Local auto assemblers yet to recover from Asian crisis, says state think tank

Published by rudy Date posted on January 2, 2008

THE Philippine car industry has yet to recover from the Asian financial crisis as it still faces weak domestic demand and competition from used imported vehicles, the Philippine Institute for Development Studies (PIDS) said.

In a study, research fellow Rafaelita M. Aldaba said that other member countries of the Association of Southeast Asian Nations (Asean) in contrast have recovered from the regional downturn of a decade ago.

Aldaba said that until 1996, local industry sales remained buoyant. On the average, sales grew by 17.2 percent annually for the years 1991 to 1996.

“As a result, a number of firms invested in new plants to expand their operations in anticipation of a continuing domestic vehicle demand,” she said.

The industry consists of 14 car assemblers with a combined annual capacity of 221,450 units and 21 commercial vehicle assemblers with a total capacity of 145,950 units.

They assemble cars, light commercial vehicles (LCVs), Asian utility vehicles (AUVs), sports utility vehicles (SUVs), trucks, and buses.

The industry is dominated by five Japanese manufacturers, namely Toyota, Honda, Mitsubishi, Isuzu, and Nissan. These firms have invested a combined P13.8 billion and employed 5,228 workers.

Other major assemblers include Ford, Columbian Autocar, and Pilipinas Hino. Total investments in the assembly sector stood at around P40 billion and employment at 15,000 workers at end-2002. In terms of the local market, the purchasing power surpassed the $1,000 gross domestic product (GDP) per capita income back then.

The 1997 crisis, however, halted the growth of the industry. Between that year and 2000, the industry failed to recover as sales dropped by 19.6 percent annually.

However, some recovery is evident from 2001 to 2003 as average growth rate rose to 7.4 percent a year. But Aldaba said the short-term problem is how to survive in the face of weak domestic demand and the presence of used imported vehicles.

Imported cars and parts are classified as completely-knocked-down (CKD), semi-knocked-down (SKD), and completely-built-up (CBU) vehicles. SKDs are semi-assembled cars without tires and batteries.

The industry has complained that it is hurting from the “unfair competition” posed by cheap second-hand used CBUs which are priced 30 percent to 50 percent lower.

“Industry sources reported that because of second-hand imports, they are losing sales of about 20,000 vehicles annually,” Aldaba said.

According to the Chamber of Automotive Manufacturers of the Philippines Inc., car sales at end-November rose by 18.3 percent as members sold a total of 105,774 units, up from 89,391 last year.

In the medium to long-term, Aldaba said the industry is faced with the problem of how to survive the international competition that is expected to grow intensely in the near future.

In addition, labor strikes and the high degree of radicalism in the labor sector have imposed high costs on the industry.

“These have led to very costly delays as affected firms must readily import the materials that cannot be delivered by the striking company, otherwise the whole production assembly line is stalled,” Aldaba said.–Darwin G. Amojelar, Manila Times

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