossover buying class with the ASX, the VW Golf-Plus sized replacement for the gasoline powered Outlander. Meantime, JPEPA (Japan-Philippines Economic Partnership Agreement) has made the high tech Pajero even more affordable. And in the Commercial vehicle segment, the stylish Strada continues to sell well, defeating the old wives' tale that only a boxy pick up is a legitimate pick up.
The most hopeful news coming out of Thailand this year is the new Chevrolet Colorado which shares its new platform with the next D-MAX. The new D-MAX is even more voluptuous than its Thai nemesis, the Toyota Vigo nee Hi Lux. It remains to be seen if the Isuzu i-TEQ engine can keep the engine bay of the new sisters considering GM-DAT has an excellent 2.2-liter crdi engine as fitted in the Captiva. Nevertheless, the i-TEQ is a known quantity with its heritage tracing back to the unburstable C-190, which powers practically all the light commercial vehicles made and sold in China today. Look to the new 7-seat Chevrolet Trailblazer, launched in Dubai, as the indicator of how the new Alterra will proceed to. New 5-speed and 6-speed automatic transmissions are also in the works. Isuzu's consistent top 5 ranking in the sales chart continues to amaze as it sells not a single car. Isuzu's good name is what propel repeat customers for all its LCV and AUV with all the frills that give a “wow” factor to typical customers. Isuzu would prefer to sell more of its mainstream trucks but unless the government can make up its mind on used truck imports by adjusting incentives to encourage national re-fleeting with EURO IV truck engines, the new truck market will remain stunted.
Hyundai and Kia
Tucson, Sonata, Accent, Elantra, Genesis coupe, Grand Starex limousine, i10, i30 - it appears HARI or Hyundai Asia Resources still cannot put a foot wrong. Sales were so strong that despite Toyota levels of pricing, Hyundai continues to cling to the 3rd best selling brand locally. Like its cousin, Kia, distributed by Columbian Auto, both were not so severely affected by the Japanese Tsunami and Thai floods as it has been rolling out its widely revamped product line despite the strong sales of its current Carens and Carnival MPVs. The latest Sorento and Sportage SUV have long waiting lists, especially for the crdi variants, as diesel mad Europe gets the bulk of the Korean factory's allocation. The new Kia Picanto has breached the width of the mini-compact sized segment while also upping the luxury quotient of what is normally perceived as basic entry-level motoring.
The Two Nissans
Indeed, the exit of Beth LEE and her team was the biggest news that Universal Motors generated this year. Not bad considering the UrVan UrBusiness continues to provide entry level multi-passenger transport and the Nissan Navara continues to wow the motoring press with their bicycle-centric athletic events.
Yulon's Nissan Motors Pilipinas in Santa Rosa continues to assemble the unique Livina MPV and the new X-trail. Nissan also continues to push its V-6 Accord-Camry challenger, the Teana. To round off its new introductions, NMPI also continues to import the Mexican made Sentra 200. NMPI continues to supply the local basic transpo and taxi market with the Santa Rosa made Classic Sentra.
Thanks to being run by a team that's used to punch above its weight, these Ex-Volvo officers have been taking full advantage of the strengths of the world's 2nd biggest car maker. In fact the last time GM had an impressive presence in the country was when it was still wedded to its multi-brand Auto bazaar concept called Autoworld. Now GM would like to focus on Chevrolet, to let the world, particularly Asia, know that in the US a Chevrolet is as common as a Toyota in Asia. The Covenant Car Company, barely three years old, continues to introduce models in all imaginable car segments. In 2011, they brought out the Spark, even before the North American market launch. While Ford Group Philippines hems and haws about bringing in the Mustang as a "halo" model, TCCC brought in a bunch of Camaros. TCCC also waded in the diesel compact market by bringing the Focus TDCi competitive Cruze diesel. More models are in store. The Sonic replacement of the Aveo. The Traverse mid size SUV to pair with the favorite full size Suburban. The Orlando, the long awaited replacement of the 7-seat Opel Zafira minivan. Coming up is the Thai-made Chevrolet Colorado light commercial vehicle which shares technology with the next Isuzu D-MAX, much in the way that Ford's Ranger is related to Mazda's BT pick up. It would be interesting if the Colorado enters our market with the excellent diesel engine that powers the Chevrolet Captiva, which may soon gain a bigger chassis based 7-seat showroom SUV mate, in the Colorado based Trailblazer.
