CARS auto industry program gets mixed reactions

DEPENDING on which industry player was going to benefit from it, the government’s long-awaited, three-years-in-the-making Comprehensive Automotive Resurgence Strategy (CARS) has received mixed reactions.

As expected, the Chamber of Automotive Manufacturers of the Philippines Inc., (CAMPI) welcomed CARS with CAMPI president Rommel Gutierrez stating that the industry supports the government’s new program to revitalize the Philippine automotive industry.

According to statistics of the Asean Automotive Federation, the Philippines produced the smallest number of vehicles in the first four months of 2015 with only 28,891 units.

Even Vietnam produced more than double that number at 47,523, while Thailand again took the lead by producing 648,508 vehicles in the first half, followed by Indonesia with 396,664, and Malaysia with 225,331.

Gutierrez, a vice president of Toyota Motor Philippines, said that CARS will boost vehicle and parts manufacturing capability and give the country’s automotive industry opportunity to take part in the regional supply chain and thereby achieve competitiveness in the region.

Undercapacity

Toyota Motor Philippines president Michinobu Sugata presents the special-edition Vios 1-million edition.

In an e-mail, Gutierrez declared: “CARS is the much needed program to revive the local automotive manufacturing industry which is producing at one-third its capacity. Investments in parts manufacturing supported by both fiscal and non-fiscal initiatives are expected to narrow the gap between cost of local production and cost of imports from other Asean countries.”

CARS provides some P27 billion worth of incentives to local vehicle manufacturers, including a $1,000 tax incentive per unit, provided a participant can produce 200,000 units of one model over the next six years.

The objective is to produce 600,000 units of three models or 200,000 units of each participating model over the six-year life of the program.

Under CARS, participants are required to invest in new major parts manufacturing. Localization of parts must be 50 percent of vehicle weight, stamping and instrument panel, center control, front and rear bumper.

The CARS program is expected to create 200,000 new direct and indirect jobs, and contribute about 1.7 percent to the country’s gross domestic product.

Enthusiastic

Toyota Motor Philippines (TMP) president Michinobu Sugata, CAMPI president Rommel Gutierrez’s boss, is enthusiastic about CARS. Sugata told reporters at the company’s celebration of its “One Million Sales Milestone” recently that Toyota plans to enroll the Vios in the program.

At present, the only industry player seen to have the wherewithal to qualify for the CARS program is TMP, so Sugata’s enthusiasm is understandable.

To meet the required 200,000 unit production volume in six years, TMP will ramp up production of the Vios to 33,000 units per year starting in 2016. In 2014, TMP rolled out a total of 26,000 units of the Vios at its assembly plant in Sta. Rosa, Laguna.

TMP already invested P2 billion for the new model change of the Vios in 2013, so a new investment that will help qualify TMP to join CARS will most likely be scheduled for the next model change.

Sugata admitted that it would be hard to comply with the production volume requirement, although TMP would try it with the Vios. He said it would be difficult for the Innova though. TMP produces locally only the Vios and the Innova for domestic consumption.

Informed of the criticism that there is no level playing field since only Toyota can meet the stringent requirements of the CARS program, Gutierrez replied in an e-mail: “The CARS program gives opportunity to any interested and qualified program participants. For Toyota, it still remains a challenge. This condition may be difficult to comply with, but Toyota is willing to take the challenge.”

Looking forward

President Aquino tours the newly inaugurated factory of Mitsubishi Motors Philippines Corp.

The other automaker that may accept the challenge of the CARS program is Mitsubishi Motors Philippines Corp. (MMPC), which recently acquired and moved into the manufacturing facilities formerly owned by Ford.

Last year, MMPC assembled only 18,000 units of the Adventure and L300, but its acquisition of the Ford assembly plant means that it is ready to expand production.

In an official statement, MMPC president Yoshiaki Kato praised CARS. “With CARS, MMPC is looking forward to further contributing to the Philippine automotive industry and economy. As the Philippines is one of our core markets in the Aseqan region, we’re happy that the government has decided to make a strong “win-win” declaration for everyone.”

The MMPC statement on CARS mentioned the company’s transfer from Cainta, Rizal, to a bigger facility in Sta. Rosa, Laguna, “to further increase production capacity in order to expand its manufacturing operations and determine the new model to be assembled locally. MMPC and principal Mitsubishi Motors Corp. of Japan will study the contents of CARS.”

Isuzu

THE MU-X makes a much better first impression thanks to its more angular front (with LED daytime-running type) and rear lights.

Isuzu Philippines Corp., whose best-seller is the mu-X, a CBU imported from Thailand, assembles the Crosswind AUV and some light trucks. IPC executive vice president Takashi Tomita was quoted as saying he thinks that 200,000 units for six years per model is still too high a requirement. He said that maybe one model, possibly the Vios, can try but it is very difficult in the case of other models.

Tomita noted that it took more than 12 years for the Crosswind and Mitsubishi’s Adventure to breach the 100,000th unit mark. Before the Executive Order of CARS was approved, a high-ranking IPC executive had expressed impatience with the delay and said that the company would proceed with its own plans without it.

Honda Cars Philippines Inc. (HCPI) declined to comment on CARS. HCPI manufactures only one vehicle, the City, its top selling model (4,208 units sold) that ranks eighth among the Best-Selling Nameplates (all categories) in the first semester of 2015.

Meanwhile, Nissan Philippines Inc. (NPI) president Antonio Zara said that with the CARS program having been released, NPI’s principal in Japan is conducting a study on whether building new models in the Philippine will turn out to be beneficial.

Investment will not be an issue, Zara said, although the 200,000 production volume required will be difficult for the company to meet.

In an official statement, NPI said: “Nissan welcomes this development as CARS outlines a clearer roadmap in the progress of the manufacturing sector of the Philippines. We will study the implications to our business and will decide based on what provides best value to our customers. The 200,000 requirement is a block to overcome without exports.

“We believe our existing manufacturing presence in the Philippines together with our expansion will sustain growth plans in the domestic market even if we decide not to participate in the program.”

Asked to comment on CARS, whether it will improve the auto industry or have an impact on the sales of the Association of Vehicle Imports and Distributors (AVID), its president Ma. Fe Perez-Agudo replied: “The IRR (implementing rules and regulations) of CARS is still a work in progress, hence it is premature to give an assessment of its impact on AVID sales.”

As non-voting associate members of CAMPI, Hyundai Asia Resources Inc. (HARI) and other vehicle importers/distributors were excluded from meetings and consultations of CAMPI with the Board of Investments about policies and regulations for the auto industry.

It was most likely one of the reasons why HARI and the other associate members left CAMPI and organized AVID as a separate nonprofit business association.

No plans

Ford Group Philippines Inc., a former CAMPI member and now an AVID member, sent this statement via communications assistant vice president Joseph Ayllon: “Ford appreciates the Philippine government’s efforts to help develop the competitiveness of the local automotive industry, including the parts sector. We are committed to our business in the Philippines but have no plans at this time for local manufacturing operations.”

Nonetheless, CAMPI is confident that CARS will be a catalyst for the sustained growth of the industry, particularly the manufacturing sector. “The brand principals always believe in the potential of the Philippine market and in the quality of its human resources. The total support package, fiscal and non-fiscal, is always welcomed,” CAMPI head Gutierrez concluded.