Ford urged to hike local content

MANILA, Philippines - Ford Motor Company Philippines, the lone exporter of completely built-up (CBUs) vehicles in the country, will have to increase its local content to over 50 percent in order to continue enjoying incentives under the Auto Export Program (AEP).

Ford is the country’s lone volume CBU exporter being the only participant in the Automotive Export Program of the Board of Investments.

Under the newly crafted AEP which has yet to be signed by President Aquino, local exporters will only be able to enjoy incentives if the local content of their vehicles are 50 percent and above. The 50 percent local component will not include labor, only parts.

“We want to motivate Ford to go over 50 percent,” Board of Investments (BOI) managing head Cristino L. Panlilio told reporters in an interview.

Panlilio explained that under the old AEP that already lapsed, the local content was not an issue. Rather it was volume based.

“We would like to encourage car parts manufacturers to produce more by making car assemblers use more local content,” he explained. “The higher the local content, the higher the tax credit.”

As of now, Panlilio said Ford is not receiving any incentives to export but continues to sell overseas. Data released by FGP showed that exports for January to March 2011 stood at 1,816 units, higher than the 1,704 units exported during the same period in 2010.

Ford is exporting Focus, Escape and Mazda 3. The Focus and Escape are being sold in Indonesia, Malaysia and Thailand while the Mazda 3 goes to Thailand.

Earlier, Panlilio said the government will cut in half the export requirement in the AEP in an attempt to encourage more local manufacturers to sell CBUs overseas.

“We are looking at cutting in half the quota in the export plan,” Panlilio said. Firms must be able to export 10,000 units in order to avail of the incentives.

“It is harder to export because of the conditions and the agreements (free trade agreements) that the government is entering,” Panlilio said. “We are still studying the possible solution to this problem.” He said that even with incentives it has been difficult to export vehicles.

“What is the point of coming out with the export program if no one will avail. We have to think out of the box now,” Panlilio added.

Car manufacturers have already submitted their position paper to the BOI. Auto firms asked the government to strengthen the domestic base before encouraging firms to export locally manufactured vehicles (LMV).