The Changing Landscape of the Car Industry in Asia: Automotive Search Preferences in the Philippines 2014 - 2016

[headline>How have car consumers been navigating online automotive marketplaces in recent years? What can these search tendencies tell us about the future of the automotive industry in the Philippines? As the local car market continues to flourish at an astounding rate, we analysed the car buying process of our users and uncovered some important insights that reveal the direction the country's automotive market will take in the coming years.[/headline>

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[column size='1/2'>Over the past 10 years, the booming automotive industry in Asia has seen a considerable amount of change and innovation. In less than a decade, the process of car buying has been completely revolutionized, with online searching taking precedence over more traditional methods such as personal calls to dealers or printed classifieds.

Consumerism in Asia has also seen rapid changes both socially and economically. With GDP steadily increasing and disposable income more readily available, the e-commerce industry has grown tenfold, clearly reflected in the amount of searches and purchases both on and offline throughout the region. In the first month of 2016 alone, 29% of the 47.1 million active internet users in the Philippines purchased a product or service online. And with many industries prospering throughout Asia due to[/column>

[column size='1/2'>this online shift, automotive manufacturers and dealers in the region have realized that online searching is now a significant, if not the most significant stage of the car buying process.

An online vehicle platform offering buyers an easy way to shop for cars online, Carmudi has analysed its data in an effort to highlight and understand search trends among car buyers in the Philippines. Our research was focused on a 2-year period spanning from 2014-2016, where we compared the period of 2014-15 with 2015-16. We also conducted a survey of our dealers to gain more insights about certain trends in the country. Our research focuses on the popularity of car body styles, car brands, and price ranges among others, to demonstrate the changing trends in automotive search behavior in the Philippines and to share our projections for the coming years.[/column>

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GDP vs. Car Sales in the Philippines

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[column size='1/2'>The Philippines is one of Southeast Asia’s strongest economies with a population of over 100 million people and a current GDP of just under $2,700 per capita. Increasing car sales in the country have continued to illustrate this statistic, with an estimated 350,000 cars to be sold by the end of 2016, a 10% increase on the year[/column>

[column size='1/2'>before. This growing purchasing power coupled with ongoing public transport infrastructure issues have increased the desire for many to own their own car. The following graph illustrates the growth of GDP in conjunction with car sales in the country, showing that the industry continues to thrive at a substantial rate.[/column>

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Sources: Trading Economics, Philstar, CAMPI

New vs. Used Car Search Preferences

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[column size='1/2'>When searching for car condition, we saw that from the period of 2014-2015, nearly 60% of all searches were focused on new cars (brand new cars from those respective years). For the period of 2015-2016, we saw that searches for used cars increased by nearly 100%, a significant increase for this category. Additionally, our data shows that almost 82% of total searches in the latter period were for used cars, pushing new car searches down to 18%, nearly one third of its original search level. From a search perspective we can conclude that there is a growing interest in used cars or more conversion-centric searches with an intent to purchase.

Contrarily, 63% percent of the used car dealers we surveyed stated that they have seen a slight decrease in second hand car sales over the past 2 years. Every dealer that stated this indicated that low downpayment offers from new car dealers was the main reason for this.

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[column size='1/2'> Additionally, the growing number of C2C transactions via online classified sites could also be a factor for slower sales in this segment. The remaining 38% stated that their sales figures have stayed on average the same, indicating that while there may have been a minor decrease, used car sales remain relatively buoyant.

The new car dealers we surveyed indicated that sales were strong in their category, in contrast to our findings above. They also iterated the fact that low downpayment offers were attracting more customers to their dealerships.

By global standards, cars in the Philippines are expensive relative to income, and this data shows that while there is aspirational interest in brand new cars and the market remains strong, used cars are the more realistic choice for many in the country.

