Back to basics : The Rise of the Budget Cars

Should buying your first car be an expensive affair? With these new budget cars, no, it shouldn’t

If you’re a keen observer of automotive trends, you’ll notice that the most common headlines usually revolve around phrases like plug-in hybrid, long-range EV batteries, hydrogen fuel cells, 0-100 in 3.0 seconds (or less), Nurburgring lap records, or autonomous driving technologies. It’s natural; car manufacturers are always looking for that latest innovation that grabs attention, sets headlines, and piques the imagination of many all over the world.

In the domestic setting, however, things are a little different. For the last couple of years, there has been a bit of a silent revolution in the Philippine auto industry. It’s not about being the fastest, being the most high-tech, or whether or not the car can drive on its own, but rather how cheap they can offer an automobile.

Toyota Wigo – starts at Php 526,000

All of the volume carmakers have been introducing new, more affordable cars in the country. Names like Wigo, Mirage, Brio, and Brio Amaze all come to mind, joining the already established A-cars in the market like the Alto, Celerio, Eon, Picanto, and Spark.

This shift in priorities is representative of a trend to launch cars geared towards first-time car buyers. Sure, there are other options like getting a motorcycle, enabling people to weave through traffic and get to their destinations much quicker than a car, but the convenience, comfort, and safety offered by an automobile is still the most desirable type of mobility in a country. And it goes without saying, having an A/C and a roof is perfect for our kind of heat and downpours.

But what can account for this rise in the number of affordable cars, particularly the ones geared for the city?

Hyundai Eon – starts at Php 488,000

There are, of course, many reasons why carmakers have started introducing smaller, cheaper cars.  Perhaps the most telling is the way many of the established models have already moved up in the world in size and, more importantly, price.

If you actually take a look at each passing generation (all-new, not facelifts, mind you) of every major nameplate, you’ll notice that they have a natural tendency to get bigger. How the Honda Civic has grown over 10 generations is perhaps the best example to illustrate this.

Chevrolet Spark – starts at Php 648,888

The first generation from 1972 was a true people’s car; a front-engine, front-wheel drive hatchback that measured just 3,731 millimeters long. From then on, each generation that followed became progressively longer and larger: 4090mm (2nd gen sedan) 4133mm (3rd gen sedan), 4229mm (4th gen sedan EE/EF), 4394mm (5th gen sedan EG), 4448mm (6th gen sedan EK), 4455mm (7th gen sedan ES), 4503mm (8th gen sedan FD), and 4525mm (9th gen sedan FB). Today’s tenth generation Civic is 4,631mm long, meaning it’s almost a meter longer than the original, just slightly smaller than a 1995 Honda Accord, and larger than a 1995 Toyota Corona.

It’s unusual that a car that was originally conceived as a simple, affordable, small car has grown to proportions that are comparable to midsize sedans. And it’s not just Civic, as the story is very much similar for other models like Corona/Camry, Lancer, Laser/Lynx/Focus, Corolla. This supersizing of cars has, in many ways, created a rather big gap for consumers between a brand-new automobile and a much cheaper used car.

Kia Picanto – starts at Php 575,000

Some carmakers worked to address this vacuum, and that’s what Toyota did. When the Corolla became the Corolla Altis and grew in size and price, Toyota introduced the Vios in 2003 to fill the entry-level void. The Vios was quite similar in size to the Corollas from a decade earlier, but was much more modern in design, powertrains, and safety. And the price of admission was also far under the Corolla Altis of the time.

The level-up that happened with many of the established nameplates also opened the door for the influx of Chinese car brands in the Philippines, starting with Chery in late 2007. Nearly every model that Chery offered had undercut any similarly sized model from the established brands. Like many Chinese carmakers, Chery marketed models that were, err, “inspired” by the cars of others which, coupled with the massive economies of scale of their factories, meant very low prices. Offering a car that was priced at under PhP 400,000 would have been just alright when the Peso was trading at 25 per U.S. Dollar in the mid 90’s, but at 40 to 1 in 2007, it’s dirt cheap.

