The automotive manufacturing industry aims to make the Philippines a competitive manufacturing base of motor vehicles and parts and components, serving both the domestic and export markets, and a global hub for automotive-related human resource development and process outsourcing.
The industry seeks to have a 70:30 CKD:CBU market share ratio by achieving full capacity utilization and achieving a 150% increase in nationwide capacity by 2022.
Its objective is to generate an additional P41 billion in investments, P151 additional production in related in related sectors, create 70,000 new jobs, and resume export operations.
For its development, the industry recommends the application of selective but wide application of fiscal incentives (to offset its cost handicaps) and implementation of industry-wide non-fiscal policy support measures (to nurture the domestic market).
The Philippine automotive manufacturing industry covers the assembly, importation/distribution, rebuilding of motor vehicles, and the manufacturing of automotive parts and components. It consists of highly diverse sectors such as metal, electrical, plastic, rubber, and composite materials. It is also characterized by heterogeneous firms with a few large, foreign-owned and modern firms (Toyota, Mitsubishi, Honda, Nissan and Isuzu) operating side by side with many small underdeveloped firms.
The industry players are serviced by the following industry associations: the Philippine Automotive Federation, Inc. (PAFI), the industry’s largest umbrella organization and recognized as the industry’s voice in international forums such as the ASEAN Automotive Federation and the APEC Auto Dialogue; the Chamber of Automotive Manufacturers in the Philippines (CAMPI), whose members include a core of manufacturers and second tier importers/distributors; and the Philippine Automotive Competitiveness Council, Inc. (PACCI), composed of four brands whose domestic operations account for 90% of vehicles manufactured in the Philippines and the Motor Vehicle Parts Manufacturers Association of the Philippines (MVPMAP).
There are currently fifteen vehicle manufacturers with operating plants in the country, seven of which are equipped with electro-deposition painting systems. There are a total of 272 parts and components manufacturers in the country. The industry has an annual capacity of 250,000 units, all vehicle types included, produced by plants rated as compliant with global standards and certified by the International Standards Organization (ISO). In 2011, the automotive industry generated production valued at P368-billion equal to 4% share in GDP.
In 2013, the industry estimates that it has directly employed 8,000 workers in automotive manufacturing, whereas approximately 68,000 jobs have been generated in auto parts manufacturing. An estimated 340,000 are employed in auto-supporting industries.
Among the industry’s strengths are:
Strong Industrial Linkages. Well-structured and with its network of production facilities, the automotive industry is one of the key drivers of the Philippine economy. Allied supporting industries encourage strong backward linkages such as capital-intensive production and testing equipment, machinery and equipment, dies and moulds, metal stamping, die casting and machining. Moreover, forward linkages in the forms of dealerships make a seamless flow of good and services in the industry by performing the main marketing and sales functions, car financing and insurance, and after sales service.
Comparative Advantage. The Philippines has comparative advantage in a number of products like ignition/other wiring sets for vehicles; radio receivers, external power; lead-acid electric accumulators; brake system parts; transmissions for motor vehicles; pneumatic tyres for motor cars and other parts and components.
Presence of global automotive brands. With the presence of global automotive brands, together with the abundant supply of highly skilled and technical manpower, the quality of final goods and services produced by the automotive industry is at par with regional and global standards. As a result, the country is currently enjoying stable automotive parts and components exports and is a favorable destination for future investments.
The industry’s current development plans call for the simultaneous and coordinated growth of both the vehicle assemblers and the parts manufacturers, in recognition of the interdependence and strong multiplier effects of these subsectors. The strategy entails a cost-competitive solution, where the increase in assembly volumes can yield economies of scale and more affordable pricing along the entire supply chain, from resource-based raw materials to the car in the showroom. Such a scenario will generate ample and quality employment opportunities, from the major brands all the way to small and medium scale enterprises.
Volume of Automotive CKD Sales vs. CBU Imports
Percentage of Automotive CKD Sales vs. CBU Imports
The manufacture of motor vehicle (excluding motorcycles, e-bikes and golfcarts) and motor vehicle parts and components is among the preferred activities listed in the IPP.
This covers the assembly of motor vehicles, manufacture of parts and components, research & development, research/testing laboratories, and technical vocational education and training institutions.
For the manufacture of motor vehicles (excluding motorcycles, e-bikes and golf carts), including the manufacture of parts and components, any of the following may qualify as new:
Any of the following may qualify for pioneer status:
The project’s ITH Rate of Exemption shall be proportionate to the Logistics Efficiency Index (LEI).
The manufacture of motor vehicle parts and components include:
Original Equipment Manufacturer (OEM) parts and components may qualify for pioneer status.
The Comprehensive Automotive Resurgence Strategy (CARS) Program is being implemented in order to attract new investments, stimulate demand and effectively implement industry regulations that will revitalize the Philippine automotive industry, and develop the country as a regional automotive manufacturing hub.
The thrust of the CARS Program is to provide time-bound, and output or performance-based fiscal support to attract strategic investments in the manufacturing of motor vehicles and parts thereof. Other non-fiscal measures already provided by existing laws, rules and regulations, shall continue to be systematically implemented by the relevant government agencies.
CARS is intended to augment and enhance the policy directions of existing motor vehicle development programs towards ensuring a resurgent automotive industry that supports innovation, technology transfer, environmental protection, and SME development; enable the country’s automotive industry to seize market opportunities opened by the ASEAN Economic Community and deepen its participation in the regional supply chain; and boost the manufacturing capability of the overall industrial sector, spur growth of SMEs and create more jobs in the country.
The CARS Program is limited to the manufacture of three (3) models of four-wheeled motor vehicles, covering the following activities:
Registered participants of the Program may be entitled to two (2) kinds of fiscal support during the enrolled Model Life, up to a maximum of six (6) years, namely: (1) Fixed Investment Support (FIS); and (2) Production Volume Incentive (PVI), following prescribed qualifications.
Read the full text of EO 182.
The Comprehensive MVDP provides for the following:
Read the full text of EO 877-A.
The restructuring of the Motor Vehicle Development Program provides for the following:
Read the full text of EO 156.
The automotive industry Technical Working Group (TWG) conducts meetings to discuss and address industry concerns and issues. These include the implementation of non-fiscal measures, especially on the importation of used motor vehicles and the need for a more productive fiscal package that can help local manufacturers to become more competitive in the ASEAN Economic Community.
Specifically, the TWG focuses on the following concerns:
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