Growth in car sales to flag in Philippines

MANILA, July 22 (Reuters) - Growth in new vehicle sales in the Philippines is expected to slow to 6 percent this year from 18 percent in 2007 as oil price hikes bite, an industry leader said on Tuesday.

Demand for more fuel-efficient vehicles, however, will continue to support the market, said Elizabeth Lee, president of the Chamber of Automotive Manufacturers of the Philippines.

New car sales in the first half of the year rose nearly 14 percent to 61,654 units despite a flurry of price increases that have seen prices of gasoline and diesel jump 36 percent and 50 percent, respectively, so far this year.

Lee said the industry is targetting sales of 125,500 units this year, up from last year's record 117,903 units.

Honda (7267.T) and Toyota Motor Corp (7203.T) vehicles are among the top sellers in the Philippines.

"Remittances would (also) be a strong contributor," Lee said on the sidelines of an industry conference.

Remittances from over 8 million Filipinos working overseas, around 10 percent of the population, continue to support the domestic economy in the face of a slowing world economy and financial shocks from the U.S. subprime mortgage crisis.

The Philippine central bank expects total remittances through formal channels this year to reach a new peak of $15.7 billion, up 9 percent from last year's record.

Lee said a change in the buying patterns of consumers who now prefer economical and dual-purpose vehicles over gas guzzling compact wagons and sport utility vehicles would also drive auto sales growth this year.

"They are taking a look at fuel efficient vehicles," Lee said. "They would usually ask how many kilometres can I save on a litre of gas."

She also said some buyers were purchasing new cars to provide private shuttle services to a growing number of commuters who, fed up with forking out for fuel, are leaving their cars at home.

Fuel prices in the Philippines are not subsidised, as they are in many parts of Asia.

Increases in domestic pump prices helped propel annual inflation to 11.4 percent in June, its fastest pace in 14 years. (Reporting by Karen Lema; Editing by Kim Coghill)