Gov’t to extend perks to fewer auto manufacturers

The much-awaited roadmap for the local automotive sector is targeted to provide a new package of incentives for only a few manufacturers who can invest in their assembly lines to increase their production volumes for export, and in new facilities for large components manufacturing.

“What we want is to limit this to a few participants. We need participants who can commit to certain minimum [production] volumes because we want scale. If there’s no scale in production, it will be expensive to produce cars here so they (manufacturers) will not be competitive,” Trade Secretary Gregory L. Domingo explained in a media briefing.

“We have two basic criteria: Volume and capital investment,” he added.

According to Domingo, the automotive manufacturer’s strategy should be export-driven because the domestic market was not big enough to accommodate the targeted increase in production volumes. He declined to cite specific numbers but he earlier said that they were looking at requiring a minimum production volume of 40,000 units per model a year. This requirement has been deemed too big if the manufacturer would cater only to local demand, which was expected to reach 250,000 units this year.

The second critical requirement will be capital investment, referring to the investments in facilities here that could produce large body parts, plastic molded parts, instrument panels and body stamping, among others.

Domingo said they expected the minimum investment for such facilities to reach a minimum of $60 million (roughly P2.6 billion) per company.

“We need investments in the production of large body parts because that’s one of the missing components in the supply chain. If we have these facilities, we can get [huge] savings from a shipping perspective and turnaround perspective. If we have these, the automaker will be more competitive [compared to its peers] in the region,” he explained.

The trade chief, however, clarified that any carmaker could still produce here, but only those who would meet their requirements based on production volume and capital investments would be able to secure the new package of incentives under the automotive manufacturing roadmap.

Domingo declined to provide any timeline for its issuance, but expressed confidence on the palatability of the roadmap as “some of the best minds are working on this.” This roadmap will outline the strategic direction, policies and new incentives needed to make the automotive industry more competitive.

The government is working hard to help revive the Philippine automotive sector as its development will be highly crucial in the resurgence of the country’s manufacturing industry.

“At the heart of the Philippine Manufacturing Industry Roadmap for Structural Transformation is the development of the automotive industry through its integration into the production and sales system of global automakers,” Trade Assistant Secretary Rafaelita M. Aldaba had said.

Aldaba earlier pointed out that a car has more than 30,000 parts and its construction was dependent on metal, chemical, plastic, textile, rubber, glass, steel, electrical and other manufacturing subsectors.

“Through inter-industry and supply chain linkages, auto manufacturing can have a large multiplier effect in an economy because any expansion in the automotive industry drives growth in feeder industries. While the Philippines’ domestic production of automobiles is currently limited, there are clear opportunities to increase production as the country’s middle class grows and [Asean] integration creates an open market of over six million people,” the trade official earlier explained.

According to Aldaba, the New Auto Program would be aimed at attracting foreign direct investments in assembly and component manufacturing to enable the Philippines to deepen its participation in the global value chains of multinational companies.