Parts makers seek clearer CARS rules

Local automotive parts makers are seeking clearer rules in the granting and distribution of fiscal incentives for their participation in the government’s Comprehensive Automotive Resurgence Strategy (CARS) Program.

Ferdinand Raquelsantos, president of the Philippine Parts Maker Association Inc. (PPMA), said that under Executive Order No. 182 and its implementing rules and regulations (IRR), local car parts makers were entitled to a fixed investment support upon compliance with the conditions provided in the order.

Under the IRR, CARS Program participants—Toyota Motor Philippines Corp. and Mitsubishi Motors Philippines Corp.—are required to raise the local content of the model enrolled. This means they will have to source more parts, particularly big body panels, from Philippine enterprises.

The IRR, however, did not give details on the manner the FIS incentives would be distributed. This clarification is critical as local parts makers are currently preparing their respective investments in anticipation of growth in demand. For instance, in the development of large metal press parts, companies are tapping members of PPMA and other small manufacturers as Tier 2 suppliers.

“Discussions are on-going among members of PPMA in resolving the ambiguity of the rules as to the manner of distributing the incentives,” Raquelsantos said. “Members look forward in achieving a list of recommendations and options for DTI’s consideration.”

Another main issue, he said, was the lack of schedule in the phasing in of local parts by the car assemblers under the CARS program.

“Our main issue is for the car assembler to prioritize the development of local parts and for them to submit a program on when to phase in the specific local parts in the production,” Raquelsantos said.

“An endorsement from the Board of Investments to the participating car assemblers for the CARS Program will be a big factor in accomplishing the objectives of PPMA in developing and boosting local production. With the target of 200,000 cars per model of Mitsubishi Mirage and Toyota Vios, the local parts makers are optimistic they could generate supply at the initial part of production as much as that which is expected to be produced during the last stages,” the group said.

Local parts makers are reportedly spending a total of P1.6 billion in fresh funds to prepare for the growth in demand from assemblers.