PHP12 Billion Potential Losses for Auto Dealers: Are There Opportunities in This Difficulty?

Automologist Harold believes that in the midst of a potential 50% shrinkage in car sales in the Philippines this year, there are sectors within the industry with potential for growth.

This COVID-19 pandemic has put nations and industries globally on life support. The USA is headed towards an unemployment level which could exceed that of World War 2. The global aviation industry is in intensive care now. The global tourism industry can kiss all their strategic growth plans goodbye. Global economists are singing the chorus that this crisis is going to be so large that it would take at least 10 to 12 years to recover, if at all.

On the local front, the pessimists are saying that the Philippine government will go bankrupt if it supports the over 10 to 15 million people who will lose their jobs. Already after 7 weeks of Enhanced Community Quarantine (ECQ), many micro-, small- and medium-scale businesses, which makes up at least 70% of the Philippine enterprises, are already doomed for closure.

Image source: Inquirer Mobility

On the automotive industry front, the auto dealers are already running a combined operating loss of between PHP10 to 12 billion pesos for the 7 weeks the nation has been on ECQ. These figures were gathered from top executives of auto dealers interviewed by a reputed journalist of a major Philippine broadsheet. These executives believe the earliest the automotive industry can see the light of recovery is in 12 to 18 months.

Not all businesses have gloomy outlooks. The companies that are making a killing now are manufacturers (and their value chain) of alcohol, hand sanitizers, masks, vitamins and immune-boosting drugs, PPEs, motorcycle delivery service and hospitals. San Miguel Corporation has shut down its gin-making operation and converted it to hand sanitizer production.

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People would conserve as much of their money for uncertain times instead of buying cars. Thus, as intimated to me by top honchos from three auto dealer groups representing over 100 dealerships combined and seconded by some top executives of car manufacturers, the car sales in 2020 will be at best 50% of their original projections. This is really bad news. But are there opportunities in this difficulty?

A car manufacturing plant in the Philippines. Will it continue or stop production? Image source: AutoIndustria.

Auto dealers will rely heavily on their service departments for survival. Many car owners will have their cars maintained properly so it can last longer instead of buying a new car. This is where the service front liners and advisors would have to do a great deal of value-selling to increase their sales per customer. Value-added products, that could extend the life of vehicle engines and parts, generate fuel savings whilst improving their operational efficiency, like X-1R Performance Products, would now be welcomed by service customers.

Auto dealers’ service heads should come up with very efficient customer retention programs and attractive promotional campaigns to invite customers to have their cars serviced with them properly, and not go to a perceived cheaper independent service garages. They must educate their service clientele that valued-added products are really preventive and hence, cheaper in the long run. 1,000 pesos spent preventively on an X-1R CVT transmission treatment now, can avoid a 50,000 peso curative CVT replacement in the near future.

The other growth area in the auto service industry is car-sanitation-related products. The COVID-19 scare has driven the demand for these products. Also, the second-hand car market may see growth. The mobility business (motorbikes and cheaper passenger cars) to service people working from homes and those simply scared to go out may see a growth in the very near future as well.

At the end of the day, it is a choice if one decides to succumb to difficulty or rise above it as it explores the opportunities. As the familiar saying goes: “In tough times, the tough guys get going.”

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