Car sales slump in July foreshadows a 'soft' GDP in Q3

MANILA, Philippines — Car manufacturers reported dismal sales in July and the industry is already bracing for a deeper slump as renewed lockdowns sap demand again.

What’s new

Automakers sold a total of 21,498 units in July, down 4.7% month-on-month, a joint report by Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI) and Truck Manufacturers Association (TMA) released Wednesday showed.

But year-on-year, vehicle sales rose 4.7%, which was quite a letdown considering the base effects from last year when the pandemic sank demand for cars.

In seven months, the industry sold 154,265 units, up 46.1% on-year. Manufacturers are hoping for a 30% on-year sales growth this year.

Why this matters 

Vehicle sales are often used as barometer of economic strength. The central bank, for instance, closely follows this to measure consumer appetite for durable goods.

Household consumption represents 70% of annual economic output, and big purchases like cars materially add to gross domestic product when produced more.

What VIPs say

CAMPI President Rommel Gutierrez said that while the industry welcomes the year-on-year sales growth, fresh lockdowns in the capital region and some provinces this month to arrest the spread of Delta variant could weigh on demand.

Already, Gutierrez said automakers “anticipate a decline in sales this month”.

What an analyst say

Nicholas Mapa, senior economist at ING Bank in Manila, said the bleak vehicle sales in July would likely translate to “soft” GDP print in the third quarter.

“Depressed incomes, still relatively high borrowing costs and overall downbeat economic outlook have all contributed to this formerly burgeoning sector,” Mapa said in an e-mailed commentary.

“The absence of car sales from the country GDP accounting will translate to a softer GDP print emanating from the capital formation account which will likely accompany fading government spending and lackluster consumption,” he added.

Other figures

• Of the total sales in July, commercial vehicles accounted for 66.96% of units sold during the month. Sales under this segment shrank 5.1% month-on-month to 14,396 units.
• Passenger cars cornered a smaller 33.04% market share. Automakers sold 7,102 units of this type in July, down 3.79% from the preceding month.