Philippines Motorcycles Market in the first ten months of the 2019 was yet positive, despite a slow start of the year and the sales figures improved 9.8%, projecting the year over the 1.7 million units, new record, despite the effect of the recent introduction of new emission standards. While Honda is market leader, KTM and BMW are fast growing.
In the Philippines economy, following the rebound in the third quarter, fiscal stimulus and solid consumer dynamics should be keeping momentum strong in the fourth quarter. Public spending increased again in October, following the surge to a year-to-date high in September; after the budget was gridlocked in H1, the government is catching up on its 2019 spending plan. Moreover, consumer credit grew robustly in October, while business loans also increased amid more favorable credit conditions thanks to the Central Bank’s monetary policy unwinding. Likewise, remittances rose at a solid rate in October, and are historically strong at the end of the year due to inflows ahead of the holiday season, boding well for private consumption in Q4.
The outlook for 2020 is positive as the impetus from government spending on infrastructure projects will fuel investment and construction activity. Moreover, consumer spending should remain resilient thanks to a tight labor market, sustained remittances and looser credit conditions. However, the longstanding U.S.-China trade rift and a continued tech downturn cloud the outlook.
In recent years, the Philippines new motorcycles market (including moped and three-wheeler vehicles) has been positive with a robust pace, doubling volumes from 2012 to 2018. and surging in the seventh place in the Global ranking, ahead of Brazil and Taiwan and behind Thailand.
In the 2018 sales grew up 35% establishing a new record of 1.59 million units sold, despite the introduction of new euro 3 emission standard normative in September.
Despite a slow start, in the 2019 the market is moderately growing with sales in the first ten months of the year reported already above 1.5 million (+9.8%), projecting the full year over 1.7 million.
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 i, which has established in the country a 7.000 uts/year production plant, is the leader among the premium brands averaging 300 sales per month, while BMW is fast growing and already hit the new record of more than 1.000 units sold.
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.