Auto firms selling fewer locally assembled vehicles

MANILA, Philippines – Locally made vehicles continued to lose market share in the first quarter as tariffs on competing Southeast Asian imports were dropped and work on an incentive program for car assemblers stalled.

“Complete knock down” (CKD) units assembled here by three industry leaders accounted for just 41.2% of their total sales as of March, according to data obtained by BusinessWorld. This was down 3 percentage points from the 44.2% share recorded in the same period last year.

The weakened performance follows a 7-year downtrend in CKD share which, a manufacturers’ group claimed, has already slashed the industry workforce by half to some 70,000 and threatened existing investments worth billions.

Toyota Motors Philippines Corp., Mitsubishi Motors Philippines Corp. and Honda Cars Philippines, Inc. sold a combined 3,747 CKDs during the first quarter, 17% more than yearago levels. But this feat was outpaced by a 25.6% sales growth for their imported units. The three account for nearly two-thirds of the Philippine automobile market.

Top seller Toyota sold only 3,747 locally made cars or 30.4% of its 12,341 total sales in the first quarter, slightly down from the 30.6% CKD share during the same period last year.

Mitsubishi likewise saw its imported brands edge out Philippine-assembled cars. It sold 2,934 CKDs which cornered just 40.8% of its 7,184-unit total, when in the same time last year its CKDs enjoyed a larger 47.1% share.

Honda, meanwhile, saw its CKD share slightly grow to 71.5% from 70.4% but its total sales fell in the quarter.

The continued drop in CKD share comes as cars and parts manufactured elsewhere in the region began entering duty-free in January under the latest round of tariff cuts required by the Association of Southeast Asian Nations (ASEAN) Trade in Goods Agreement.

Imported Toyota, Mitsubishi and Honda models sold here are sourced from Thailand and Indonesia aside from Japan and Taiwan, spokespersons of the car firms said.

Recognizing this, the Board of Investments spearheaded the upgrading of the Motor Vehicle Development Program (MVDP), a package of policies implemented in 2002 which range from tax perks for assemblers and an import ban on used vehicles. The state agency has also noted the need for lower excise taxes on CKDs to make prices more competitive, and more tax perks for models that use higher levels of Philippine-made parts.

The draft for a new MVDP is now waiting Malacañang approval.

Sought for comment, the Philippine Automotive Competitiveness Council, Inc. — a group of car assemblers and parts makers — urged the speedy issuance and implementation of the new program.

“There are two outlooks. If status quo is maintained, that would be no good,” the group’s executive director, Benjamin C. Sevilla, said in a telephone interview.

From an 87% CKD share in 2002, the ratio has dropped every year ending with 48% in 2009, Mr. Sevilla said.

“That trend will mathematically continue [under current conditions],” he said.

“But if the new MVDP is signed and embedded in it is the expansion of the domestic market a promise of benefits and privileges for locally made cars and exports, then it would be favorable,” he said.

The draft waiting for the President Gloria Macapagal-Arroyo’s approval, however, has been met with opposition from automotive industry workers who suspect the revision is a ploy to ease import restrictions in line with the Japan-Philippines Economic Partnership Agreement.

They are also dissatisfied with a provision that appoints the Labor department instead of their group to the envisioned Automotive Industry Development Council. –Jessica Anne D. Hermosa, BusinessWorld