VW urged to put up factory in Philippines

Volkswagen XL Sport sports car shown at the Paris Motor Show. Photo by Jason K. Ang

As the Philippines is putting together its car manufacturing investment ‘roadmap’ at a glacial pace, many carmakers have already established regional and global production centers in other ASEAN countries, mainly Thailand. One of the automotive giants that has yet to establish a production base in ASEAN is Volkswagen.

The Philippines is wooing the Volkswagen Group, the largest automotive manufacturer in Europe, to put up a manufacturing facility in the country as the German automaker is reportedly scouting for a potential assembly site in Asia.

Trade Secretary Gregory L. Domingo disclosed Tuesday night that the company had shown interest in considering the Philippines for its plan during President Aquino’s recent trip to Europe.

“It’s premature to say anything because (Volkswagen) is looking at different countries in Asia,” Domingo said.

Volkswagen vehicles are currently being distributed in the country by Ayala Auto Holdings Corp. It was only in September 2013 that the Volkswagen Group reestablished its presence in the Philippines, which formed part of its efforts to expand in the region.

The Asean market, including the Philippines, is considered by the group as the next frontier for Volkswagen in the Asia-Pacific region.

“We will continue to talk to (Volkswagen) to see how we can further attract them to set up an assembly facility here because it’s not only through incentives that we can attract investors like Volkswagen. Those who have serious business plans in the Philippines will also consider the present environment (or business climate), which is more important than incentives,” the trade chief explained.

“I’m sure there will be continued discussions (following the Europe trip) just like with the other car companies,” he added.

An assembly facility within ASEAN will be crucial to VW’s market penetration in the Philippines. So far, only a limited number of vehicles has been sold, mainly because of higher pricing versus the mainstream Japanese competitors.

When asked in January of this year about the possibility of setting up an assembly plant in ASEAN, John Philip Orbeta, chairman of VW distributor Automobile Central Enterprise Inc., said that they “definitely raised their hand” to establish the factory here, but that discussions were still ongoing.

At present, the Philippine government is finalizing the so-called Comprehensive Automotive Resurgence Strategy (CARS), which will provide a new package of incentives for Philippine car makers to further boost investments and generate as much as 300,000 new jobs for the sector.

Under the proposed CARS program, the government may invest about $600 million (or P26 billion) in the form of fiscal and nonfiscal support.

The program will provide attractive perks such as tax credits to a limited number of participants and only for certain vehicle models. The incentives may include financial support meant to help close the $2,000 per unit gap in the cost of producing a vehicle here against the cost of importing a car.

As of the end of 2013, the Philippine automotive manufacturing sector, which included assembly operations and parts production, has generated P248.5 billion in sales and directly employed about 76,000 people, making it one of the major drivers of the country’s economic growth.

“The automotive manufacturing industry is one of the major drivers of the country’s industry sector, generating about a quarter of a trillion pesos in sales last year. Now in its implementation phase, the road map targets 300,000 quality jobs by 2022. With report by Amy R. Remo