PH to save $17B in forex by producing vehicles locally

MANILA, Philippines – After a long wait, the outcome of discussions over the Philippine automotive industry roadmap has been revealed. 

The aim: to save P757.8 billion ($16.84 billion*) in foreign exchange over a 5-year period if all vehicles sold in the Philippines are made locally.

The foreign exchange savings estimate is based on the annual volume imports of completely built units (CBUs) in 2013.

The automotive roadmap also targets to sell 500,000 units by 2022, 400,000 units of which will be locally-produced, Trade Assistant Secretary Rafaelita Aldaba showed in her presentation on Friday, October 17.

The automotive roadmap would be implemented over a 5-year period.

Aldaba estimated that the automotive roadmap will be issued in 2015, implemented by 2016, and its impact felt by 2017,  as planning by automotive companies is estimated to take a year and a half from the issuance of the roadmap.

The goal is not only to serve the domestic market but also to export, but DTI has yet to make the projections.

The automotive industry is said to have a multiplier effect of 3.4% and higher investments of up to 2.2% share in the gross domestic product (GDP).

By 2022, the industry is also seen to create 200,000 to 300,000 jobs for skilled and highly-skilled workers.

Technology transfer and absorption of new manufacturing capabilities, including investments in major parts like engine and body parts would also raise the local content from 30% to 60%.

Without the roadmap, local production would shrink to as low as 50,000 units by 2022, in which case, “everything will be imported,” Aldaba said.

Revising incentives package

To achieve those goals, the government is readying automotive policies and incentives that would make locally-produced vehicles more affordable to a growing market, Aldaba added.

“We will revise the existing incentive package and put in place incentives that would close the competitiveness gap to rebuild the domestic market,” Aldaba said.

The incentives would be time-bound from 5 to 6 years, and performance-based, with the condition that they will invest in critical areas like vehicle body parts and other strategic spares that are not produced domestically.

The country also has an advantage in the manufacturing of air filters for engines, brake system, external power, ignition sets, lead-acid electric accumulators, radio receivers, transmission, and tires.

The cost difference in producing a car in the Philippines is between $1,500 and $2,000 compared to Thailand.

According to the 2013 ASEAN Automotive Federation (AAF) data, the Philippines lags behind its regional peers in vehicle assembly, with a production output of 79,169 units.

In 2013, Thailand assembled a total of 2.46 million units; Indonesia produced 1.21 million units; Malaysia, 601,407 units; and Vietnam, 93,630 units, the AAF added.

The Philippines currently has a rated capacity of 200,000 vehicles per year with about 4 carmakers and 272 companies in parts and components. The industry employs about 68,000.

Industry players, among them Chevrolet Philippines, have been waiting for DTI’s automotive industry roadmap, which is expected to help them be prepared for the ASEAN integration by 2015. (READ: Chevrolet Philippines drives toward ASEAN integration and beyond) – Rappler.com

*$1 = P44.92