It took more than three years of consultations with the auto industry and its stakeholders before the Department of Trade and Industry (DTI) finally had Malacanang approve Executive Order (EO) 182 or the Comprehensive Automotive Resurgence Strategy (CARS) Program on May 29, 2015. That is just about the same amount of time needed to develop a new car model.
Ferdinand Raquelsantos, president of the Philippine Parts Maker Association (formerly the Motor Vehicle Parts Manufacturers Association of the Philippines), said the CARS Program was a consolidation of the various long-term industry roadmaps that the DTI requested from the car assemblers, truck manufacturers, automotive importers, electric vehicle manufacturers and auto parts makers as far as three years ago.
“PPMA alone began working on its parts maker industry roadmap as far back as February 2012, which later on was merged with the Car Assemblers Roadmap. Thus we know for a fact that based on various drafts of the consolidated auto industry roadmap, DTI has been slowly but surely putting together since 2014 the contents of this EO 182 and its implementing rules and regulations [IRR]. The IRR was not something that they just came up with within six months after receipt of a copy of EO 182. A lot of time, effort and preparation were put into this beforehand,” he added.
Raquelsantos surmised that since the auto industry had a long head start, so naturally it was the first to get the incentives available. “Not only did the parts makers and DTI prepare long and hard for CARS but most especially the car assemblers themselves. It was no secret in the auto industry that since 2014, Toyota and Mitsubishi have been preparing car models and plant capacities through strategic investments in preparation for CARS. It was therefore not a surprise that they were ready to apply as two of the three Participating Car Makers when the time came.”
EO 182 or the CARS Program provides financial incentives of up to P27 billion for three Participating Car Makers to enroll three different car models for local assembly. This translates into P9 billion per car model. However, production must reach 200,000 units for each model over its six-year product life. This will mean an additional 600,000 units locally produced over six years or 100,000 units a year additional. This will more than double the current volume of cars to be locally assembled.
“But EO 182 does not benefit car assemblers alone,” said Raquelsantos. “It also mandates local manufacture of body shells and large plastic parts, common parts and strategic parts and investments in shared testing facilities for autos and parts. In effect, local parts makers like us benefit from it too.”
“For so long, the Philippine auto industry has lagged behind our Asean [Association of Southeast Asian Nations] neighbors due to inferior incentives. The CARS Program bridges the gap somehow and levels the playing field somewhat. But not enough though. We used to spend about $1,800 more per unit to produce the same car model compared to them. With about $1,000 in incentives from CARS, this is down to a manageable $800 per unit,” he added.
He revealed that with the doubling in the volume of cars to be locally assembled, this will also provide more business opportunities in both upstream and downstream industries. “We estimate new job opportunities of about 60 percent of the existing 70,000 employees in the entire auto industry.”
“On top of these, we also expect new local and foreign investments to flow in as a result of either joint ventures [JVs] or technical licensing agreements [TLAs] with local companies to satisfy the requirements of the Program. We project some 36 new JV and TLA under the CARS Program within the next two years. In fact, as early as now, one Japanese metal stamping company has confirmed a TLA with a local metal press shop to invest in tool and die in producing locally some big metal car body components,” he added.
Raquelsantos added that although the Philippines does not export vehicles in completely built-up (CBU) form, it is one of the biggest exporters of auto parts. “Thanks to the previous Motor Vehicle Development Program, the Philippines exported a lot of wiring harnesses and became the regional hub for transmission and gears manufacturing for cars for Mitsubishi, Isuzu, Honda and Toyota. For the last several years, we have been exporting various auto parts to the tune of $3.8 Billion annually in 2013 and $4.3 Billion in 2014. We are confident that we will do even better with the CARS Program in place.”