DTI chief reveals why PH auto industry will recover

Department of Trade and Industry (DTI) Secretary Ramon Lopez recently enumerated the factors that favor the recovery of the Philippine automotive industry despite its dismal performance in 2018.

In a speech read for him by DTI Undersecretary Rafaelita Aldaba at the One Million Unit Sales Milestone Celebration of Mitsubishi Motors Philippines Corp. (MMPC) in Makati last pril 8, Lopez said that despite last year’s slowdown, the auto industry has been on an upward trend since 2014.

In 2017, sales hit 473,377 units while production was 141,252 units, but in 2018, 400,298 units were sold and only 79,693 units were produced.

Lopez attributed the weaker performance of the auto sector in 2018 compared to 2017 due to increases in the excise tax on autos, and higher inflation.

He expressed confidence, however, that the industry can recover with growth driven by the increase of middle income households from 30.5 percent in 2014 to 47.6 percent in 2019.

“Very important is the deceleration of inflation to 3.3 percent in March, extending the downtrend that began in November last year,” the DTI chief emphasized.

Aside from the growth of middle income households and the declining inflation rate, Lopez cited the strong economic fundamentals that make it a good time to do business in the Philippines.

In 2018, the Philippine GDP (Gross Domestic Production) hit 6.2 percent, one of the bright spots in the region. This growth was spearheaded by the industry sector, specifically construction and manufacturing.

The manufacturing sector’s average growth in 2010-2018 was 7.3 percent, as compared to 3.2 percent in 2000 to 2009.

Approved investments have been hitting record highs, with P918 billion in 2018, an increase of 48 percent year-on-year. This steady and strong positive sentiment continued in the first quarter of this year as our investments hit P243 billion or an increase of 60 percent, compared to P152.1 billion for the same period in 2018.

The country’s Business Expectations Survey showed that the overall confidence index improved by 35.2 percent in the first quarter of 2019, compared to 27.2 percent in the same year-ago period.

What’s more, the Consumer Expectations Survey showed the overall confidence index progressing by -0.5 percent in the same period, from -22.5 percent from last year

Lopez noted that PH automotive imports are currently higher than exports, though PH automotive parts are one of the country’s top exports.

Philippine automotive exports have decreased to $11.6 million in 2018 from $14.4 million in 2017, while imports have also decreased to $5.90 billion in 2018 from $6.65 billion in 2017.

Although automotive parts exports declined to $3.46 billion in 2018 from $3.67 billion in 2017, Lopez pointed out that auto parts imports rose to $1.12 billion in 2018 from $849 million in 2017.

“This imbalance between our exports and imports means that we need to push for more initiatives from the public and private sectors to address our country’s trade deficit,” Lopez said, expressing confidence that MMPC will implement its expansion plans to turn the country into a production hub and exporter of vehicles in the Asean region.

He added that the production of models for export will not only address our trade deficit, but will also broaden our manufacturing base and create new jobs.

How government supports the auto industry

Reiterating the DTI’s commitment to grow and strengthen the local auto industry, Lopez posited that the Comprehensive Automotive Resurgence Strategy (CARS) program is at the heart of the government’s Manufacturing Resurgence Program, which will help in the development of a strong manufacturing sector.

Lopez cited the policies and programs supportive of the auto industry, like the Omnibus Investments Code which grants fiscal and non-fiscal incentives to enterprises registered under the Investments Priorities Plan.

He also mentioned the Motor Vehicle Development Program (MVDP) which reduced import duty rates from 1 percent to zero percent for completely knocked down (CKD) parts and components.

“Currently, we are reviewing the Program to better address the needs of the industry,” Lopez said. “We are crafting the Eco-PUV Program to produce the modern jeepney and jumpstart the development of the commercial vehicle segment.”

The DTI and Board of Investments is tasked to formulate a program to fast-track the development of alternative fuel vehicles in the country, Lopez disclosed.

The Alternative Fuel Vehicles Bill is pending in Congress which provides incentives for the manufacture, assembly, conversion, and importation of electric, hybrid, and other alternative fuel vehicles.

Recognizing the growing importance of artificial intelligence or AI, the DTI is also focusing its efforts to develop an AI program that would support industry upgrading, Lopez said, citing a 2018 McKinsey Report highlighting the need for automotive OEMs (Original Equipment Manufacturers) to partner with new ecosystem players to unlock the potential value of AI.

In conclusion, Secretary Lopez again expressed his gratitude to MMPC for its unwavering support to bolster the economy through investments and the creation of more employment