Charting the Filipino vehicle roadmap

Seven years after its introduction, the Board of Investments is on a renewed effort to invigorate the failed Motor Vehicle Development Program that had intended in 2002 to build up a local vehicle manufacturing and assembly program.

A recent BOI review revealed that completely built up (CBU) vehicle sales continued to dominate the domestic market in the last decade, and that locally made content utilization reaching only between 20 percent and 30 percent. There were also no new investments during the past 10 years.

Launched in late 2002, Executive Order 156 or the MVDP was intended to revert back the domestic industry’s performance to pre-Asian crisis levels and make the sector more investor-friendly. Back then, the local auto industry sold 162,095 units; last year, it sold only 124,449 units.

EO 156 banned the importation of used vehicles, restructured the excise tax structure, promoted production for export, restructured tariffs on parts and components, and called for regional complementation through the Asean Industrial Complementation Scheme.

Welcome

Local vehicle parts manufacturers are waiting with bated breath just how government intends to flesh out this new program. Just recently, after conducting an assessment, the BOI came up with several proposed policies to restructure the MVDP.

There are two interesting proposals in the new MVDP. The first involves the provision of incentives, including tariff differentials between local and imported parts, zero duty for raw and semi-processed materials for the local manufacture of parts and components, and the establishment of an industry fund for use by completely knocked-down (CKD) manufacturers.

The second stipulates for a Philippine Brand Vehicle category to be added that would be for the mass market, low cost, and have high local content. This will also be exempt from excise tax. A special export program would likewise be designed for it.

Local content manufacturers are really looking forward to the creation of an Industry Support Fund intended to finance facilities upgrade of the participants, to boost R&D capabilities, and purchase test equipment.

Local parts makers see the need for testing equipment to rebuild the local parts making industry. Presently, only five (or 1.25 percent) of the 400 auto product standards approved by the Bureau of Product Standards could be locally tested.

Cautious

If local parts manufacturers and assemblers are looking at the move to change the MVDP as the light at the end of the tunnel, importers of completely built up (CBU) units are more cautious in expressing their views, and are particularly asking for more details.

Industry members understandably want more specific definitions to terms such as “local content,” “mass market,” even “low cost.” They also need to know exactly what incentives are being planned, and what the so-called Philippine Brand Vehicle would be.

Even the proposed parts and components fund is seen with much apprehension since this would give local parts manufacturers with the much needed funds to set up R&D and testing centers. Similarly, industry members do not want another body to oversee the industry.

RP-made

The biggest source of concern is turning out to be the resurrection of the turn-of-the-century’s Asian Utility Vehicle. Now to be called Philippine Brand Vehicles (PBV), this is intended to compete with today’s low-end Sports Utility Vehicles like the Toyota Innova.

AUVs like the Filipino family-friendly Tamaraw FX had been discontinued by car manufacturers in favor of vehicles with higher content of imported parts. Again, it is easy to understand why. The country does not have a big-enough market to justify maintaining plants with the same economies of scale as those found in China or Thailand.

By the way, there are also incentives being planned for the development of alternative fuel vehicles (AFV) like electric vehicles and hybrids. This is one segment of the industry that government feels can be explored to boost local content manufacture, and there are a number of local companies that are interested in participating.

Part of the incentive package for both the PBV and AFV are reduced or zero excise tax, income tax holidays and duty-free importation of raw and semi-processed materials and capital equipment, benefits similar to those granted to locators in export processing zones and to BOI-registered companies. Incentives are also being eyed for participants exporting not only vehicles but auto components as well.

Pulling it off

All these proposals should bode well in promoting the country’s competitiveness in the automotive sector in the light of the forthcoming full trade liberalization imposing tariff-free importation starting next year.

Now, let’s hope that our government manages to get its act together and is able to successfully pull off its objectives. This will be the second attempt to bring cheaper vehicles with more local content to a wider base of our countrymen. Let’s hope that our bureaucrats will have learned from past mistakes.

2009 Philippine Collegiate Championship update

The “gathering of the best” is complete with Ateneo Blue Eagles (UAAP champion), and San Sebastian College-Recoletos Golden Stags (NCAA champion), leading the elite group to the “Sweet 16” Finals of the PLDT-SMART sponsored 2009 Philippine Collegiate Championship games.

The series starts on Nov. 23, 2009 at the Ynares Sports Center, Pasig City. The first game starts at 2 p.m. with the FEU Tamaraws trying to knock out qualifier Arellano U Chiefs, while the second game pits the San Beda Red Lions against another qualifier, the San Sebastian College-Recoletos Cavite Baycats. Winners will advance to the round of eight while losers go home.

ABS-CBN will cover all the “Sweet 16” games live on Studio 23, with a replay in the evening on the Balls channel.

PCCL is also inviting collegiate basketball fans and students to join for free the two contests recently launched. “Pick the Final Four” contest is now open. Simply log in at www.CollegiateChampionsLeague.net to submit your choices. Those with the correct “picks” will receive surprise gift items.

The other contest is for amateur camera enthusiasts who may submit their action shots of players during the games of the “Sweet 16” Finals. Log in at the PCCL website for details.

For updates on the progress of teams as they continue the journey in the 2009 Philippine Collegiate Championship games, visit the official website, www.CollegiateChampionsLeague.net or send email enquiries to PCCL_[email protected].

Should you wish to share any insights, write me at Link Edge, 25th Floor, 139 Corporate Center, Valero Street, Salcedo Village, 1227 Makati City. Or e-mail me at [email protected]. For a compilation of previous articles, visit www.BizlinksPhilippines.net.