US auto parts traders urged to move from China to PH

At a recently concluded trade mission to the United States, members of the Philippine Auto Parts Maker Association (PPMA) have stated their case to US auto parts trading companies: Decentralize the Chinese automotive industry by moving some of their businesses to the Philippines.

PPMA members cited the ongoing COVID-19 pandemic which originated in China in late 2019 as part of the reasons for the need to decentralize.

Last March 2, representatives of the PPMA were in Los Angeles for a trade mission promoting Philippine auto parts for the American aftermarket. The group also had a meeting the whole afternoon of March 6 in the Philippine consulate in New York City. The game plan was to lure US companies, and eventually the European auto market who have manufacturing hubs in China, to consider transferring their operations to the Philippines.

In a March 15 interview, PPMA president Ferdinand Raquel santos explained to Inquirer Motoring that his group took the ongoing pandemic as an example for the organization’s need to “penetrate the local and international market.”

He added, “Our B2B meetings went very well and all companies we talked to were positive prospects for our supply.”

The PPMA is composed of 65 active members and over 150 parts makers, including tier 2 and 3, with members being in the 40-percent large exporting companies, 35-percent medium-sized, and 25 percent small companies.

In an earlier interview on March 4, Raquelsantos said of PPMA’s US visit, “Our main objective is to market our locally-produced auto parts. We also would like to entice American companies that have manufacturing facilities in China to relocate their manufacturing facilities and operations to the Philippines. This is all relative to the US-China Trade war that imposes up to 50 percent tariff on imported parts from China. Moreover, the effects of the novel Coronavirus have added injury to the sourcing of parts from China.”

Raquelsantos—who is currently on his fifth day of self-quarantine following his arrival in the Philippines from the United States on March 13, assured that PPMA members have met international manufacturing standards to back up their proposals.

“PPMA’s parts are of highest standards fitted to OEMs (Original Equipment Manufacturers) or major car assemblers. For us to be able to supply, we all need to pass quality standards like ISO/TS (International Organization for Standardization/ Technical Specification) Standards, or America’s FMVSS (Federal Motor Vehicle Safety Standards) or equivalent,” Raquelsantos quipped.

Some of the group’s members are currently exporting parts like wire harnesses, brake pedals, lift springs, and leather-wrapped steering wheels. PPMA says its members can also produce parts for specific applications for plastic parts, molded rubber, metal-stamped press parts, welded assemblies, sewn leather or fabric upholstery, and high-precision CNC machined parts, among others.

According to its website, PPMA’s mission is to “enhance the recovery and sustain the growth of the motor vehicle parts and components industry, as well as meet the challenges of the new millennium.”

The PPMA was originally known as the Motor Vehicle Parts Manufacturers Association of the Philippines (MVPMAP), established in July 2015 to supply the auto industry and provide technical and management support to its members.

“Currently, our plant loading is only up to 40 percent of capacity. Having export sales is necessary to fill it up,” stressed Raquelsantos. “With our current engineering resources, our parts makers can provide quick product developments and ease in ordering lead times”.

Trade war

Raquelsantos explained that “US importers before only paid 2.5 percent custom duties until the trade war came in. Now they’re paying extra 25 percent in tariff for a total of 27.5 percent. The next tranche is supposed to come this year, where an additional 10 to 25 percent (will be added on) for imports with additional processing or assembly on the component part, but we had been placed on hold for some more negotiations before the Covid-19 outbreak became a global pande mic.”

Raquelsantos compared this to the tariffs on Philippine-sourced products. “If they import from the Philippines, where we enjoy GSP (General Scheme of Preference), they practically pay zero tariff. I heard that Thailand is already graduating from their previous GSP to the United States, so now they will be subject to relative tariff and customs duties, which now makes our locally manufactured parts more competitive, especially in comparison with China-made parts,” he said.

PPMA had been planning the trade mission since mid-2019. Raquelsantos added that this was due to inquiries from the United States and even some North American companies operating in China that have “already visited us in the Philippines and scouting for some joint ventures or technical agreements to produce their parts in the Philippines.”

It was only last January that the group decided to push through when the Department of Trade and Industry (DTI) organized a formal trade mission to New York, along with members of other manufacturing industries.

“However, due to the Covid-2019 outbreak, government representatives were advised to cancel foreign trips. Our association decided to push through with our trip. Trade representatives in the Philippine embassy in the United States continued to coordinate and hook us up with prospective clients, not only in New York but also in Pennsylvania and Los Angeles. Moreover, while Thailand and Vietnam were reeling from the outbreak, we strategically went ahead with this roadshow,” narrated Raquelsantos.

He revealed that the PPMA has been looking at the European auto market as well.

“Should the Covid-19 continue and paralyze production output from China, then re-sourcing is the next option. This is where we, the PPMA, wish to be involved. For other specific parts not available in the Philippines, these parts can still be sourced from other countries but will obviously be more expensive than what the previous prices of China-made products can sell,” said Raquelsantos.