The increase in auto sales excise tax directly affects GT Capital (GTCAP) as half of its earnings come from Toyota Motors Phils. The increase in excise tax is from 2% to 5% for cars priced below PHP600,000, 20% for cars priced PHP600,000 to PHP1.1 mn, 40% for cars priced PHP1.1 mn to PHP2.1 mn and 60% for cars priced above PHP2.1 million.
Given the terrible traffic conditions in the Metro, this was bound to happen. This also contributes to a double-blow to auto-makers with a potential increase in interest rates stemming from the potential December US interest rate hike. Interest rates and auto sales are inversely-related. Add an excise tax increase and this spells bearish times for the auto sector.
Unlike in the past decades though, there are now economical models such as the Kia Picanto and Nissan Almera. Sales of this lower segment are seen to remain healthy. Aside from GTCAP, AC is also into auto sales with Isuzu and Honda. It is an ancillary business though contributing a minor percentage to AC unlike GTCAP.
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