PH car industry still far behind neighbors despite robust growth

IF THE first half of 2015 were to be an indication, then the Philippine automotive sector is indeed well poised for another stellar performance this year, on the back of steadily rising domestic demand and the robust growth of the local economy.

Gauging by the numbers alone, local vehicle assemblers as well the importers and distributors have shown remarkable performances, as they chalked up sales of more than 150,000 units combined in the first six months of the year.

Joint data from the Chamber of Automotive Manufacturers of the Philippines Inc. and Truck Manufacturers Association showed its members breaching another record as vehicle sales rose 21 percent to 131,465 units from January to June 2015.

“We just ended the first semester on a very strong note,” Campi president Rommel Gutierrez had said. “Our automotive industry is riding with the other industries’ growth. Micro, small and medium sized enterprises are expanding, which made for the robust demand for AUVs (Asian utility vehicles) and SUVs (sport utility vehicles) and light commercial vehicles.

Also contributing to the first half growth, according to Gutierrez, was the ongoing refleeting of the construction industry and the stronger demand for heavy duty vehicles, which had consequently fueled the growth in fuel haulers sales.

AT THE launch of the all-new Hyundai Tucson and the i20 Cross Sport are (from left) Hari chair emeritus Richard Lee, Hari vice chair Conrad Marty, Hyundai Motor Co. export department head and senior general manager Park Jin-young, Hyundai Motor Co. Asia and Pacific Regional Headquarters director Park Sang-min and Hari president and CEO Ma. Fe Perez-Agudo. photos by EUGENE ARANETA

Similarly, the Association of Vehicle Importers and Distributors saw a strong performance from among its members, as sales rose 15 percent to 20,626 units in the first six months of the year, driven largely by the strong uptake in the light commercial vehicle (LCV) segment.

Avid data showed that in the first half of the year, total sales in the passenger car segment grew 10 percent to 9,953 units from a year ago, while total LCV sales rose 20 percent to 10,673 units for the same period.

“The remarkable surge in unit sales reflects the collective effects of strong consumer uptake and Avid’s incessant efforts in expanding avenues in which it engages its ever-evolving consumer base. Notably, Avid has welcomed Ford Group Philippines, the exclusive distributor of Ford vehicles in the country, into its fold as it continues to find ways of broadening its membership to advance its value contribution to the growth of the Philippine automotive industry,” Avid had said.

Trailing behind

In this March 15, 2013 file photo, Indonesian workers assemble passenger cars at the new Toyota plant in Karawang, West Java, Indonesia after Toyota officially opened their second manufacturing plant in the country. AP

However, despite the steady growth and strong sales muscle, the Philippine automotive sector continued to lag behind its counterparts in the region in terms of sales and production, data from the Asean Automotive Federation (AAF) showed.

As of end May this year, the Philippines’ position remained unchanged at the fourth place out of seven Asean economies assessed, with sales reaching only 107,280 units.

Indonesia remained the frontrunner in the region with total motor vehicle sales hitting 443,181 units as of end May, followed by Thailand with 308,787 units; and Malaysia, with 264,747 units. Coming in fifth place would be Vietnam with sales reaching 74,507 units, followed by Singapore, with 25,791 units, and Brunei with 6,550 units.

In terms of motor vehicle production, the Philippines remained at the bottom of the pile with 37,079 units produced as of end May. Leading the vehicle production in region for the same period was Thailand which recorded an output of 783,553 units; followed by Indonesia with 486,172 units; Malaysia, with 276,355 units; and Vietnam, with 62,919 units.

Bright prospects

The country’s dismal position in the regional front however failed to dampen the optimism of the industry as local automotive players are already highly confident of hitting a double digit growth this year.

Campi, for one, sees vehicle sales surging by about 32 percent this year to 310,000 units from the 234,747 units sold in 2014. In terms of product category, the small car passenger segment is expected to continue attracting more buyers this year particularly the young professionals com   prising the growing business process outsourcing industry. The group also projects bigger demand for SUVs and LCVs given the worsening weather pattern and flooding concerns in the country.

“Dropping oil prices, wider product selection at competitive prices and improved fuel efficiency of higher displacement vehicles are providing the additional push especially to those who are considering a second vehicle purchase,” Gutierrez earlier said.

Avid meanwhile had set early this year a 20-percent growth target in vehicle sales this year on the back of an expected surge in small cars and small sports utility vehicles, according to the group’s president Ma. Fe Perez-Agudo. In 2014, Avid members saw a 13 percent increase in its sales to a total of 35,565 units. This meant that a 20 percent growth would see Avid vehicle sales rising to more than 42,000 units this year.

Auto manufacturing hub

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

The Philippines’ position in the region is expected to further change significantly once the government’s Comprehensive Automotive Resurgence Strategy (CARS) Program kicks off.

President Aquino signed in May this year Executive Order No. 182, which provides for the implementation of the CARS Program—a move seen to significantly revitalize the local automotive sector, and boost the country’s competitiveness as an automotive manufacturing hub in the region.

The CARS Program, which dangles some P27 billion worth of incentives to local assemblers and autoparts makers, is seen to to attract more than P27 billion in new parts manufacturing investments, produce at least 600,000 vehicles, generate some 200,000 new jobs, and generate a total economic activity estimated to be worth P300 billion over the six year life of the program. The resulting contribution to gross domestic product was estimated at about 1.7 percent.

“The program is designed to build and grow the parts-making capability of the auto industry, for without a robust parts making industry, our car making industry will remain uncompetitive. The CARS program is about building capabilities and jobs to make our automotive manufacturing industry competitive in Asean,” Trade Secretary Gregory Domingo said.

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

The CARS Program calls for new investments in manufacturing parts not currently available in the country, including large car body panels, bumpers, instrument panels, head lamps, shock absorbers, plastic fuel tanks, automotive fabric and others. The technology “spill over” will help develop basic support industries for manufacturing, such as casting, forging, machining, and tool and die.

It was earlier pointed out that a car has more than 30,000 parts and its construction is dependent on metal, chemical, plastic, textile, rubber, glass, steel, electrical, and other manufacturing sub sectors. Thus, through inter-industry and supply chain linkages, auto manufacturing can have a big multiplier effect in an economy because any expansion in the automotive industry can drive the growth in feeder industries.

So far, only the two biggest automotive players in the country have expressed interest to be part of the CARS Program. Toyota Motor Philippines Corp. said it was mulling to apply its Vios model for the program, while Mitsubishi Motors Philippines Corp. said it was looking towards the expansion of its operations in the country to further contribute to the Philippine automobile industry and economy.