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Car Brand Search Preferences

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[column size='1/2'>Car brand recognition is strong in the Philippines, with global heavyweights such as Toyota, Honda and Hyundai dominating car sales in the country. And it is therefore not surprising that our search[/column>

[column size='1/2'>data supports these figures. For the past two years, Toyota has been the most searched brand with an average of 29% for both new and used car segments over both years.[/column>

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[column size='1/2'>For the period of 2014-2015, Hyundai was the most searched brand for new cars with 29%, followed by Toyota with 23%, and Ford with 10%. For the period of 2015-2016,[/column>

[column size='1/2'>we can see that for individual brands, Toyota was the most searched brand with 31%, Hyundai followed with 14% and Honda secured third place with 11%.[/column>

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[column size='1/2'>For used cars, Toyota was the most searched brand for the period of 2014-2015 garnering 29% of searchers' interest. The Japanese brand was closely followed by Hyundai with 23% and Ford with 12%. For the following period (2015-2016), Toyota took a share of 34% with Honda (13%), and Hyundai (9%) trailing behind.

With regard to car condition, Toyota is the most popular brand in both the new and used car categories, followed by Honda.

Our data also reflects our survey responses, with an overwhelming majority of both new and used dealers concurring that Toyota is by far the most popular car brand for them. The reasons behind Toyota’s dominance in the market, according to these automotive industry insiders, is due to the brand’s high resale value, its competitive pricing, excellent fuel efficiency and[/column>

[column size='1/2'> reasonable maintenance costs.

The remainder of our dealers said that Ford and Honda were their most popular brands, with Ford dominating due to affordability and Honda due to its high resale value.

However, search popularity does not exactly mirror sales numbers. For 2015, the top 5 car brands according to market share were as follows: Toyota (43%), Mitsubishi (19%), Ford (8%), Isuzu (7%), and Honda (6%).

For the start of the year to mid-2016, Toyota once again lorded over the entire market with a 43% share, and rankings stayed practically the same with Mitsubishi at second (18%), Ford at third (10%), Isuzu at fourth (8%) and Honda at fifth (7%). But what we can say with certainty is that Toyota is the most popular car brand in the country, in terms of both searches and sales.[/column>

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Car Body Style Search Preferences

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[column size='1/2'>Comparing our data from the period of 2014-15 to 2015-16, we can see that for new cars, four body styles were the most searched for by users. For the period of 2014-15, the MPV was the most popular body style with users, generating 28% of all searches in the body style category. It was followed by the sedan with 23% and the van with 13%, indicating that searchers are drawn to new [/column>

[column size='1/2'>commercial vehicles instead of used. This could be due in part to owners wanting mechanical longevity and a professional appearance. For the latter period of 2015-16, we see a slight change in interest with searches for the city car gaining momentum with 24%, followed by the MPV with 22% and finally the sedan with 19% of all searches.[/column>

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For the used car segment, three body styles were the most popular with searchers for both years- the Multi Purpose Vehicle (MPV), sedan and SUV. For the period of 2014-15, the MPV was the most popular with a 29% share, followed by the sedan with 23% and lastly the SUV with 17%. While these body styles remained the most popular for the period of 2015-16, their individual popularity changed. The MPV dropped in interest to 23%, giving the sedan a share of 32% overall, while the SUV decreased to 14%. Overall, we can see that used car body preferences are more practical and family orientated than new car body styles.

[quote cite='Paolo Brambilla, General Sales Manager, Audi Philippines' align='left'>"SUVs and compact sedans are the most popular body styles with our buyers. Most of these buyers are young executives, and the pricing of these said body types falls within their executive car plans, and meets their needs and wants as well."[/quote>

75% of new car dealers who responded to our survey stated that the SUV was the dominant body style they sold to customers. The remaining 25% reported that the sedan body style attracted the largest customer base. Similarly, 75% of used dealers in our survey said that the SUV was the top choice among buyers. SUVs, according to customer feedback, were popular because they had good safety records, were spacious for the whole family, and were excellent in difficult weather conditions, such as flooding. 50% of these dealer respondents also stated that men in the 40-50 age range were the most common type of buyer of this car. Of the other 25% of used dealers, 12.5% said that the AUV was the most popular body style with buyers, for similar reasons stated above, while the remaining 12.5% stated that the sedan was the most popular, due to its affordable pricing making it easy for office workers to purchase.

