Mitsubishi bullish on CARS program despite excise tax issues hounding PH auto industry

A possible dip in sales was never part of the bargain when Mitsubishi Motors Philippines Corp. (MMPC) committed to the government’s multibillion peso automobile resurgence program.

However, with Congress in the middle of talks to hike excise taxes on cars, the Japanese-owned firm would just have to deal with the sudden change in the rules of the game.

Talks of tax reform weren’t new. But when the first package of the comprehensive tax reform program was filed in Congress in January, further taxing an industry in a growth momentum, a top official described it nothing more than “surprising.”

“We were already geared toward the CARS and were committed to undertake it and then suddenly they came up with this new idea on tax reform, and one of the elements of the tax reform is to generate money through the excise tax,” MMPC first vice president Dante C. Santos said in a press conference on Monday night.

As surprised as Mitsubishi was, the plans still pushed through, with parent company Mitsubishi Motors Corp. president, CEO Osamu Masuko remaining bullish in their future in the country.

Earlier on Monday, MMPC launched in Malacañang the first locally made Mirage G4—a teaser of the 20,000 units expected to be produced from its plant in Laguna at the end of the year as part of the Comprehensive Automobile Resurgence Strategy (CARS) Program.

“It is my belief that the automotive industry with its broad base, high quality labor force and strong support through the government’s development policy, will contribute to the economic prosperity of the Philippines. Just last year, we witnessed the auto industry growing by 25 percent and our intention is to contribute to this growth and accelerate it,” Masuko said.

MMPC would start the local production of the Mirage—its entry model in the CARS program—in May. This would also boost the company’s local employment from 1,000 workers to 1,500.

This year-end target volume only represents a fraction of what is expected from the automaker under the CARS program. Within a six-year period, a qualified automaker registered in the CARS program must produce at least 200,000 units—a bar which was deemed too high by other players in the industry.

Originally slated for three players to be provided with 9 billion pesos worth of incentives each, so far only Mitsubishi and Toyota Motors have qualified under the CARS program.

However, the prospects of the automobile industry have been dampened by the tradeoff detailed in the Tax Reform for Acceleration and Inclusion bill.

In order to offset the revenue losses in pushing for lower personal income tax, the bill would expand schemes to generate funds, including an increase in the excise tax slapped on cars.

Carmakers expect this to temporarily hurt sales, but they would still have to wait for the final form of the bill before they could recalculate their individual sales targets.

Earlier this month, business groups representing the automobile industry submitted their position paper to Congress, trying to put the brakes on the higher tax rates the bill wants to impose.

“So the objective now is to protect the original objectives of the CARS program,” Santos said, reiterating goals to boost local production to make the industry more competitive.

“Under this element, the government is moving to protect the CARS participant models—which are two companies—and the government has already signified to us that their motion is to protect the impact on the CARS models, and to protect local production by giving lesser impact on taxation. We are supporting that kind of concept. That is the same position as most congressmen have now,” he added.