Philippines to become major car market by 2020

MANILA, Philippines - The Philippines is poised to become a major automotive market in Southeast Asia by 2020 as domestic sales are expected to continue posting stellar growth while local production is seen ramping up with the government’s Comprehensive Automotive Resurgence Strategy (CARS) program.

Local industry players see the Philippine automotive market pumping in sales, accounting for eight to 10 percent of the total vehicle sales in the region by 2020.

By 2020, sales of the automotive market within member economies of the Association of South East Asian Nations (Asean) are projected to reach five to six million units, with Thailand and Indonesia still seen as leaders in the region.

The Philippines, however, will become an important automotive market growth area in the region as volume of vehicles sold is expected to zoom to 500,000 units by 2020, Mitsubishi Motors Philippines Corp. first vice president and corporate secretary Dante Santos said.

Santos said the Philippine automotive market, although small from a regional perspective, has been experiencing unprecedented sales growth in the last five years. 

From 168,000 units sold in 2010, vehicle sales in the country reached 269,000 units last year and are expected to surpass industry target of 310,000 units this year. 

For next year, the Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI) is initially projecting vehicle sales to reach a new high of 350,000 units.

“Low car ownership ratio, favorable demographics and rising income indicate high potential for growth in the Philippine auto market,” Santos said.

But while domestic sales have been on the ascent for several years now, Philippine vehicle production has remained pale compared to its neighbors.

Data from the Asean Automotive Federation showed Philippine motor vehicle production stood at the bottom of the region with only 83,874 units produced locally from January to October.

The output was far from the 1.6 million units produced in Thailand or the 1.1 million units from Indonesia during the same period.
Industry players, however, believe the country’s position as an automotive production hub may soon improve with the CARS program that seeks to provide for fiscal and non-fiscal incentives to encourage the local assembly of automotive vehicles.

The Board of Investments issued last week the implementing rules and regulations (IRR) for EO 182 or the CARS program.

Under the program, two prospective local car assemblers may apply for fiscal support not exceeding P27 billion by locally assembling three vehicle models or P9 billion per model with a commitment to produce 200,000 units for each model during its six-year model life.

“We expect the car assemblers to go full blast with their expansion and product developments plans that they have temporarily shelved, while waiting for this IRR. We expect investments in the auto industry, both foreign and local, to now go full steam ahead,” Philippine Part Maker Association (PPMA) president Ferdinand Raquel Santos said.

Raquel Santos said the PPMA believes the CARS program is the lifeline that the struggling local auto parts making industry has long been waiting for.

“Since this will mean an increase in local auto assembly and production of an average of 100,000 units per year or more than double last year’s local production of 88,000 units, this will result in the same increase in the demand and local manufacture of auto parts. This bodes well for us, the local auto parts makers,” he said.

“Add to this the opportunity for local auto parts makers to forge joint venture partnerships or technical licensing agreements with foreign original equipment suppliers to localize the manufacture and assembly of vehicle components and parts. This will result in both an inflow of foreign investments and ultimately, a transfer of technology that will benefit the local parts making industry,” Raquel Santos added.

Raquel Santos said that even though most of the big body shell parts would be done by the car assemblers, it is the desire of local parts makers to get some of the small sheet metal components like brackets, stiffeners, and latches for them to press, stamp and fabricate, while at the same time providing the tools, dies, molds and fixtures required.