Local auto makers need perks to compete - study

MANILA, Philippines - A recent study on the local automotive industry has reiterated the importance of incentives in order to make manufacturers more economically competitive.

“Solid incentives support from the government will make it possible for locally registered automotive manufacturers to be economically competitive. With incentives, manufacturers can sustain buying from local parts makers that will enable sharing of their research and development efforts, best practices in applying manufacturing know how to local parts makers,” the 29-page University of Asia and the Pacific (UA&P) study stated.

The Department of Trade and Industry (DTI) has been waiting for the UA&P study in order to decide whether they will implement the Motor Vehicle Development Plan (MVDP) or Executive Order 877-A or scrap the MVDP.

  The study stated that a cost benefit analysis of the proposed fiscal incentives show that for every peso of fiscal incentives granted to the industry, there is a positive return to the government. For instance, for CBU exports  assuming that the export credit per unit is $700 the benefit to cost ration is 1.82.

The study stated that under a regional market growth seeking segment there are four new activities that can be considered as eligible for fiscal incentives.

The first is activities related to the establishment of local operations destined as a regional manufacturing base for an existing or new automotive model.

The second is activities related to the establishment of local operations to enable the manufacture and assembly of CBU alternate energy using or hybrid vehicle models.

Third is activities related to the establishment of local operations leading to the manufacture and or assembly of newly designed vehicles for passenger use.

The fourth is activites related to the manufacture and assembly of parts and components.

The study likewise showed that the Philippines can look at the ASEAN as a domestic market given the zero tariff for member-countries. The main complaint of auto manufacturers is the low domestic base of the Philippines.

The study stated that given the potential growth of vehicle demand for the ASEAN, it is highly probable that other ASEAN countries like Indonesia and Thailand will experience constraints in their plant capacity.

“The expected growth in demand can be considered as a clear opportunity for Philippine automotive manufacturers to fill the gap and utilize the available local capacity,” the study said.