Motorsorts fans and ethusiasts
Though both Subaru and Suzuki have withdrawn from rallye motorsports, all their new cars continue to offer the long spring travel ride unique to cars developed from motorsports. Thus both continue to hold on to their highly specialized car enthusiast niches whether its the diminutive Suzuki Celerio, made in India or the sublime Subaru Forester turbo. The Subaru Legacy GT, Legacy Wagon and Outback now provide STI like performance for the executive sector. The upcoming new Impreza versions sport new engines and transmissions plus a WRX -STI hatchback with 5-speed automatic. Motor Image will soon be opening more dealerships and showrooms in the country. After introducing the new enlarged Swift and face lifted Alto, Suzuki continues to tempt the local market with its SX4 sedan and hatchback, plus the Grand Vitara compact SUV. MINI continues to coddle its loyal fan base by introducing more versions of the MINI plus the biggest MINI ever, the 4-door crossover looking Countryman. As for motorsports, sadly factory participation is on the wane save for the Tuason Racing School Fords and a very minimalist entry by Chevrolet with the Cruze. But the sport is growing with lots of independent enthusiasts as witnessed by a very busy race schedule in all the Johnny Tan owned racing circuits.
The Premium market
After a healthy string of sales for its accident avoiding self-braking XC 60, Volvo introduced the top of the line and sexily styled twin turbo V-6 S 60 which, not only automatically brakes for obstacles, but also for pedestrians. Later in the year, Volvo introduced its own version of direct-injection turbocharged engines, similar to Mercedes's, Audi's TFSi and Ford's Eco-boost in the entry level S 60, in 1.6 liter displacement.
BMW Asian Carmakers have recouped the top selling sales crown when supplies of the new 5-series finally caught up with local demand mid-year. After introducing the new X-3 and 1-series in 2011, BMW is ramping up for the introduction of the latest 3-series.
Always one to contest BMW's claim to the top spot, CATS Motors, Mercedes Benz distributor will be unveiling its new building which has quadrupled the size of its EDSA HQ. Celebrating Mercedes-Benz's centenary world wide, the festivities coincided with the 60 years of "Chedeng" in the Philippines. Felix Ang has chosen 2011 to be the year to enhance of Mercedes's super cars; from AMG versions of the C-class sedans to the SLK and SLS. CATS also introduced the new C-class along with a special guest, former F1 racing champion Mika Häkkinen. Rumors about FIAT, Chrysler's new owners, entering the Philippine market through the Chrysler-Jeep-Dodge franchise of CATS Motors remain as rumors. CATS also introduced the latest Dodge Challenger, Dodge Charger R/T, the Mercedes-ML based Dodge Durango and Jeep Grand Cherokee, plus more versions of the venerable Jeep Wrangler and Commander.
Porsche and Audi sales, continue to depend on the personal charm and network of their best sales executive, one Robert Coyuito, Jr.. Mirroring the fortunes of the parent company, sales of Panamera, new Cayenne and the GT3, hot versions of the newest generation of the iconic 911 are making up for lost time. The popular Audi R8 and strong sales performance of the A4 round up Audi's steady share of the luxury market. Unusually, 2011 is the year that PGA has sent large delegations of the motoring press to drive the latest Lamborghini Aventador, Audi R8 V10 and A6 at the Sepang F1 Race circuit. Expect the Audi A1 MINI challenger to enter the market this year.
On a smaller scale, TATA owned Jaguar and Land Rover sales, along with Land Rover sorties into image building motorsports events in China are also highly dependent on the charm of Wellington Soong, ESQ. Besides the XJ and XF, Mr. Soong also continues to promote the Maserati Quattroporte. The father and son team led the way in moving from their former Buendia HQ to swank new premises at the Fort, Global City.
