Philippines Motorcycles Market has lost a huge 18% in the first quarter 2019, following years of impressive development. Sales were hit by a less positive economic environment and by the recent introduction of new emission standards. While Honda is market leader, KTM and BMW are fast growing.
Philippines economy appears to have had a resurgence in the second quarter. Exports continued to gradually recover in May, and business confidence improved in the quarter. Moreover, government data revealed public spending ramped up in May, as policymakers try to achieve their 2019 growth target and make up for lost time from the budget impasse in H1. Although remittances slowed in April, a rock-solid U.S. labor market should have kept remittances afloat in May and June, while cooling inflation likely boosted consumer spending in Q2.
Economic momentum should gather steam in the second half of the year thanks to fiscal stimulus and more accommodative monetary conditions. Government spending on infrastructure projects should rebound in H2, which should in turn boost private investment. The U.S.-China trade dispute and a regional slowdown, however, represent key risks to the outlook.
In recent years, the market is growing constantly with a robust pace, doubling volumes from 2012 to 2018. and surging in seventh place in the Global ranking, ahead of Brazil and Taiwan and behind Thailand.
In the 2018 sales grew up 35% with 1.59 million two/three-wheeler sold.
While the introduction of the new euro 3 standard since September represented a potential risk on sales volume, it seems the producers were able to manage the issue anticipating the introduction of models respecting the standard and the market accelerated in the Q4.
However the trend changed in the first quarter 2019 when sales have been 305.039, down a sharp 18.3%
The six manufacturer having local production have a clear advantage in the domestic market, but they have to fight against an aggressive group of local brands.
Indeed, the leader is the Japanese Honda with over half a million sales in the 2018 and 32% of market share. In second place Yamaha with 289.000 ahead of Suzuki, Kawasaki and Kymco.
Chinese brands are estimated at a combined share of 30% while the Indian Bajaj Auto, operating in partnership with Kawasaki, is the leader in the Three Wheeler segment.
KTM is the leader among the premium brands averaging 250 sales per month, while BMW is fast growing despite of not being a local producer.
Motorcycles Market Environment
Compared to other Southeast Asian markets, the Philippine market is not yet saturated, providing many investment opportunities and having space for further development.
The growing Filipino middle class sees motorcycles as efficient and cost-effective for both personal and business needs. With easy access to credit, sales potential in the country is promising. Consumers are able to buy motorcycles at reasonable prices, with many investors specializing in semi-knocked down units. Local companies have also established technical licensing agreements with foreign brands to facilitate localization of inputs and technology transfer.
Actually, Japanese brands such as Honda, Kawasaki, Suzuki, Yamaha and the Taiwanese Kymco have production base not only for domestic sales, while Chinese and Indian brands are looking at the market with growing interest. Since 2017, KTM is producing in the Laguna plant with 2018 production at 7.000 units, 60% for export.
In addition, the government has put in place development programs such as the Comprehensive Motor Vehicle Development Program, aiming to promote investments, technology transfer, and industrial upgrading and already 28 local and foreign companies have availed of the incentives in this program through the assistance of BOI.
At the same time, the Philippine Economic Zone Authority (PEZA) also provides fiscal and non-fiscal incentives, including income tax holidays from 4 to 8 years, tax and duty exemptions.
The government is taking care of two-wheeler emission as well and since September 2018 all local motorcycle manufacturers, assemblers and importers must sell only Euro 3-compliant products.
Prior to registration of a motorcycle unit, manufacturers/importers are required to secure a Certificate of Conformity (COC) obtained from the DENR to be able to get a Certificate of Stock Report (CSR) from the Land Transportation Office (LTO). This policy would mean an additional cost for the production of motorcycles because it will need upgrades on the fuel systems and catalytic converters but will benefit the population in terms of emission.