PH auto industry gaining ground in Asean

MANILA, Philippines–In the process of the Philippines’ remarkable run to motorization, it has steadily been catching up with Asean (Association of Southeast Asian Nations) neighbors that have had more developed automotive industries.

The Asean Automotive Federation just recently released its sales report for the first seven months of 2014 for the region, and the reviews for the Philippines have been glowing, with a growth in sales of motor vehicles at no less than 26 percent compared to the same period last year, making it the fastest-growing automobile and motorcycle market in the region, edging out Vietnam, Singapore, Malaysia and Indonesia. The same report also places the country as having the second-highest growth rate at 23.1 percent (compared to the same period in 2013) in terms of motor vehicle production, outpaced only by Vietnam, as of end-July 2014.

Can the country keep up this pace, or are we redlining our own auto industry and overheating the system? Inquirer Motoring asked Filipino auto executives based globally, and they were unanimous in assessing that the Philippines could step on it some more.

Nissan Philippines Inc.’s president and managing director Antonio Zara says that the Philippine auto industry “is at the verge of motorization, given our increasing per capita income.”

“One can’t imagine that our current auto industry is less than a quarter of Thailand’s despite a population which is 40 percent more. I expect significant growth to come from outside Metro Manila,” Zara predicts.

He adds that this growth will happen independent of the auto industry “roadmap” now with government. Demand will grow as Filipinos’ buying power strengthens.

“The only question which remains is where these cars will be built. Either way, Nissan has hedged our plans in a way that will allow us to capitalize on the expected growth of the industry,” Zara quips.

Vibrant, important market

Vince Socco, Toyota Motor Asia Pacific Japan project general manager, says that the Philippines will be one of the most vibrant and important auto markets for Toyota.

“It was never a question of if, but more when. I am very pleased that today the Philippines is delivering on that promise. I believe that the fundamentals of the economy, industry and society have finally taken root and the prospects for sustained growth are now undeniable. This year, the Philippines is expected to become the third largest market of Toyota in Asia, following Thailand and Indonesia,” Socco declares.

Lito German, BMW Motorrad regional director and outgoing regional marketing director for BMW Asia, says: “The future prospects of the Philippine automotive industry are extremely bright. Of course, like most industries, growth in the automotive sector relies not only on sustained economic growth, political stability and reduced corruption, but also on improved infrastructure, road networks and the widespread availability of lower financing rates.”

Peter “Sunny” Medalla, head of Mini Asia, says the industry, with the help of the government’s focus on infrastructure improvements and corruption control, will grow even more in the coming years.

Fair trade prioritized

“This would come with the economic growth and road networks outside Metro Manila. I only hope that fair trade for the new and current investors coming in should be prioritized,” he says.

Orlando “Buboy” Alvarez Jr., Mitsubishi Motor Philippines Corp. EVP, observes that the industry “needs the help from the government to accelerate the growth being forecast to reach 500,000 units by 2020.”

“It is important that the current administration puts us in its priority list while our country is being considered by the global car producer for its expansion/investment ahead of our neighbor countries. I rather see our country export vehicles than continue sending talented professionals to other countries,” he says.

Jesus Metelo Arias, managing director of Ford Vietnam and the chair of the Vietnam Automobile Manufacturers Association, describes the Philippine industry as “very vibrant.”

Opportunities

“The time of the Philippine auto industry has arrived. The phenomenal economic growth has provided opportunities for Filipinos the choices that best suit their mobility needs. With the accelerating growth in the economy, more exciting times will be ahead for the Philippine auto industry,” says Arias.

Wini Camacho, senior exterior designer for production cars at the Mercedes-Benz design headquarters in Sindelfingen, Germany, says that the Philippine auto industry “is still too small to justify a home-grown car manufacturer that will be able to compete in the world market.”

He adds, “If we’re really serious about it, we can look at what Proton and Perodua did in Malaysia, which entails some sort of joint venture with an established car manufacturer.”

Shift to small

In an interview two months ago, Dante Santos, Truck Manufacturers Association president, noted that the 24-percent growth from January to June 2014 was “quite interesting,” especially since the first semester of 2014 also “signaled a shift in consumer preference from LCVs (light commercial vehicles, to which SUVs, pickups and vans belong) to passenger cars, which grew by 34.3 percent compared to the LCV growth rate of only 17.7 percent. This is seen as a direct result of the sudden increase in the shopping list for small cars.”

He added that the trucks and buses segment “also fared well as a result of the refleeting of many corporate accounts, which by themselves are preparing for a surge in their businesses in the coming years. This has been supplemented by the government’s move to replace aging commercial vehicles. Such a direction will increase sales for the next two years.

“One thing is certain. The past half-decade signaled the motorization in this country, and the industry is very much capable of providing what the market needs,” assessed Santos.

Santos added: “We are always thinking that the improvement of any nation must be preceded by a solid motorization of the masses—in all regions of the country. Such an environment will move industry; we will see more farm-to-market roads, house-to-office centers and house-to-academic institutions, etc. This will be followed by more vehicles. We have to capitalize on these growth surges by ensuring that auto production in the country is at par in terms of costs and quality with other Asean countries.”

Santos pointed to the following factors that have contributed to the skyrocketing growth in vehicle sales:

“First, we have all been witnesses to the tenacity of our national business infrastructure. We continue to move forward in the past years while other countries’ economic growth rates have started to taper.

“Second, our market is directly affected by our spending ability founded on an improved per capita income, which continues to rise to the level of $3,300. This level starts approximating those of other countries in the region. That means that for the automotive sector, we are just reaching the critical mass or tipping point in automotive growth.

“Third, industry supply capability is still high, with all the production plants in the country.

“Fourth, there is increased access to the financing sector.”