While there are similarities between our search data and our dealer feedback, we can see that there are some disparities, the biggest being that users interested in new cars have been drawn to other body styles when searching on our site. Likewise, searchers for used cars show a lower interest in SUVs than our dealers have reported. One potential reason behind this could be that SUVs are a safe bet for Filipinos due to their versatility and searchers may be investigating other body styles to see what is available in the market before opting for the reliable SUV, as online car portals offer considerably bigger inventories than individual dealers.

Car Color Search Preference Distribution

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[column size='1/2'>While engine performance and handling are priorities for many car buyers, exterior design and color are also paramount to car purchase satisfaction. Comparing both new car periods (2014-2015 / 2015-2016), white and silver/gray have interchangeably been the most searched colors. We can also see that interest in black cars has increased by almost 138%, the largest jump out of all the popular colors. These results could be attributed to the fact that in hotter countries, lighter colored cars reflect sunlight, causing cooler air to be circulated internally,[/column>

[column size='1/2'>reducing the need for air-conditioning and thus improving fuel economy. Although the soaring interest in black exteriors somewhat contradicts this, research has indicated that many associate black with people of a high status. Evidently, buyers are concerned with appearance, but clearly there are some who are concerned with how their car color can reduce their fuel costs. Red also saw an increase over both periods, with a 65% boost in 2016, showing that an interest in more brightly colored cars may be taking hold among buyers.

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For used cars over the same period, gray/silver dominated, followed by white and then black. Interestingly, black color searches for used cars had a significantly higher volume for both periods compared to new cars and reinforces the idea that black indicates high status, counteracting the fact that the buyer's chosen car is not brand new.

[quote cite='Paolo Brambilla, General Sales Manager, Audi Philippines' align='right'>"Our most popular colors are white and black. For black, most buyers are interested in this color because they want their car to convey the executive-car-look. As for white, most get it because white makes the car look pristine, because it is very visible (especially at night), and because they want their car to look bigger."[/quote>

For both periods and for both categories some car colors, namely green, blue and brown had a steady search interest reflecting the small supply and demand for more niche car colors.

Analyzing the responses from our survey, dealers overwhelmingly reported that black was the most popular color with buyers overall, followed by white and silver. Blue also had some interest, but it is evident from dealer feedback that neutral colors are the staple shades for Filipino buyers, something our data clearly reflects. Dealers stated that both black and white were popular due to their striking, elegant and masculine appeal. Silver, on the other hand lends itself well to the changing climate in the Philippines, making it easy for buyers to maintain.

Globally, the most popular car colors are white, followed by black, and gray/silver. The Asia Pacific region as a whole also favors these neutral colors.

Price Range Distribution for New and Used Cars

With car sales reaching their highest level with 292,502 units sold to date, the price range of both new and used cars over the last two years has fluctuated considerably and highlighted some surprising trends.

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[column size='1/2'>Analysing our searchers’ behavior with regard to the price range of new cars, we can see that certain price points have either increased or decreased over our comparison period. As seen above, the lowest price range of ₱500,000 for new cars increased by an impressive 41% for the 2015-16 period, showing that new cars at the cheapest price point are of great interest to searchers. With a young, expanding population in the Philippines having a median age of 23, this marked increase could be attributed to growing incomes among the young such as students or young professionals. For both periods, the ₱800,000 price point garnered the most interest but there was a decrease in searches for both years for the higher[/column>

[column size='1/2'>mid-price ranges from ₱1 million to ₱1.3 million. However, interest was once again revived around the ₱1.3 - ₱1.6 million mark, overall indicating an interest in either lower or higher priced cars in this bracket. Our new car dealers shared similar trends as the ones above, stating the ₱800,000 mark attracted a lot of attention from potential buyers.