Other Chinese car companies joined in like Chana and Lifan, but it was Chery’s initial run that was strong with the QQ especially in the provinces; the pricing really was great for first-time car owners. The QQ even attracted a big contract for the fleet of a soft drink company, but that was a double-edged sword. Chery faced problems registering their cars (we were informed that the homologation papers submitted to the LTO were supposedly in Chinese) and the slow supply of parts; at the time, replacement bumpers took months to source. Soon, they lost the contract.

Mitsubishi Mirage G4 – starts at Php 573,000

Other Chinese brands came into the country, but are trying out a different strategy. Foton, for instance, focused on commercial vehicles that significantly undercut their competitors. Not only that, they did a lot of marketing in the provinces rather than the highly saturated metropolitan areas, and it seems to be working very well. The local distributor of BAIC is also looking to work on their presence in the provinces given the competition in the capital.

Still, despite the issues with the initial foray of Chery, the influx of Chinese brands showed the strong potential of the entry-level market, and the established volume car manufacturers and distributors looked for models to fill the gap at specific price points; somewhere between PhP 400,000 to under PhP 700,000. Suzuki has always been there in this price range, so it wasn’t an issue for them, given that the Japanese small car specialist already had the Alto, Celerio, Swift and Jimny. Korean carmakers were already very much present in this class with cars like the Kia Picanto and Hyundai i10 and Eon.

Suzuki Alto 800 – starts at Php 398,000

The Vios, in its second generation, established itself as the best-selling car in the country after overtaking the Corolla and Innova. But over three generations, the Vios too has grown in size and price, creating a new entry-level void, and that’s where the much smaller and much more affordable Wigo hatchback slotted into just a few years ago. Even the Avanza is doing very well as an affordable MPV.

Mitsubishi Mirage – starts at Php 560,000

Honda introduced the Jazz and City to be subcompact offerings, but after they grew in dimensions and cost, Honda launched the smaller A-cars like the Brio hatchback and Brio Amaze saloon to slot under them. Mitsubishi has had that gap for quite a while given that they only really had the Lancer, and so the subcompact Mirage and Mirage G4 sedan fit the bill nicely especially since these two cars somewhat straddled the line between the A and B segments.

Offering affordable new cars is also a great way for brands to introduce themselves to a fast-growing clientele. We live in a country where -if a customer is well taken care of by the aftersales departments- there is a strong tendency for brand loyalty and a subsequent repurchase when it comes the time to upgrade.

In the 2016 Sales Satisfaction Index study conducted by J.D. Power, they found that customers classified under highly satisfied with their new car purchase, 44% “definitely would” buy from the same brand again. 51% also said they “definitely would” recommend the brand to their friends and family. It comes as no surprise that making a good first impression in the affordable car classes is a must, and neither is it unexpected that many of these models are driving our motorization.

Suzuki Celerio – starts at Php 538,000

And it also bodes well that affordable cars are the bread and butter of local manufacturing and assembly, providing thousands of jobs historically and currently. Back in 1990, the government initiated the People’s Car Program, or PCP. The stipulations were simple: build a passenger car with a small gasoline engine that has a displacement no bigger than 1200cc (under 1.2 liters) with local parts content at 35% in 1991 and up to 53% in 1993. The participants of PCP included Kia with the Pride as well as Honda with the 1.2-liter Civic EG hatchback, among others.

Today’s version is the CARS Program, of which there are three participants: Toyota with the Vios and Innova, Mitsubishi with the Mirage G4 (and later the Mirage hatchback), as well as Hyundai with the 800cc Eon. Together with the Isuzu Crosswind, Honda City, and Nissan Almera, they comprise the bulk of automobiles that are proudly Philippine-made.

Honda Brio Amaze – starts at Php 634,000

With an economy growing to new heights, the demand for cheap but reliable personal transportation will grow. Of course, there is the massive volume of the motorcycle sector, but the automobile is still the preferred mode of personal mobility. It’s great that carmakers are offering the convenience of automotive transportation at affordable prices, much in the same way that Henry Ford intended when he conceived the Model T over a century ago.

There are many who comment that the Philippines is way behind in terms of sophisticated powertrain tech, advanced self-driving programs, and futuristic designs, but we’ll get there eventually. We are well into our own version of motorization, judging by the over 400,000 vehicles sold last year.

And by the traffic outside.

Honda Brio – starts at Php 614,000
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Executive Editor