Incentives sought for automotive exports

The long-term viability of the motor vehicle export development program of the Philippines will depend on the government’s ability to grant export incentives to local automotive participants.

This was the observation of Henry Co, Ford Motor Co. Philippines president, who noted that the Philippines at the moment has the "smallest market, weakest supply, base, and high infrastructure cost."

If the Philippines wants to become a major player in the ASEAN motor vehicle export market, Co said, it must be able to sell. And for this to happen, he said local automotive manufacturers must be given incentives to go into exports.

He said the offer of the Department of Finance to just grant duty free importation of capital equipment "won’t work."

He pointed out that other countries such as South Africa, and more developed Australia, grant incentives in the form of duty credits which the motor vehicle manufacturers can use to pay for duties on their importations. North Africa grants $2,000 in duty credits per unit, while Australia gives $600, he said.

According to Co, local automotive manufacturers do not expect to get as high as what South Africa is willing to give. He said local automotive manufacturers may be agreeable to an amount closer to what Australia is giving.

Ford Philippines is currently the only local motor vehicle manufacturer which has started using the Philippines as an export base for its Lynx and Escape models to the rest of ASEAN.

He noted that other motor vehicle manufacturers are still adopting a wait and see attitude before deciding on whether to use the Philippines as an export base for some of their models.

Co stressed that foreign automotive assemblers continue to stay in the ASEAN only because of the ASEAN Free Trade Area/ Common Effective Preferential Tariff (AFTA/CEPT) scheme which has allowed them to improve their production and make it more efficient by locating the production of certain models in countries which can best produce it and do complementary export to other ASEAN nations.

This, he said, has been realized in Ford’s current set-up wherein the Philippines produces and exports the Lynx and Escape, while Thailand produces and exports the Ranger.

Ford Philippines, Co said, has been able to increase its plant capacity utilization substantially and was able to produce a total of 14,000 units of both the Lynx and Escape for the domestic market and for export to Indonesia and Thailand.

On the other hand, Ford Philippines now imports its Ranger pick-up model from Thailand.

Because of more cost-efficient production in Thailand, Ford has been able to lower by P20,000 the price of its 2003 Ranger model to P620,000, he said.

Ford Philippines, which currently has a mere 14-percent share of the pick-up market, is targetting a higher market share of 20 percent for its lower priced, beefed up Ranger pick-up model.