TOKYO: Bucking calls for raising tax on car purchases to decongest Metro Manila’s roads, Mitsubishi Motors Corp (MMC) is urging the Philippines, instead, to offer tax incentives to buyers and encourage production to bolster exports, create jobs and attract more investments into the country.
Osamu Masuko – chairman, president and chief executive officer of the Tokyo-based Mitsubishi Motors Corp. (MMC) – is bullish on the Philippines and believes Filipinos are capable of producing vehicles for exports if the government offers the right tax incentives to car buyers.
“We have a dream of exporting from the Philippines,” said Yoshiaki Kato, president and CEO of Mitsubishi Motors Philippines.
MMC, along with another Japanese trading company, owns Mitsubishi Motors Philippines Corp. It holds a 17 percent stake in the Philippine automobile market, the second biggest after Toyota.
Speaking through an interpreter, Masuko reiterated a previous statement to Filipino journalists—that if car sales volume continues to grow, eventually the Philippines will be in a position to export locally assembled vehicles to the region.
The Philippines needs a long-term vision to realize that potential, he added.
Even though Thailand already exports vehicles to the region and Indonesia is poised to follow suit soon, the Philippines could be the third leg of a robust auto manufacturing or assembling base in Asean. A 600-million strong economic bloc of 10 countries, including the Philippines, the Association of Southeast Asian Nations is quite an attractive market.
Recognizing that each country should develop its own growth strategies and policies, Masuko made a case for why the Philippines should consider tax incentives to car buyers.
To encourage environment-friendly vehicles, Thailand, for example, and other countries offer tax incentives to buyers of electric vehicles and similar ones that feature fuel efficiency and clean emmissions, he said.
In some markets, electric vehicles are exempt from value-added tax, he added.
In the Philippines, Masuko suggested, the government could consider incentives for passenger cars, with the aim of achieving volume production that, in turn, lowers the unit cost.
Ramping up the local output will entice parts manufacturers to also invest in the Philippines, which is likely to lead to an improved business environment even for their local counterparts, he said.
After echoing Masuko’s view of the Philippines being a prospective export base, Kato qualified that the country would need to compete with countries that already export vehicles, Thailand in particular, which already supplies cars and parts to the region.
Growing production output will allow Philippine assemblers to achieve economies of scale, which can lower costs. That, however, is only the first step.
Kato added that improving quality is a prerequisite to becoming export-ready.
Earlier, some Filipino lawmakers suggested that the government should impose higher sales taxes to help reduce the number of vehicles the capital region’s congested roads.
The Philippine government estimates that the economic impact of traffic congestion has worsened to P3 billion a day, or 0.8 percent of the country’s gross domestic product (GDP), the cost of final goods and services in a year.
Recently, the Duterte government pledged to spend P8 trillion on various infrastructure projects across the country, largely to address the traffic congestion problem for the long term.
Sta. Rosa plant ramps up production
Encouraged by the government incentives, Mitsubishi is beefing up its investment in the Philippines and hiring more Filipino workers for its plant in Santa Rosa, Laguna, MMC’s Masuko said.
When President Rodrigo Duterte visited Japan last month, Mitsubishi signed a letter of intent supporting the Philippines’ Comprehensive Automotive Resurgence Strategy (CARS) program, which was adopted by the Aquino government and carried forward by the present administration. The program offers P27 billion worth of incentives to auto assemblers.
In response to the program, Mitsubishi has committed to invest P4.3 billion in the Philippines, where it hopes to build two sedan models locally, the Mirage G4 beginning in January 2017 and later on, the Mirage.
Masuko said the Santa Rosa plant has hired about 500 more workers since the beginning of 2016, increasing the number of employees to 1,500. A second shift has started working just this November, and its stamping shop is expected to be operational in 2018.
Mitsubishi’s P4.3 billion commitment is likely to be spent during the next three years, Kato said, explaining that the stamping shop already represented a chunk of the company’s investment pledge.
If Mitsubishi’s investments pay off after three years, which is half the length of the CARS program, the company will consider boosting its investment in the Philippines further.
During a meeting with Filipino journalists who were invited by Mitsubishi to visit its office and a plant in Japan, Masuko outlined the reasons for his optimism about the Philippines.
The country’s 100-million young population is an “advantage” and a key economic “resource,” he said. The ability to speak English also represents a “big advantage” for the Filipino over other Asian workers.
Despite the controversies surrounding President Duterte, the Philippine political situation is perceived to be stable, and the fact that the transition of power from the Aquino government has been peaceful supports that perception, he said.
He summed up his analysis by saying, “Compared with Japan, you have a much brighter future.”
Masuko did say, however, that the Philippine car market is small, but that means there is room for expansion.
He said it would be hard to expand the market if higher taxes were imposed on car buyers, and even more so if the suggestion for a 40-percent tax hike on new purchases were adopted.
Masuko shows confidence that the Philippine car market will continue to grow, even if the government does not adopt his suggested tax breaks for automobile buyers.
According to forecasts, the market could swell to 500,000 units by 2020, even without tax incentives to car buyers factored in. Citing the forecasts, the Mitsubishi president said car sales in the Philippines this year could reach 310,000. In 2010, the car market only recorded 168,000 in sales volume, and last year, sales reached 269,000, according to reports.
If the Philippines has to import cars to meet its growing domestic demand, then Filipinos will lose out economically, Masuko warned.
Besides assembling cars, the Mitsubishi group takes other interests in the Philippines, including stakes in banking and in food and beverage conglomerate San Miguel Corporation through the Japanese company, Kirin.