Palace mulls over plans to invest in local auto industry

The government is mulling over plans to invest about $600 million (equivalent to at least P26 billion) in the form of fiscal and non-fiscal support to help revive and further boost the local automotive manufacturing sector.

“This is a government investment,” Cabinet Secretary Jose Rene D. Almendras stressed on the sidelines of the Philippine Economic Briefing Tuesday.

Almendras was quick to clarify that the $600 million was just a number being floated. The amount, which will be used to support local carmakers, has not been approved yet, and is merely one of the suggestions from local automotive companies, he added.

“The $600-million figure is just a number, but we’re still talking [about it]. This is just part of some of the ongoing discussions. We’re still looking at an amount [that could be deployed] in over three years or five years. But I don’t want to call it an incentive because of its trade implications,” Almendras explained.

“Everybody’s been making suggestions, so we need to study. One particular manufacturer is suggesting (a support of) $1,000 per unit produced. But it could be more than $600 million because it’s going to be both cash and noncash, both budgetary and nonbudgetary items.”

Provisions on the planned seed fund are expected to be included in the proposed automotive manufacturing roadmap which, according to Almendras, may be issued within the next two months, or at least before the year ends.

The roadmap is expected to provide highly attractive fiscal perks to a limited number of participants and only for certain vehicle models. For companies to avail of these incentives, they have to be able to produce 40,000 units of one model a year, and invest at least $60 million for facilities that can produce large car components in the country, such as body stamp panels, and large plastic parts, like bumpers and dashboards.

Incentives, meanwhile, will include, among others, financial support meant to help close the $2,000 per unit gap in the cost of producing a vehicle here as against the much lower cost of importing a car.

“The objective of the program is to encourage [automotive firms] to make the correct investments that will generate jobs, because [those who will get the jobs are the ones] who will buy these cars,” Almendras said.

“We’re looking at the long-term. If you’re just thinking of producing small spare parts for now, that’s not the game plan. The game plan is to create an industry that will create more jobs,” he added. Amy R. Remo