Filipino buyers shift to smaller cars and HEVs as fuel prices soar

(The third in a series)

Some Filipinos continue to buy new cars despite higher fuel costs, the data shows, but the price spike could eventually spark interest in a largely untapped segment of the market: hybrid electric vehicles, or HEVs.

Rommel Ocampo, president of auto finance and leasing services company Toyota Financial Services Philippines (TFSPH), told the Inquirer that they are now seeing more loan applications for HEVs than before.

“There are a lot of requests and [loan] apps. [It’s a] better number of applications than before, when you rarely heard or saw people applying [a] hybrid [vehicle]“, he said in an interview.

Diesel fuel is no longer as affordable as it used to be, especially as an alternative to gasoline.

But rising prices haven’t necessarily shifted demand in favor of gasoline engines, Ocampo said, because many alternatives on the market are powered by the now more expensive diesel fuel.

The most notable development, he said, is the growing interest in HEVs, which alternate between using electric power and fuel, making it relatively more cost-effective.

“It’s the beginning [for] people to rethink their choices and consider hybrid engines,” Ocampo said, although specific numbers weren’t immediately available.

The insight from TFSPH, which in 2021 financed five out of 10 Toyota cars sold, provides insight into a possible new direction for consumer preference in the face of rising fuel costs.

It remains to be seen whether this greater interest, driven in part by rising fuel prices, will translate into actual HEV sales.

With other types of electric cars considered, only just over a thousand units were reportedly sold in the Philippines from 2010 to 2020.

The impact of rising fuel prices on the demand for new cars is not yet visible. But so far, sales continue to grow.

“The ongoing fuel adjustments have had no effect on our sales. In fact, May was our best month this year,” said Manny Aligada, president of Kia Philippines, noting that the company even outpaced the industry in the first five months with a 29% increase.

Data from January to May this year showed the industry grew by 14.6%, selling a total of 126,273 units in May compared to 110,217 units during the same period in 2021, according to a joint report by the Philippine Chamber of Automobile Manufacturers, Inc. (Campi) and the Truck Manufacturers Association.

Campi aims to increase sales by 17% this year to 336,000 units. When asked if fuel prices would affect their outlook, Rommel Gutierrez, chairman of Campi, told the Inquirer that their “projection remains unchanged”.

Nonetheless, Nicholas Mapa, senior economist at ING Bank NV, told the Inquirer that the impact of rising fuel costs could eventually result in demand shifting towards smaller cars.

“As for the decline in sales due to high fuel consumption, we could see slower demand for large SUVs (sports utility vehicles) as consumers turn to small, economical subcompacts. [cars]Mapa told the Inquirer.

In general, he said sales were still “robust” although slightly below their pre-pandemic performance. He said car sales are expected to average 25,000 a month, with some of the demand driven by pandemic-related reasons such as the need for social distancing. INQ

(To be continued)

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