SMEs seen left out of vehicle program

Months after they made their call to be part of the supply chain of the CARS program, small- and medium-sized parts makers have yet to be informed if they would be part of the government-initiated project at all, said a top official of the Parts Makers Association Inc. (PPMA).

Under the government’s P27-billion Comprehensive Automobile Resurgence Strategy (CARS) program, three carmakers are expected to each produce 200,000 units over a six-year period—a tall order that is expected to tap the market of small and medium parts makers.

However, despite earlier requests to diversify the supply chain, the two automakers registered under the CARS program—Toyota Motors Philippines Corp. (TMP) and Mitsubishi Motors Philippines Corp. (MMPC)—still prefer to work with large parts makers, most of whom are Japanese-affiliated.

Last year, officials of both car firms said they were considering to eventually include more parts makers in the supply chain, placing them in latter tiers. Nonetheless, PPMA president Ferdinand I. Raquelsantos said there was still no clear timetable as to when SMEs would enter the picture.

“It looks like it would take a while although they said they would develop local parts . But of course, from the ones we’ve seen, these are basically large companies,” he told the Inquirer.

Raquelsantos was referring to MMPC, which made the list of its initial local suppliers publicly available late last year. He said he expected the same from Toyota.

Late last year, Mitsubishi and Toyota separately announced that they partnered with 25 and 30 local parts makers, respectively, as initial suppliers for the CARS program.

MMPC will start production later this year to reach a yearend volume target of 20,000 units. TMP, on the other hand, will start production in 2018.

“The Board of Investments has been advising the car assemblers but again, of course, the large companies produce large parts. The large parts easily give you the local percentage they are looking for,” he said when asked how the government had been supporting them.

The CARS program requires registered car makers to eventually increase their local content to at least 50 percent of the assembly by weight.

There are PPMA members who stand to benefit from the CARS program, according to Raquelsantos. However, these companies account for 40 percent of PPMA membership, identifying themselves as large firms.

SMEs representing the remaining 60 percent are still out of the loop. While there is no actual cost to not being able to participate in the program, the CARS initiative is seen as an additional benefit that smaller sized firms would like to have.

“As far as opportunity is concerned, we would rather have the whole to reap from the projects. We are still hoping there would come other programs that would benefit the SMEs,” Raquelsantos said, referring to SMEs.

Commenting on the list of firms partnering with Mitsubishi, Raquelsantos said those suppliers were mostly Japanese-affiliated initially expected to partner with MSEs. However, the suppliers have been “very selective” in the process.

“We were hoping these suppliers would go joint venture or technical licensing agreement with local parts makers,” he said, noting that the local suppliers tapped so far were large firms.

BOI managing head Ceferino S. Rodolfo, for his part, said last year that car firms had the discretion to choose which suppliers they would partner with as long as the requirements of the CARS program were followed.