‘JPEPA won’t lead to more investments in car sector’

Automotive industry analysts said that a Japan-Philippine Economic Partnership Agreement (JPEPA) won’t lead to more investments in the local automotive sector.

"Investments go where there is a market. Look at Thailand which has automotive sales triple that of the Philippines," the analysts said.

The Philippine automotive market, analysts stressed, continues to perform weakly with sales barely hitting 90,000 units last year.

The market continues to be challenged by imported used cars which the government still cannot stop, analysts said.

Rather than relying on the JPEPA, automotive industry analysts believe that the government should offer more incentives.

"If you want investors to come and stay, you have to make it attractive and profitable for them, but you cannot force them to invest just because you have a bilateral agreement that is between two governments and not with the investor," they said.

The JPEPA, industry analysts explained, would only help in so far as tariff matters.

Philippine negotiators in the ongoing JPEPA had asked their Japanese counterparts to ensure that Japan would agree to the continued production of at least two CKD models each for the Japanese automotive companies already operating in the Philippines.

The continued CKD production would be in exchange for a phased reduction in automotive tariffs by the Philippines on imports of Japan-made vehicles with an engine displacement of three liters and below.

Including such a provision would ensure the continued viability of Philippine automotive manufacturing.

The local automotive industry fears that without such an assurance, their Japanese principals would shift completely to exporting completely built-up (CBU) units and terminate all CKD assembly operations especially once the tariffs on CBUs make it more financially viable to resort to such exports.

Without local CKD operations, there could be massive layoffs in the automotive industry.

CBUs imports only require the addition of tires and batteries while CKD assembly still has plenty of local auto part content and requires skilled labor.