DTI seeks 3rd manufacturer under CARS program

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THE Department of Trade and Industry (DTI) is working on a new strategy to boost the manufacturing output in another potential sector similar to what was done in the car-making industry under the Comprehensive Automotive Resurgence Strategy Program (CARS Program).

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“We’re still studying it. We’re looking outside the CARS Program—but similar approach—just to support the production of the local content of that sector,” Trade Secretary Ramon Lopez told reporters over the weekend.

“Depending on the outcome of the study, that will be the second program even if the third player for CARS Program is not yet done. We can enter into another industry… We haven’t finalized it yet, but we’re still studying closely another industry,” he added.

He declined to name the particular industry, but Lopez said all the sectors under the completed and ongoing roadmaps are being considered, with the focus on manufacturing segments that present competitiveness and provide a lot of direct and indirect jobs and a large network of linkages.

The study on the new program may be completed in one to two months.

The DTI’s Board of Investments has been doing the Industry Roadmapping Program, helping sectors craft their own roadmaps that serve as guide to how an industry is faring, the trends, and the short- and long- term goals. So far, 40 roadmaps have been submitted to the BOI, of which 32 are completed and in place while the rest are being made final.

Lopez said the DTI is coming up with a manufacturing resurgence strategy “ . . . one at a time. We’re still evaluating the best incentives [under the new]manufacturing strategy.”

3rd slot for CARS
The DTI is scouting for another automotive player to fill the third and final slot for another model to be mass produced under the six-year CARS Program.

Under the program, three model units must be locally mass produced in six years to hit 600,000 vehicles or 200,000 units for each carmaker by 2022. Carmakers accepted to the program—through initial investments and production commitments—are entitled to fiscal incentives of up to P9 billion for each participant.

Two players have qualified and are now in the initial stages of production: Toyota Motor Philippines Corp. with its Vios model, and Mitsubishi Motors Philippines Corp. with its Mirage and Mirage G4.

“We still don’t have the third player. We’re still looking for one. We’re talking [with the other vehicle manufacturers in the Philippines]but they still can’t commit to the 100,000 units [even for the first half of the program],” Lopez said.

Lopez, who is also the BOI chairman, said the government “might consider” special exemptions for the third slot such as “scaling down” the requirements but with less incentives.

“Well, maybe down the road, we might consider but it’s still not final—the scale down. But that would mean lesser incentives too. Right? But the economies of scale are not that big anymore. That’s what we have at the back of our minds,” the DTI chief said.

“But those are just our current ideas. If that will be the case, it has to be fair with the first two,” he added, referring to Toyota and Mitsubishi.

Under Rule 2, Section 5, of the implementing rules and regulations (IRR) of the CARS Program, “… in case the three models are not fully subscribed within the application period or an approved applicant rejects or abandons its project … “ then the BOI “… may set a new application period for enrolment of additional model/s, in which case, more than one model may be granted to a PCM … “ or participating car maker.

Lopez said the priority is to find a third player before moving forward to the next phase of the Program, which opens the applications for car parts makers.

Toyota has committed a P3.22-billion investment starting 2016 to produce 230,000 Vios units in 2018 to 2023, while Mitsubishi has set aside P4.3 billion for production and P2 billion for a stamping facility will produce more than 30,000 units per year from 2017 to 2022.

Car parts
Philippine Parts Makers Association President Ferdinand Raquelsantos told The Manila Times that there are seven joint ventures (JVs) between foreign and local car parts makers that intend to join the CARS Program. At start of the year, he forecasted 36 JVs to be created for the program.

Of the seven, four JVs are already “starting the development of car parts” and three are still working on the agreements.

“These JVs are mostly committed to press parts such as body shells and other big car components. These [agreements]are mostly between foreign firms and bigger local companies that manufacture big shells,” Raquelsantos said.

The parts makers are now in talks with Toyota and Mitsubishi to take in the products and services of smaller car parts makers.

“Unfortunately, what I see is that the big parts are the priority—the big shells. That’s the big chunk of the localization. What we’re trying to promote to car assemblers is to engage the smaller car parts makers since the program is aimed to benefit local automotive manufacturing at large,” Raquelsantos said.

To qualify for the CARS Program, the parts manufacturers must have an agreement with carmakers under the program as the carmakers will endorse to the BOI the local parts makers.

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