Auto industry perks limited

GOVERNMENT incentives under the planned automotive road map will be limited to vehicle assemblers engaged in export of completely built units (CBUs) to other Southeast Asian countries, a Cabinet official said.

“The strategy has to be export-driven [because] the domestic market is not big enough,” Department of Trade and Industry (DTI) Secretary Gregory L. Domingo told reporters last week.

Existing automakers in the country currently enjoying the tax holidays and duty-free importation of capital equipment under the 2013 Investment Priorities Plan. However, they assemble only for the local market.

The government, via Executive Order 244 in 2003, had tried to promote the export of CBUs to other Southeast Asian countries by granting automakers tax credits for every unit they sell abroad. These credits could then be used to pay tariffs on imported units they sell in the Philippines.

NOT ATTRACTIVE ENOUGH

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

In 2012, Ford, however, shutdown its Sta. Rosa plant in Laguna after almost 13 years of operation due to weak domestic demand and a low supply base. Prior to the shutdown, Ford had exported the Ford Escape SUV and the Ford Focus compact sedan to neighboring countries since 2002.

Last March 31, Mitsubishi Motors Philippines Corp. announced it had bought the Sta. Rosa plant — for a still undisclosed amount — in a bid to expand its sales and production capacity in the country.

While saying that the automotive road map is still being “formulated”, Mr. Domingo said state perks would now be “limited to few” companies that could “commit to certain requirements… such as volume and capital investment.”

COMPETITIVE

“We want to set a higher volume in order to have scale, because without scale, it would be very expensive… from a cost-benefit perspective,” he said.

“Second, they should be able to bring in their large auto parts and components suppliers because if we will be able to get them, we would be more competitive,” he added.

“We’re looking at it from a perspective of how we can make automotive assembly here competitive with the region.”

Latest available data from the ASEAN (Association of Southeast Asian Nations) Automotive Federation Web site showed that vehicle production in the Philippines as of end-May, while posting a 14.3% increase year-on-year, lagged behind that of Thailand, Malaysia, Vietnam, and Indonesia at 34,561 units.

Thailand remained the region’s automotive manufacturing hub at 792,233 units in the same period, albeit down by 29.5% from last year’s 1.123 million output due to an ongoing political crisis there.

Established in 1976, the ASEAN Automotive Federation is composed of national automobile associations. It ceased operations in 1983 but was revived in 1996 to develop the sector further in line with the ASEAN Free Trade Agreement. — Daryll Edisonn D. Saclag, Businessworld

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