Tricky Transportation Investment Schemes

Whether we like it or not change is upon the transportation scene in the Philippines. The Public Utility Vehicle Modernization Program (PUVMP) was initially introduced by the Land Transportation Franchising and Regulatory Board (LTFRB) in 2015, then launched by the Department of Transportation of the Philippines in 2017, with the goal of making the country's public transportation system efficient and environmentally friendly by 2020.

I have talked about this before and will not go into that issue. The main issue I’ll be focusing on is that some folks are asking me about the profitability of investing in transportation-related ventures. Point is, there are legal engagements engaged in the program of vehicle modernization while there are others who are questionable, such as the below.

LTFRB and SEC cautions against Unauthorized Modern Jeepney Franchise Investments

According to their advisory, Yellowdot Transport Terminal Inc., a company engaged in fleet management business with a concept of “You Avail, We Manage, You Earn”, offers investment contracts that include the purchase and management of “Millennial Jeep” worth Php1.95 million. Investors are required to pay a down payment of Php250,000 while the rest of the amount will be paid through a car loan.

The investment promises a return of investment ranging from Php55,000 to Php85,000 per month. The subject entity is registered with the Commission as a corporation, however, it is NOT authorized to solicit investments from the public, not having secured prior registration and/or license to sell securities or solicit investments as prescribed under Section 8 of the Securities Regulation Code (SRC).

Those who act as salesmen, brokers, dealers or agents in selling or convincing people to invest, including soliciting investments or recruiting investors through the internet may be held criminally liable under Section 28 of the SRC and penalized with a maximum fine of Five Million Pesos (Php5,000,000.00) or imprisonment of Twenty-One (21) years or both, pursuant to Section 73 of the SRC.

Investing with Business Sense

I am not saying that transport businesses are bad investments. It all depends on how such businesses are managed. We have transportation via land, sea, and air engaging in business logistics as well as serving retail consumers. Some require huge capital while others use technology innovation such as Angkas, & Grab.

As I have always said before, if a proposal does not make business sense, then it may be a scam.

True Cost to Own/Manage

To determine if it makes business sense, as an individual investor, you need to run the numbers. A vehicle is a depreciating asset. Unless it is a classic car the value will go down over time. But even a classic car is an investment that doesn’t always go up in value; tastes and interests change.

Determining the True Cost to Own is a way to calculate the hidden-additional costs you may not have included. These extra costs include depreciation, interest on your loan, taxes, and fees, insurance premiums, fuel costs, maintenance, and repairs of any vehicle.

An automobile has a useful life and if the profits of such a transport business are exceeding the total cost to operate, makes consistent money, therefore the “investment” is justified. But you have to remember, the calculation is on paper and reality may be different especially with fierce competition in the transport industry today.

An alternative is to invest into publicly listed transport-related companies in the Philippine Stock Exchange instead.

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Tricky Transportation Investment Schemes Tricky Transportation Investment Schemes Reviewed by Vernon Joseph Go on Wednesday, August 21, 2019 Rating: 5

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