THE Philippines needs an auto industry road map if it wants to stay competitive with neighboring countries in Southeast Asia, an auto company official said.
“The Philippine government needs to come up with a very attractive incentive for us, manufacturers, to invest into the Philippines,” said Nissan Philippines Inc. president and managing director Antonio Zara.
In 2012, discussions to formulate an auto industry road map were initiated with an eye toward encouraging more investors into the country by giving incentives to car manufacturers. A draft was supposed to be released in the first quarter of last year, but it was deferred as the Department of Trade and Industry wanted to “fine-tune” the details.
“If you compare the Philippines versus Thailand, Indonesia, and Malaysia, we’re just a small market,” Zara said.
Thailand, the leading car manufacturing in the region, already has a Master Plan for the Automotive Industry for 2012 to 2016, which was developed with a view of establishing the country as one of the world’s key manufacturing centers by increasing vehicle output by an average of 10 percent annually.
Incentives
What makes the country more attractive to car companies, according to Thailand’s Board of Investment, is that it offers tax and non-tax incentives. Non-tax incentives include land ownership rights for foreign investors, permission to bring in foreign experts and technicians, and work permit and visa facilitation for foreign expat and employees. There are also no foreign equity restrictions imposed by the Thai government to car manufacturers.
Vehicle production in Thailand was at 2.4 million in 2012, while the Philippines recorded only a meager 75,000 units in the same year.
“Depending on how the road map goes, we can opt to continue and expand our operations in Sta. Rosa in Laguna (Nissan’s manufacturing plant in the Philippines). On the other hand, if it would be economical to bring in completely build up units, that’s where the global strength of Nissan can come in. We invested $100 million in our factory in Thailand,” Zara recently told reporters.
Nissan has also manufacturing facilities in Indonesia and Malaysia.
While the local production is low, vehicle sales in the Philippines have been otherwise.
Based on reports issued by the Chamber of Automotive Manufacturers of the Philippines, Inc. (Campi) and Truck Manufacturers Association (TMA), the group sold a total of 234,747 units in 2014. The figure is 30 percent higher than their 2013 sales pegged at 181,283 units.
Campi said the passenger car segment exhibited the highest growth rate of 48 percent with sales of 90,287 units compared to the total sales of 61,083 units in 2013.
Meanwhile, the commercial vehicle segment exhibited an increase of 20 percent or 144,460 units in 2014 compared to 120,200 units sold in 2013.
Within the commercial vehicle category, Light Commercial Vehicle showed a significant volume increase of 26 percent with sales of 93,589 units for 2014 compared to the 74,398 units sold in 2013.
For 2014, locally assembled vehicles accounted for only 37 percent while imported vehicles captured 63 percent.
Zara said vehicle sales in the Philippines will reach 400,000 in the next five years, attributing the growth to the increasing per capita income of more than $3,000 and the good liquidity in the banking system.
“For the middle class to buy their first brand new car, they need to have accessible credit, affordable down payment, and reasonable interest rate. And those combined, is enabling the growth of the industry,” the official said.
This year, Campi and TMA projected vehicle sales in the Philippines to reach 272,000, but Campi president Rommel Gutierrez said it can possibly reach 300,000.