Avid: In its fourth year of championing of a level playing field

In July four years ago, the Association of Vehicle Importers and Distributors (Avid) was founded by eleven car companies that do not assemble motor vehicles in the Philippines and were therefore relegated to nonvoting associate membership in the Chamber of Automotive Manufacturers of the Philippines Inc. (Campi). In stark contrast to Campi’s mostly Japanese membership, Avid’s membership roster now consists of companies that import and distribute brands ranging from luxury (Porsche, Bentley, Lamborghini, Audi, Mercedes-Benz, Jaguar and Volvo) to sporty (Land Rover, MINI Cooper, Jeep) to mass market (Hyundai, Chevrolet, Subaru, Dodge, Chrysler, Geely, Foton and FAW.)

 

According to its Website, Avid is a nonstock, nonprofit private organization that responds to the need to improve the auto industry’s competitiveness by partnering with a growing network of industry experts from government and the private sector to provide reasonable and objective information about free and fair competition and consumer welfare.  Instead of putting up a car show extravaganza like Campi’s Philippine International Motor Show (PIMS), Avid conducts a Thought Leadership Forum every year, thus creating an intellectual aura for itself—although some members do participate in the annual Manila International Auto Show (MIAS).

 

Avid’s performance in the first six months of 2014 should not be reviewed in terms of total overall sales because comparing the sales figures of luxury car distributors (Avid’s majority) with those of Japanese mass market assemblers (Campi’s majority) would be like comparing apples and oranges.  Instead, we should look at Avid’s first semester this year in terms of its progress in achieving its major objectives.

 

But Avid is also very much involved in looking to the future. Things are rapidly coming to a head because of the integration of Southeast Asian economies next year into the Asean Economic Community (AEC) and because of the long-delayed Roadmap for the Philippine automotive industry that the Department of Trade and Industry (DTI) promised to finalize several years ago. Without the Roadmap, how prepared can our auto industry be for the AEC?

 

Avid is tackling that problem, at least verbally, by choosing “ComeUnity: Setting Directions for One ASEAN” as the theme for its 4th Thought Leadership Forum today with university professors and DTI officials as speakers.  Avid and Hyundai Asia Resources Inc. (Hari) president Ma. Fe Perez-Agudo will be one of the speakers in the afternoon session themed “Building the right niche for the Philippine automotive industry in the ASEAN Economic Community.”

 

Since she played a leading role in organizing Avid and has been its president since its founding in 2010, Agudo is the best source of information on Avid. Below are Agudo’s answers to my questions:

 

Q. What was the main objective for organizing Avid? Has this objective been achieved?

 

A.  Avid was created with a special purpose in mind.  In this era of globalization where trade barriers continue to fall, Avid members saw the need to organize themselves into an advocacy group that champions and protects their respective interests.  Our principal advocacy is to ensure that its members can compete on a level playing field.  It also wants to take an active and participative role in crafting policies and trade regulations to ensure that they are fair and enforced equitably.  We have gradually built Avid’s credibility in the auto industry.  Both the government and private sectors now recognize the value that our association brings to the industry.

 

Q. Has Avid prepared a plan or strategy for the integration of the Asean Economic Community in 2015?

 

A.  The AEC is one of the most important regional engagements of the Philippines.  The business sector has no option but to adjust and find avenues to optimize the benefits of this economic integration.  Given this scenario, Avid will sustain its initiatives to support a level playing field in the auto industry, promote competitiveness and uphold consumer welfare.  The Avid 4th Thought Leadership Forum was conceptualized with the goal of effectively communicating the opportunities and challenges that the AEC poses to various sectors.

 

Q. What does Avid think should be done in the short and long term to make our auto industry as competitive as the other Asean countries like Indonesia, Malaysia and Vietnam? (Forget Thailand, they’re too far ahead.)

 

A. AEC changed the way businesses operate in the region.  Companies must align their strategies with this new landscape.  The regional game plan must focus on moving up in the automotive value chain and improving marketing and branding image.  We also see the need to support our parts and supply industry.  There are less than 300 auto parts and components makers supporting the auto industry today.  Majority of these are small and medium scale enterprises (SMEs.)  However, SMEs are troubled by issues of low productivity, old equipment, inadequate capacity to facilitate technology transfer from multinationals and lastly, difficulty in sourcing raw materials domestically.  Imminent changes will only be apparent if there is enough structural support, availability of raw materials, an institutionalized system that supports technology transfer and human resource development through skills training programs.

 

Q.  What is Avid’s answer to the claim that local car assemblers create more job and income opportunities than car importers?

 

A.  Auto importers play a significant role in the economy through:

 

a. Fiscal Contribution. Car importers are among the top payers of custom duties and taxes.  In 2012 alone, the three top ranking auto companies landed in the Top 15 taxpayers list. Toyota Motor Philippines Corp. at third place with tax and duties payment of P10.8 billion.  Mitsubishi Motor Philippines Corp. placed fifth with P5.5 billion.  Hyundai Asia Resources Inc. ranked eight with P4.88 billion (Malaya Business Insight, 2/12/13).

 

b. Investment and Employment Generation. Car importers create investment and employment opportunities.  Avid member companies have over 5,000 direct employees who support some 30,000 dependents.

 

c. Upholding Consumer Welfare. Vehicle importation positively impacts on consumers as this can bring about lower and more competitive prices, and wider and more affordable choices in the market.

 

d. Increased Positive Competition. Vehicle importation promotes a more competitive business environment.  Competition forces players to be more efficient and favors better resource allocation on the part of government.

 

Q.  Speculation is rife that the long-awaited Roadmap for the Philippine auto industry will grant incentives to encourage the manufacturing of cars and parts for export—to the possible detriment of vehicle importers and distributors.  If this is true, what role will Avid have in developing the industry?

 

A. Avid is a proactive supporter of the Roadmap for the Philippine auto industry.  In terms of fiscal incentives, Avid is of the view that incentives must be strategically used to attract the right investments and to address issues of scale and the weak supply chain in the auto industry.  Incentives must be performance-based and time-bound. It is high time that the auto industry players reduce their dependence on government incentives (underscoring supplied) Our game plan for the AEC must include building and flexing our marketing muscle because operating in a highly liberalized environment will require us to level up in terms of products and services, marketing and branding, and being more deeply engaged in the global supply chain.  As regards Avid’s role, we will continue to be a voice that advocates a level playing field and an innovation-driven policy environment for the auto industry, and which supports initiatives to enhance consumer welfare.