Exports not a priority in auto industry program

THE GOVERNMENT strategy for the local automotive industry will focus more on exploiting the domestic market rather than encouraging exports, a senior Trade department official said.

The plan is to aggressively promote locally made utility vehicles by asking Congress to lower excise taxes while simply retaining the old perks for car exporters, Board of Investments (BoI) Managing Head Cristino L. Panlilio said in a telephone interview last week.

The statement came as the agency continues to draft implementing rules for the new Motor Vehicle Development Program (MVDP).

It is also contrary to earlier pronouncements that export operations are needed to justify higher production volumes that would have lowered per unit costs.

“Exporting has become difficult because of the ASEAN Free Trade Area (AFTA),” Mr. Panlilio said, referring to the integrated market created among members of the Association of Southeast Asian Nations after a series of tariff cuts.

“We are no longer going to be so ambitious as to try to revive exports. We are no longer as bullish. What we are trying to do is save the domestic market for local assemblers,” he added.

“We will still come out with incentives for exports [but] we are just reissuing the previous incentives.”

The export policy, laid down via Executive Order 244 in 2003, awards tax credits to carmakers for every unit they sell abroad. These credits can then be used to pay for tariffs on imported units they sell in the Philippines.

This scheme attracted only one automobile assembler — Ford Group Philippines — before the registration period lapsed in 2008.

The focus instead is shifting towards making locally made cars more attractive to the Philippine market, with Mr. Panlilio saying that the BoI is planning to “ask Congress to remove the excise tax on … utility vehicles.”

Lobbying in Congress “will take a bit longer but we will work on that,” he said.

The domestic market absorbed 153,163 new vehicles from January to November this year, up by 28.87% according to latest industry data. Commercial vehicles such as vans, trucks and buses made up roughly two-thirds of the figure.

The increased demand has prompted Toyota Motor Philippines Corp. to ramp up production at its Laguna factory.

Decisions to add new models to its assembly line, however, will depend on “what government will do to make local production viable and competitive” and are not just limited to fiscal incentives, Toyota Motor Philippines Vice-President Rommel R. Gutierrez said in a text message.

The assemblers group Philippine Automotive Competitiveness Council, Inc. (PACCI), meanwhile, said an export strategy was still important.

“An upgraded MVDP is necessary to allow domestic manufacturing to compete regionally through robust exports,” PACCI Executive Director Benjamin C. Sevilla said in a telephone interview last week.

“This industry is acknowledged as a key contributor to the economy through its large multiplier effects… On that basis, it must be nurtured owing to its potential to both contribute to the economy and government revenues in a significant manner,” Mr. Sevilla said.

The government should also “equally explore” perks not just for Asian utility vehicles but other domestic market segments with the aim of “raising the industry’s competitiveness and opportunities to export.”  –JESSICA ANNE D. HERMOSA, Senior Reporter, Businessworld