PHILIPPINES: Growth Feeds Appetite For Luxury Cars

By IPS Correspondents Reprint | | Print |

Johanna Son

MANILA, Mar 5 1997 (IPS) - They make up a minute fraction of the Philippines’ 70 million people, but their expensive tastes have revved up domestic sales of luxury cars.

The country’s super-rich have been buying up Porsches, Jaguars, Volvos, Alfa Romeos and top-of-the-line BMWs and Mercedes Benzes – all of which have become available in the last two years after the government liberalised their importation.

Economic growth of recent years has brought boom times to many Filipinos in this developing South-east Asian country, boosting disposable incomes and savings that go to acquiring cars and creating a tiny but rich market for luxury vehicles.

Car sales have accelerated along with the resurgence of an economy whose growth has bounced back from negative rates in 1991 to 5.48 per cent GDP growth in 1996.

More than 200 vehicles are sold daily on average, or 1,000 per cent higher than sales levels a decade ago when the economy was in a slump.

From 1988 to 1995, car sales grew by an average 45 percent a year, and this year a 25 per cent growth is expected, more than double the car industry’s original target of 12 per cent.

The taste for cars is such that economists are starting to worry about its impact on the Philippines’ sizable import bill. Already, six among the 20 heaviest importers in 1996 were vehicle assemblers, the ‘BusinessWorld’ newspaper found recently.

And the local market has proven receptive not just to the usual sedans, family and utility vehicles – but also to upscale models that cost more than 10 times the regular cars.

These luxury vehicles are priced way beyond the reach of citizens in a country whose per capita GNP is just over 1,000 dollars, but even car assemblers and importers themselves are surprised by their sales so far.

Figures compiled by the Chamber of Automotive Manufacturers of the Philippines, which groups most vehicle assemblers, show that sales of luxury cars picked up in 1995 though they make up only one percent or less of the total car sales.

Sweden’s Volvo cars have been doing particularly well since 1995, selling 246 units that year and reaching 286 last year.

The cheapest Jaguar – the British cars were launched in the local market two weeks ago – sells for 3.8 million pesos (146,153 dollars). The most expensive model sells for 5.8 million pesos (223,076 dollars).

As of end-February, Jaguar Philippines Inc. has sold 24 units and has a reservation list of 60 waiting to be filled. Jaguar’s local distributor hopes to sell up to 100 units this year.

A Porsche, whose German lineage needs little marketing, sells for between 2.9 million and 10 million pesos (111,538 to 384,615 dollars). PGA Cars Inc., importer and distributor of Porsche, plans to bring in its GT-model, one million dollar race car soon.

PGA Cars reports selling 28 Porsches in 1996 and hopes to sell 50 units this year, a figure that nearly approximates the number sold in Malaysia, Singapore and Hong Kong annually.

The BMW-7 series goes for five million pesos and up (192,300 dollars or more) and the Mercedes Benz S class even much more, though they have to be imported. Like the Volvo, lower-end BMWs and Benzes are assembled locally.

When affluent customers consider buying these cars, they know they can afford it. So in that sense, “the price doesn’t really matter much,” Steve Watts, head of Jaguar Cars Exports Ltd (Far East), said here recently.

Some buyers don’t bother to try out the car, and send only their chauffeurs to check them out. One Jaguar customer casually walked in and bought two cars during the car’s recent launch.

The Philippine car market has become an arena of competition among vehicle makers and importers taking advantage of the liberalisation and deregulation of the economy.

The Philippines is also proving to be a promising market in Asia, where vehicle manufacturers, lured by cheaper labour costs, have flocked to countries like China, Vietnam and Thailand to produce cars for the region. The Asia-Pacific has already seen the most explosive growth in motorised transport in recent years.

“We’re optimistic about the market in the country in view of growing affluence after years of sustained economic growth,” Watts said.

In the race for rich customers’ money, rival vehicle distributors and assemblers are competing for buyers by offering quality services and luxurious showrooms.

Asian Carmakers, the local assember of BMWs, sends customers a service vehicle if their cars break down. Volvo treats patrons to coffee and concerts in a showroom called the ‘Conservatory’.

Experts say the pickup in car sales may be just the beginning of the vehicle boom, though Manila’s streets are clogged enough at present. “Everyone is talking about bringing in or getting a car, but no one talks about how the infrastructure is coping,” said one businessman.

Filipinos are buying cars faster than the government can improve on road networks and infrastructure. Currently under construction are a second light railway transit, and a 35-km ‘skyway’ being built to ease congestion.

On most days average speed in Manila slows to less than 12 kilometres an hour, making the sportscar speeds of Jaguars or Porsches irrelevant for city driving. Thus, officials of Jaguar are promoting their vehicles as cars for out-of-town trips to, say, golf courses.

Industry officials see the vehicle boom as a positive trend and point to the experience of Thailand, South-east Asia’s centre for car manufacturing, whose explosion in car demand occurred as incomes rose.

But the Philippines ought to heed the other lesson in the car boom that Bangkok residents know full well by now: traffic can make life in the city miserable.