The brands from China
Foton's large dealer showrooms are now fast dotting the inter-island landscape as MPX van and View vans, popularized by the PCSO ambulances, expand sales. Sales of Blizzard turbo pick ups to the MMDA increased their visibility too. Great Wall, a Guangzhou carmaker is now selling a Toyota Scion look alike called the Cool Bear and the Hover, a rehashed North American Isuzu Axiom. Geely now owns Volvo, but has largely left Volvo's management style intact as Geely showrooms are starting to pop up in the Metro. Lifan has been around for sometime, along with commercial vehicle makers JAC and Jinbei. Chery is in the process of rationalizing its product line while it maintains its culled dealer network. BYD should be taking advantage of its unique hybrid technology to bring hybrid motoring to the masses.
With the exception of Foton and to some degree, Chery, most China brand importers need to move up from being mere commodity importers and warehousers. This will prove difficult as most China brands have very little experience in after sales servicing, much less supplying export markets. China's car industry grew so big and so fast on the back of its domestic market so that even though it would love to tap the export market, a structure to handle export sales barely exists, giving local importers a hard time. For example, Geely has the imagination to own Volvo and JV with Manganese Bronze, makers of the quaint London Cab. The FX4 is being exported to the Middle East and Thailand in both right hand drive and left hand drive versions. But for some reason, this unique vehicle is not even in the showroom of Geely's Philippine dealer.
Used car imports
Though temporarily halted, the issue on used car imports tends to spill over into the truck sector, where almost 99% of the market are reconditioned and converted trucks. The used car and truck imports always becomes a labor issue. Whose workers have a right to keep their jobs owing to stiff competition? The formal hire, security-of-tenure assembly line and parts manufacturing workers or the contractual day job workers of used truck and car re-conditioners? It goes without saying that the used vehicles, whether smuggled or poorly reconditioned are always cheaper and our consumers are not mature enough to value safety over cheap price. The question that should be posed now is the government willing to let populist sentiment decide policy? By this it means, flood the country with cheap used vehicle imports and safety and environment be damned. This may have a neutral effect on employment as Assemblers will shut down the assembly lines and choose to import CBUs from their principals. Or, ban them altogether and raise tariffs on imported CBUs to limit consumer choice to buy only locally made. Every Economist worth his salt agrees that this passe idea has been tried and it just ended protecting an elite at the expense of the consumer.
Reason for hope to the Middle Class
The world enters the remains of the decade with uncertainty emanating from the former locomotives of the world economy. US society is too polarized to even think of growth, much less a return to economic normalcy, unless double dip Recessions are its staple. The Euro zone is in danger of disintegrating, making the word Euro and zone a contradiction in terms. Japan, wracked by disasters, continues in the same funk, the same stasis that has defined not one but two lost decades. In all three former powerhouses, the special interests of the entrenched elite cling on to their entitlements at the cost of alienating and impoverishing the many, dragging down the world's economy. This has led to a generation of aimless youth, the very core of what the future Middle Class should be.
The world can only be driven by the resolute. You read "emerging markets" from the lips of seers and economists alike. But the real source of growth, China, is a practitioner of capitalism in its purest form, a corporatist state that is bent on making money whenever and wherever it can.
We are small and our exports are minuscule? True, but what we can learn from China is the "can do" spirit that focuses of making things happen. Though they had their time, the stability of China was reached when they stopped the habit of discrediting and witch hunting the old whenever a new government kicks in.
Economic growth will not yet leap this year and so the Middle Class, the very consumers that drive car sales will be very cautious. Like it or loathe it, the local car market is still a rich man's market - if you don't count the used car and truck imports. It matters most that government keeps the Middle Class hopeful so they will open their efforts and pockets to spending more, thus making us, an attractive market for FIAT, Alfa-Romeo, Ferrari and yes, Volkswagen. With a hopeful Middle Class, they would hopefully won't mind if the President enjoys driving a Porsche, whether pre-owned or not, free of controversy.
We need not be dependent on OCW remittance as we still have a relatively sizable agricultural sector. There is plenty of room to incentivize Agriculture as 100 million mouths to feed is a big market. Even if we sweep out the monopsonists and oligopolists and create a miracle in agricultural production and equitable access to opportunity - the way telecommunications was reformed - the problem is how to share the produce and the wealth with the country's other non-agricultural half? The transport sector has managed this with great difficulty as the lag in investment in our infrastructure grows exponentially with each passing year. We are sure even the President wouldn't mind the extra added kilometers of expressway to stretch his Porsche.