Study: Introducing excise taxes to pickups may ‘derail’ PH auto industry’s recovery

Uh oh
by Drei Laurel | Sep 27, 2022
Ford Ranger 2023
PHOTO: Leandre Grecia

The funding for all those fancy new bridges and infrastructure projects? It has to come from somewhere, right? And with the way discussions regarding the Department of Finance’s (DOF) proposal to raise taxes are going, it’s increasingly looking likely that a chunk of it will come from imposing excise taxes on pickups.

According to a recent study by Fitch Solutions, though,  that extra revenue may come at the expense of the local auto industry’s recovery from the COVID-19 pandemic.

While the outlook for passenger vehicle sales in 2023 remains “promising,” research conducted by Fitch Solutions suggests that the possible reimposition of excise taxes on pickup trucks “could derail the recovery in sales.”

“Prospects for the continued strong recovery in vehicle sales in 2023 have diminished following the possible reintroduction of excise taxes on pickup trucks, mainly due to the subsegment’s popularity in the country,” part of the study reads.

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Fitch Solutions, added, however, that the looming uncertainty surrounding the excise tax situation may lead to a surge in demand for pickups in the Philippines.

“We highlight that the excise tax exemption aimed at reducing the burden of purchasing pickup trucks has been called to question recently,” the study says.

“While the decision to reimpose the excise tax is yet to be made final, we believe that demand for pickup trucks will rise as the deadline to the excise tax exemption nears resulting in sales dropping thereafter.”

Currently, Fitch Solutions is forecasting a 19.7% rise in vehicle sales, or a total of 321,400 units, ins 2022 compared to the year prior. That’s a 17% growth in passenger car sales and a 21% increase for commercial units. All this is without taking into consideration the potential imposition of new excise taxes, though.

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In the medium term (2022-2026), Fitch Solutions suggested that it expects the demand for light commercial vehicles to remain high thanks to the segment’s local appeal. Again, however, the potential for growth for the segment may be negatively affected by the imposition of excise taxes.

“In addition, due to pickup trucks' continuous appeal on the domestic market, demand for light commercial vehicles will continue to be high,” Fitch Solutions said.

“However, prospects of the re-introduction of excise taxes by the Marcos administration could derail the fast growth the sub-segment has witnessed since the onset of much-relaxed movement restrictions.”

So, how big of an impact do you think excise taxes will have on the pickup or light commercial vehicle segment? Will this affect your plans to buy one in the near future?

And in case you missed it, here are the projected prices for the likes of the Toyota Hilux, Ford Ranger, and Nissan Navara in the event excise taxes are imposed on the segment.

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PHOTO: Leandre Grecia
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