Buyers appear to have an “all-or-nothing” approach to new cars, which could be due to the younger nouveau riche in the country purchasing cheaper cars, or more established individuals showcasing their wealth by buying in the higher price bracket.

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[column size='1/2'>For used cars, searchers are drawn to the lowest prices available. The cheapest price point of ₱100,000 saw the biggest growth, with a 50% increase for the period of 2015-2016. The next lowest prices of ₱200k and ₱300k also saw a boost for the 2015-2016 period, with an increase of 26% and 6%, respectively. Most interestingly, all other prices in the used car category saw a decrease, with the lowest level of search interest concentrated around the ₱500k - ₱600k mark, coinciding with searchers' interest in this price range for brand new cars.[/column>

[column size='1/2'>Our survey revealed that nearly 40% of our used car dealers concurred with our data that buyers are shopping for second hand vehicles around the ₱200,000 mark.

The rest of our survey respondents- just over 60%- stated that on average, buyers were more interested in second hand vehicles priced between ₱300,000 and ₱500,000. The reason given for this was that buyers find it more worthwhile to invest in more expensive second hand units.[/column>

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So what can these automotive search preferences tell us about the current state and future of the car industry in the Philippines?

Undeniably, the automotive industry in the Philippines is thriving. With the country set to hit its highest sales target in history by the end of this year, it is clear that it has only entered its nascent phase. While we can see that used car sales are the strongest, there is a significant amount of interest in brand new vehicles, especially commercial vehicles and city cars in this category. This demonstrates that increased disposable income and aspirational tendencies are a direct consequence of higher GDP rates and external influences such as the internet in the country. This is especially evident for the city car category that is largely dominated by first time buyers.

[quote cite='Atty Robby Consunji, President of Car Awards Group, Inc.' align='right'>"The Philippine auto industry will continue to grow steadily over the next 5 years considering the rising income levels in the country and the fact that many will still want to buy a car."[/quote>

In general, the used car dealers we surveyed seemed to be positive about the future of used car sales. While about half stated that they anticipate sales figures to stay the same, the remaining respondents stated that they predict an increase in current sales numbers. Reasons given for this included that the interest in eco-friendly cars was not quite “there” in the Philippines just yet, that used cars offered great value for money, and that the proposed increase in excise taxes on new cars in the coming years will encourage buyers to choose preowned vehicles.

New car dealers were equally optimistic. They predicted that car sales will also increase, but were more positive about eco-friendly cars, saying that these types of vehicle, such as hybrid cars, will see an increase in sales also. Other new car dealers stated that government incentives would encourage local manufacturers to produce more and rising incomes would push new car sales up even further.

[quote cite='Vicent Licup, Caleb’s View Automotive Group' align='left'>"The future is bright for new car sales especially now that the government will give incentives to local manufacturers. There is an increase of income in buying demographics. Small cars are becoming the alternative mobility of motorists because of the daily traffic."[/quote>

It is evident from the data above and available car sales data that Japanese brands will continue to dominate for the foreseeable future. And although there seems to be some uncertainty, a shift to more eco-friendly and electric models may be seen. With news that Tesla is in talks to expand its operations in the country and with E-trikes becoming mandatory on Philippine roads this year, both foreign investors and lawmakers understand the importance of environmentally-friendly and economical cars, and the market is, if albeit slowly, starting to reflect this.

Our price range data also supports this shift. We can see that the highest amount of searches in the new car category were concentrated at the lower end of the scale, indicating an interest in smaller, more advanced, and highly fuel efficient vehicles such as the Suzuki Celerio- one of the most fuel efficient cars on the market today. And although used car sales have been reported to be down in number, dealers are very optimistic about this segment of the auto industry in the Philippines. What we can ultimately deduce from our data is that potential buyers in the future will want affordable, versatile cars that are more environmentally-friendly. We are entering a new age of the automotive industry in the Philippines and the foundation for growth and innovation has firmly been set.