Automotive
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).
01
About Automotive
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.
02
Facts and Figures
Volume of Automotive CKD Sales vs. CBU Imports
| 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | |
|---|---|---|---|---|---|---|---|---|---|---|
| CKD Sales | 58,566 | 56,050 | 61,128 | 61,513 | 64,498 | 74,984 | 67,742 | 71,562 | 78,784 | 86,218 |
| CBU Imports | 38,497 | 43,491 | 56,775 | 62,936 | 67,946 | 95,283 | 97,451 | 111,217 | 129,710 | 182,946 |
| TOTAL | 97,063 | 99,541 | 117,903 | 124,449 | 132,444 | 170,267 | 165,193 | 182,779 | 208,494 | 269,164 |
Percentage of Automotive CKD Sales vs. CBU Imports
| 2005 | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | |
|---|---|---|---|---|---|---|---|---|---|---|
| CKD Sales | 60% | 56% | 52% | 49% | 49% | 44% | 41% | 39% | 38% | 32% |
| CBU Imports | 40% | 44% | 48% | 51% | 51% | 56% | 59% | 61% | 62% | 68% |
03
Roadmap
04
Policies
IPP 2014-2016
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:
- Projects that will involve the establishment of a factory complete with production machinery/equipment and facilities.
- Projects of an existing motor vehicle manufacturer/assembler of passenger car/commercial vehicle that involves the production of a new model or a full model change (FMC) provided there is new investment of at least Php 200 million.
Any of the following may qualify for pioneer status:
- Projects on the manufacture/assembly of alternative fuel vehicle and electric vehicles. Alternative fuel vehicles include hybrid vehicles, and flexible-fuel vehicles.
- Manufacture/assembly of brand new three or four-wheel Philippine utility vehicles for cargos and/or passengers.
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:
- Body panel stamping
- Engines, transmissions, and transaxle
- Large injection moulded parts
- Bumpers; instrument panel; door trims; center console; grill; wheel house finisher; lamps; shock absorber; wiper motor/blade; engine mounts; electric power steering; combination meter; instrument cluster; chassis & sub-frame; interior finishing; switches; seat mechanism; retractable seat belts; window regulator; constant velocity joints/transmission; aluminium radiators; plastic fuel tanks; fuel pumps; brake system and components; evaporators and condensers; relays; flame laminated automotive fabric; door & rear view mirrors; automotive glass; engine parts & assembly; and transmission parts & assembly
- Controller assembly, motor, and battery (other than lead acid) for electric vehicle
Original Equipment Manufacturer (OEM) parts and components may qualify for pioneer status.
05
Programs
Comprehensive Automotive Resurgence Strategy (EO 182)
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:
- Production of the enrolled Models;
- Manufacture of Body Shell Assembly and Large Plastic Assemblies of the Model;
- Manufacture of Common Parts and Strategic Parts not currently produced in the country at Original Equipment Manufacturer (OEM) standards of the Model/s; and
- Shared Testing Facility for vehicles and/or parts.
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.
Comprehensive Motor Vehicle Development Program (EO 877-A)
The Comprehensive MVDP provides for the following:
- Creates a Motor Vehicle Industry Development Council to oversee, coordinate and align all government policies and programs, rules and regulations, related to the motor vehicle industry.
- Increases the level of progress achieved by EO 156 through the enhancement of the existing motor vehicle industry policy framework
- Strengthens the used vehicle importation prohibition under EO 156
- Provides for the restructuring of (1) tariff rates to be comparable to neighboring countries with similar motor vehicle development programs; and (2) excise taxation system for motor vehicles to be fair, transparent, and stable
- Provides for granting of export incentives and support measures to encourage greater participation, diversification of exports, and capacity utilization of parts manufacturing and auto-support industries
Read the full text of EO 877-A.
Restructured Motor Vehicle Development Program (EO 156)
The restructuring of the Motor Vehicle Development Program provides for the following:
- Ban the importation of all types of used motor vehicles and parts and components, except those that may be allowed under certain conditions
- Restructure the Most Favored Nation (MFN) tariff rates for motor vehicles and their raw materials and parts and components at such rates that will encourage the development of the industry
- Restructure the current excise tax system for motor vehicles with the end view of creating a simple, fair and stable tax structure
- Continue the application of AICO scheme as may be adopted by ASEAN consisted with the implementation of the ASEAN-CEPT
- Grant incentives to assemblers and parts and components makers for the export of CBUs and parts and components
Read the full text of EO 156.
Industry Development Program
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:
- Strict implementation of the Motor Vehicle Inspection Scheme (MVIS)
- Enforcement of anti-counterfeit measures for vehicle parts and components
- Implementation of full inter-connectivity between BOI, BOC, BIR and LTO
- Abolition of the Certificate of Payment (CP) for CKDs
- End-of-Life program for vehicles
- Re-fleeting program to replace vehicles that are more than 10 years old
06
Champions
Federation of Automotive Industries of the Philippines
c/o Pilipinas Hino, Inc., Industrial Park Rd., Canlubang Industrial Zone, Calamba, Laguna
Board of Investments (BOI)
Industry and Investments Building,
385 Senator Gil Puyat Ave.,
Makati City Philippines
Tel. No.: (632) 896-9239
Email: MCHDichosa@boi.gov.ph
