Why there are two big auto shows in PH

If you are one of the 88,000 plus who visited the 8th Manila International Auto Show (MIAS) the other week, you may have wondered what happened to the big car manufacturers like Toyota, Mitsubishi, Honda and Nissan.

Toyota Motor Philippines (TMP) had a small booth displaying only two cars including the Prius C hybrid in the World Trade Center (WTC), the main venue.  TMP’s booth was totally overshadowed by the awesome 1,000-sqm, wall-to-wall Ford exhibit directly across it. Mitsubishi Motors and Nissan were nowhere to be seen while Honda Cars Philippines, Inc. was hardly noticed in the adjoining WTC East Wing with only two cars, ditto the small two-car Kia booth located outside the main venue.

Why major carmakers played a minor role in MIAS is easy to explain.  They belong to the Chamber of Automotive Manufacturers of the Philippines Inc. (Campi) which has its own Philippine International Motor Show (PIMS) in August.  When Elizabeth H. Lee, the chief operating officer of Universal Motors Corp. (UMC), the local assembler of Nissan light commercial vehicles was president of Campi, she strictly forbade Campi members from participating in MIAS. Campi under Lee launched its own car show, PIMS, in August 2007, also at the WTC.

Only the dealers of Campi members were allowed to join MIAS, but without any support from their parent companies. Nonetheless, some non-voting associate members like Hyundai Asia Resources Inc. (HARI) defied Lee and continued to showcase their products in MIAS.

Ban. Although Lee suddenly quit her UMC and Campi posts last year, the ban on MIAS is still apparently in force.  The voting regular members of Campi are Toyota, Mitsubishi, Honda, Nissan, Isuzu, Suzuki, Columbian Autocar Corp. (Kia) and Asian Carmakers Corp. (BMW). The non-voting associate members of Campi led by Hyundai Asia Resources, Inc. (HARI) shook up the auto industry in July 2010 by leaving Campi and forming a new group, the Association of Vehicle Importers and Distributors (AVID.)

AVID president Ma. Fe Perez-Agudo, the CEO of HARI said they formed AVID and quit Campi to protect their interests and ensure that Executive Order 877-A, the latest version of the Motor Vehicle Development Program (MVDP), does not discriminate against CBU importers via new customs regulations, higher tariffs and multilateral trading agreements that violate international trading covenants, standards and best practices which guarantee free and fair commerce. As non-voting associate members of Campi, they were not consulted or included in meetings that the Board of Investments held with car assemblers to draft the implementing rules and regulations of E.O. 877-A.

AVID members dominated the 8th MIAS with large, spectacular exhibits: Hyundai, CATS Motors (Mercedes-Benz, Chrysler, Dodge and Jeep), PGA Cars (Porsche, Audi and Lamborghini), Formula Sports Inc. (Jaguar and Range Rover), Motor Image Pilipinas (Subaru), The Covenant Car Company  Inc. (Chevrolet), Scandinavian Motors Corp. (Volvo), British United Automobiles Inc. (MINI Cooper), Focus Ventures Inc. (Chana, FAW) and United Asia Automotive Group (Foton.)

Ford Group PH (FGP) resigned from Campi before everyone else did, but has not joined AVID.  Yet Ford’s exhibit at the 8th MIAS was one of the biggest.

Best booth. Asian Carmakers Corp. (ACC), the importer and distributor of BMW, has not joined AVID and remains in the Campi fold yet its large, high-tech booth showcasing the BMW high-performance M series won the Best Booth award at the 8th MIAS. ACC chair Jose Ch. “Pepito” Alvarez manages to straddle both camps. He also chairs Columbian Autocar (Kia), which is also a Campi member, and will soon bring back the Peugeot brand. He was one of Campi’s original members when it was created in 1995.  It was Alvarez who brought into Campi his old friend Elizabeth H. Lee and, being vice president when she suddenly resigned, temporarily (albeit reluctantly) assumed the Campi presidency.  The new president is Rommel Gutierrez of Toyota Motor PH.

Incidentally, although the Hyundai Motor Group owns 34 percent of Kia Motors in South Korea, over here HARI and Columbian Autocar compete fiercely for market share, being headed by industry arch-rivals like Avid president Ma. Fe Perez-Agudo and Campi veteran Alvarez, respectively.

Many Campi voting regular members switched to importing cars CBU (completely built up) and scaled down local production, especially after the Asean Free Trade Agreement (AFTA) zeroed the tariffs on Asean-sourced vehicles in 2010 and the Japan-Philippines Economic Partnership Agreement (Jpepa) also made tax-free the importation of CBUs from Japan with engine displacement of 3.0 liters and above.

Lexus Manila enjoys the best of possible worlds. Since Lexus is Toyota’s premium brand and all the models it imports have engines 3.0 liter and bigger, among all the premium car brands it benefits the most from JPEPA. And has no need to join AVID although it is an importer-distributor like all the AVID members.

Entry-level. What continues to be produced in the PH are mostly entry-level and Asian utility vehicles. For example, of the five models that Honda Cars PH, Inc. sells, only the City, its entry-level sedan, is assembled here from CKD (completely knocked-down) packs. The four other—Civic, Jazz, Accord and CR-V—are brought in CBU from Thailand or Japan. Mitsubishi Motors PH sells 10 passenger vehicle models here but assembles locally only the Adventure, Lancer EX and L300 van, with the seven others including the best-selling Montero Sport coming from Thailand or Japan. Nissan Motors PH Corp. assembles four: out of 10 offerings:  the Sentra, Grand Livina, X-Trail and Urvan. Of the 15 models Toyota Motor PH sells here including the popular Corolla Altis, Fortuner and Hiace, only two—the Vios and Innova—are assembled here.

Ford Group PH, which includes the Mazda brand, still assembles the Mazda3 and Ford Escape here, but is moving production of the hot new 2012 Ford Focus to Thailand, from where the Fiesta, Mazda2, Everest and Ranger are sourced while the Explorer and Expedition—and soon, the Mustang—are imported from the United States. FGP president Randy Krieger has not ruled out the possibility of also transferring the production of the Escape and Mazda3 to Thailand in the future since it costs less to manufacture cars there.

Meanwhile, E.O. 877-A stays pending in limbo.  The BOI wants the PH to be a regional export production hub for motor vehicles just like Thailand, but global investors, aware of our lack of economies of scale (due to a small domestic market), high production cost (due to the highest energy rates in Asia and inadequate infrastructure) plus  weak supplier base, are locating elsewhere, such as Indonesia.

So when the PIMS opens in August, most of the cars on show will be CBU imports, just like at the MIAS.