Will the automotive industry rev up again?

MANILA, Philippines — I press on the gas pedal and press even more. The car responds and moves faster, surrendering to my rhythm. It feels good. In an instant, I slip into a thin membrane in this chaotic universe. It’s cathartic, it’s liberating, it’s wild.

Driving on EDSA nowadays is a motorist’s dream — no monstrous traffic jam, no people, not a lot of cars. The usually dreaded highway is everything we wish it were. From the usual five kilometers per hour or 20 max during our pre-coronavirus disease 2019 or COVID-19 life, one can now drive faster until all that’s left is a body moving through time and space. On some nights, it seems the highway is all mine. And then, of course, the checkpoints appear and I am jolted out of my imaginings.

Soon enough, I realize that after the lockdown, Metro Manila’s roads will be filled again as motorists and commuters alike embrace the new normal and return to work.

But will it really be back to normal?  The whole COVID-19 situation also puts a spotlight on a major industry in the country that will be significantly affected by the pandemic — the automotive industry.

So, while I bask in the stark improvement of traffic in Metro Manila these days, I am also aware of the harsh reality that the country’s automotive industry could bog down and it might take time before it can recover.

People will not be buying cars after this pandemic, at least not yet. Those unfortunate enough to lose their jobs will have to sell their existing cars to use the cash. Banks will reassess their risk appetite and, perhaps, the era of easily approved car loans is over for now.  Car dealers will be tightening their belts, too.

This is what will be happening globally, and not just in the Philippines.

Now who cares about the car industry? This might seem like a first world problem, but actually it’s not.

The industry after all employs tens of thousands of jobs.

According to government data,  the industry has directly employed 8,000 workers in automotive manufacturing, whereas approximately 68,000 jobs have been generated in auto parts manufacturing. An estimated 340,000 are employed in auto-supporting industries. The figures, based on 2013 businesses, are outdated and I am sure could go significantly higher.

Rep. Stella Quimbo of the second district of Marikina says the motor vehicle industry employs 61,000 workers. Of the total number, 40,000 are salaried and about 19,000 are daily wage earners, she says.

“During the lockdown, the industry was not allowed to operate but continued to shoulder salaries amounting to about P27 million per day,” she says, citing the Labor Force Survey.

Thus, she says, the industry is expected to face liquidity issues.

Last February, car sales reached 29,790 units, up 13.2 percent from 26,327 units in the same month last year, according to industry data.

This is not going to continue, at least not in the coming months. In fact, industry players estimate a 20 percent drop in sales for 2020. It could be more.

What to do?

What can the industry do then? I asked my sources and they’re seeing some major changes.

Perhaps some players will share showrooms to cut costs, some dealers may focus on services just to keep the cash flowing in.

Car companies could also focus on the second hand business, at least for now. This might be a win-win solution wherein consumers who really need cars, but can’t afford to buy brand new ones, can buy the cars they need, and for the sellers, it will ensure the continuity of their businesses. For motorists like me, it may also keep traffic in Metro Manila more bearable.

Government response

The government is not expected to use taxpayers money to bail out the automotive industry, given the long list of other badly hit sectors such as the MSMEs.

We can’t afford the cash for clunkers bailout implemented by the US in 2009 as a post-recession stimulus program wherein it extended a $3 billion cash rebate to buyers of new cars.

But Rep. Quimbo says automotive firms can qualify as “critically impacted” and eligible for assistance such as wage subsidies and interest free loans under the consolidated fiscal stimulus bill she and Albay Rep. Joey Salceda have filed.

“These would have labor conditionalities...e.g assisted firms are required to retain a certain percentage of their workers....Assistance will be needed to ensure their supply chain is not disrupted,” she says.

There’s no telling yet how the industry will respond, but I’m sure of one thing, it will not be easy for the automotive sector.

But with enough determination, innovative solutions and support, I believe it can survive.

I know it and I am betting my father's beat-up 1983 Toyota Corona sedan — stuck in my garage for sentimental reasons because it was with it that I learned how to drive — that someday, the automotive industry, like my father's car, would rev up again. 

Iris Gonzales’ email address is [email protected]. Follow her on Twitter I Column archives.