The Ugly Truth

A recent article by STAR business reporter Louella D. Desiderio got me up in arms. Not at the writer, mind you, but at the content of said article. The story, titled “Phl remains Asia’s laggard in motor vehicle production,” touched a raw nerve. But it really shouldn’t touch just the raw nerve of this car enthusiast, it should raise the outrage of just about every flag-waving, country-loving Filipino—especially those who are concerned about the country’s unemployment rate and economic development (or the lack of it).  

According to the article, data from the ASEAN Automotive Federation showed that the Philippines assembled 50,223 vehicles as of end-August—down 1.8 percent from the 51,137 units from the same period last year.

Bear in mind that I’m talking about locally manufactured vehicles, not total Philippine vehicle sales which combine local and imported automobiles. (In terms of total sales, the Philippines sold 116,613 units from January to August this year—still a far cry from Thailand’s 939,342 units, Indonesia’s 792,358, and Malaysia’s 433,023.)

But total vehicle sales are more a function of a population’s affluence, more specifically per capita income. The bone I’m picking is the deplorable drop of locally made cars—something the government should squarely take the blame for.

Fifty-thousand-plus cars made in eight months? That’s not so bad, you might say. Well not bad until you put those figures in relation to our ASEAN neighbors. Consider this: Thailand assembled a staggering 1,736,000 vehicles in the same 8-month period. Granted, Thailand is the region’s car-making capital—the “Detroit of Asia,” as they are now widely acknowledged. Many of the Japanese and American carmakers have made it their manufacturing and export hub. The ASEAN Free Trade Agreement (AFTA), which allows zero taxes and duties for vehicles exported within ASEAN, have made it irresistible for car companies to base their businesses in one or two of the ASEAN member nations.

Unfortunately, economies of scale would eventually make them all consolidate their manufacturing operations on the ASEAN country that offers the best combination of government incentives, positive economic and political climate, advanced infrastructure, skilled manpower, and, yes, even the weather. And so far, hats off to Thailand for being able to deliver the consistently highest levels in all those aspects (the 2011 flooding in Bangkok notwithstanding).

Malaysia? They manufactured 385,851 units from January to August this year—still head and shoulders above our numbers. Even Vietnam, the scooter/underbone capital of the world and which just a few years ago hardly had a car industry worth tweeting about, made more cars than us: 55,883 units. (To think that Vietnamese car industry sold just 60,538 units in the first eight months of this year, which means that most of the cars sold there are made there.)

What’s wrong, people?!? Not too long ago, the Philippines was the Detroit of Asia. In my childhood, one neighbor had a Dodge Dart while another neighbor had a Ford Granada (the big U.S. model, not the more common German/UK model). A friend a block away had a Ford Mustang Mach 1. Our streets saw Hillmans, Vauxhalls, and Renaults. True, most of these cars were brought in privately and not manufactured locally, but the country enjoyed automotive diversity and we had a thriving local car industry that was leaps and bounds ahead of our ASEAN neighbors.

We manufactured Datsuns, Mercedes-Benzes, Mitsubishis (“Colts” in those days), Toyotas, Fords, Volkswagens, Opels, and Isuzus, among others. That’s a whole gamut of car brands from what was then a tiny fraction compared to total Philippine vehicles sales today. Yet the vast majority of cars sold here were manufactured locally. We proudly made them all. Today, only five car companies out of the roughly 20 that sell cars here have plants here. These are—and I tip my hat to them—Toyota, Honda, Mitsubishi, Isuzu, and Nissan. These are the companies that bring jobs to Filipinos. 

The Philippines lost the manufacturing operations of Ford and Goodyear—both to Thailand—only recently. I blame the government’s apathy and lack of incentives to keep those operations here. A shame because those plants not just offered jobs here but exported much of their output which brought in precious dollars to the local economy.  

Most of the cars we see on the road today are imported as completely built up units (CBU) from Japan, Korea, America, various European countries, China, and yes, Thailand. And the irony is that while all but one of those countries have their respective car brands, it is the one—Thailand—that does not have its own local brand that is among the biggest exporter of cars to the Philippines.

Most pickups and mid-size SUV’s sold locally come from Thailand, which also has the distinction of being the pickup capital of the world next to North America. The huge sales success of pickups there is not due to some native predilection for trucks, but due to the Thai government’s subsidy of pickup prices that drove their prices almost a slow as subcompact cars.

It’s not too different from how the Philippines unwittingly became the texting capital of the world. Our 1-peso-per-text rates drove Filipinos to texting like there’s no tomorrow. In contrast, many countries had text rates that cost as much as a 1-minute voice call—at least 10 to 15 years ago, but not anymore, but I digress. 

What all of this goes to show is that with the right government incentives combined with a truly workable (and quickly crafted, not one to take two administrations to draw up) program, we could be the hatchback capital of the world, the compact car sedan of the world, heck, even the hybrid/electric car capital of the world.

Speaking of hybrids, many sectors from private, business, and even some from government have been clamoring for a proper hybrid/alternative fuel incentive program but what the heck is taking Office of the President (and the departments from which it relies on information and recommendations) so long? This could be a flagship project that would put not just the local car industry but the whole country in a positive light. And yes, every party involved could all walk away from it with a few extra bucks in their coffers.

Don’t you think it’s time we moved away from being known for boxing and beauty queens? All it takes is the right push—and the right price. The Toyota Corolla has been Japan’s (and much of the world’s) bestselling car for decades. Yet when the Japanese government decided to reward environmentally friendly cars by subsidizing the prices of hybrid and electric cars, their sales took off. Today the Toyota Prius is the bestselling car in Japan. And has been so for quite a few years now.

What else needs to be done? For one thing, it would help if graft and corruption are truly eliminated, if not at least drastically minimized. Government should also stop see-sawing between bills—dangling incentives only to withdraw them when investors take the bait. Or having a new President (or a new senate, a new congress, or even a new government department secretary) who would renege on the previous administration’s promises. Power costs should be lowered (the Philippines has the highest electricity costs in the region and is among the highest in the world.) And stop yakking about Filipinos having the advantage in English language skills. Thailand and China are way less adept in English yet most international plants are located in those two countries. 

Obviously, our government cannot afford to subsidize the price of a Prius, a Honda CR-Z or any of the hybrid Lexus models, but it can slash the taxes imposed on such cars. Or perhaps waive the registration fees or road taxes for such cars. But anything is better than doing nothing. Or should we wait for our ASEAN neighbors to offer such bills and watch the car companies put up hybrid plants in those countries?