Special auto parts program proposed

Citing the huge contribution of auto parts exports to the country’s total outbound merchandise shipments, Toyota Motor Philippines Corp. (TMP) and the locators in the Toyota Special Economic Zone are seeking the formulation of a special government program that will provide incentives to auto parts makers.

TMP president Michinobu Sugata said the program could be similar to what was currently in place for exports of completely built-up units (CBUs).

Looking at current trends, he said the local vehicle sector had very rosy prospects. However, it would have to contend with the threat of increasingly low-priced vehicle imports once concessions under the Asean-China and Asean-Korea Free Trade Agreements take effect at the start of 2012.

Even auto parts manufacturers, he said, would have to deal with more pressure from their counterparts in the region.

“The increasing cost competition among parts suppliers in the region also threatens the position of the Philippines as an automotive parts production base. At present, the risk of losing business to strong production bases like Thailand and Indonesia is very high,” he said.

Without additional support from the government, he said the country faced the possibility of losing a “significant portion” of auto export sales.

Export of auto components and parts now account for 95 percent of total auto industry exports, as only Ford Group Philippines was shipping out CBUs.

The lack of additional support could drive locally based manufacturers to shift their production bases elsewhere, a move that would effectively reduce parts and components export volumes.

“Recent events brought upon us challenges that have temporarily, but significantly, affected our business conditions. The automotive industry was one of the most affected in the aftermath of the Great Eastern Japan Earthquake. Nevertheless, we are optimistic that the industry will experience noticeable recovery by the second half of 2011,” he said in a statement issued yesterday.

“This is a positive sign that the auto industry may be able to respond to the high potential growth in industry sales beginning 2013, the projected start of motorization in the Philippines. However, the industry will only be able to take advantage of this opportunity with a competitive production base,” he added.

Toyota and its locators likewise sought the revival of the export support fund (ESF), a fund that provided monetary support to help flailing exporters cope with negative occurrences in the market.

The ESF was put in place in 2008 to help keep domestic industries afloat at the height of the global recession.

In an earlier interview, Trade Secretary Gregory Domingo said the government did not allocate any fresh budget to fund this.

For her part, Philippine Economic Zone Authority Director General Lilia de Lima committed to continue supporting the auto industry, both on the assembly side and the parts side.

While she did not promise the granting of additional perks, she said Peza was now undertaking three major automation projects, which aimed to make the processing of documents inside economic zones faster and more efficient.

The Toyota Group last year shipped $860 million in parts and components—equivalent to 86,000 CBUs in terms of value.