Domestic demand for auto products to remain upbeat

CEBU, Philippines - Due to manageable inflation expectations and high liquidity, domestic demand for automotive products is expected to remain robust in 2013, a research entity projected.

The Metrobank Research Department foresees a sustained growth for the automotive sector, while banks are opening their doors to easy loan packages for automotive and vehicle acquisition, amid the low interest rate regime.

The automotive sector ended 2012 on a positive note, with sales growing by 11 percent year-on-year to 156,655 units based based on the record by the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI).

Likewise, sales of members under the Association of Vehicle Importers and Distributors (AVID) grew, with 28,400 units sold, a 14 percent increase year-on-year.

According to the report, the jump was largely attributed to stable supply in the second half of the 2012 and higher demand during the fourth quarter.

The 2012 growth is a bit above the average annual growth for the past five years, which signals that the sector may be well on a recovery path, the report emphasize.

Strong domestic demand drove the sector, supported by low interest rates and higher incomes.

As of June 2012, auto loans are at P76 billion level, a 17 percent higher compared to the same month in 2011.

The share of non-performing loans to total auto loans as of that period, while higher compared to March’s, is still lower than June ratios for the past three years.

Furthermore, imports of passenger cars and motorcycles increased by 19 percent in value based on year-on-year comparison from January to October 2012.

The latest Consumer Expectations Survey by the Bangko Sentral Ng Pilipinas (BSP) suggests that more demand this year as buying intentions for motor vehicles in the next 12 months improved in the fourth quarter of 2012, compared to the previous quarter.

Also, interest rates are also expected to remain subdued, thereby granting easier financing options for interested buyers.

However, the report said that downside risks still remain especially on the supply side since its parts are sourced and assembled across countries within the region.

The over-all weak economy or the possibility of another natural calamity such as tsunami in Japan, flooding in Thailand  may limit growth prospects in the near term, the report concluded.  (FREEMAN)