New rules seen spurring auto industry expansion

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AUTO assemblers are ready to go full blast with their expansion and product developments plans this year following the approval by the Board of Investments (BOI) of the much awaited Implementing Rules and Regulations (IRR) for the Comprehensive Automotive Resurgence Strategy (CARS) Program.

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The CARS Program, or Executive Order 182, is the new version of what used to be the old Motor Vehicle Development Program.

Ferdinand Raquelsantos, president of the Philippine Part Maker Association (PPMA), said the approval of the IRR had been very much awaited by the entire auto industry because the IRR provides for fiscal and non-fiscal incentives aimed at encouraging the local assembly of vehicles.

“Now, we expect the car assemblers to go full blast with their expansion and product developments plans that they had temporarily shelved while waiting for this IRR,” Raquelsantos said in a statement.

He said PPMA expects investments in the auto industry, both foreign and local, to now be unlocked with the IRR already in place.

Raquelsantos said that the CARS Program was crafted and refined over the last three years, involving numerous consultations between the BOI and the various stakeholders of the domestic auto industry, including auto parts makers.

Under the CARS Program, two prospective local car assemblers may apply for fiscal support not exceeding P27 billion by locally assembling three vehicle models, or P9 billion per model, with a commitment to produce 200,000 units for each model during its six-year model life.

This is the lifeline that the struggling local auto parts making industry has long been waiting for, Raquelsantos said.

“Since this will mean an increase in local auto assembly and production of an average of 100,000 units per year, or more than double last year’s local production of 88,000 units, this will result in the same increase in the demand and local manufacture of auto parts. This bodes well for us, the local auto parts makers,” said Raquelsantos.

The IRR will also give opportunity for local auto parts makers to forge joint venture partnerships or technical licensing agreements with foreign original equipment suppliers to localize the manufacture and assembly of vehicle components and parts.

“This will result in both an inflow of foreign investments and ultimately, a transfer of technology that will benefit the local parts making industry,” Raquelsantos said.

EO 182 and its IRR, he added, even specify that the body shell assembly, large plastic assemblies, common parts and strategic parts will now be the local activities in the program.

“So, even though most of the big body shell parts will be done by the car assemblers, it is the desire of local parts makers to get some of the small sheet metal components like brackets, stiffeners, latches and the like for them to press, stamp and fabricate, while at the same time providing the tools, dies, molds and fixtures required,” said Raquelsantos.

Raquelsantos said PPMA is elated that the CARS Program also provides support for shared testing services and facilities which local parts makers badly needed.

“For so long, this has been a missing link. Now, local parts makers can complete their product design and development with the tests required that can now be done locally.

He pointed out that as the Philippines enters this year at the threshold of what is perceived to be the third wave of Asean motorization, “we are in a very good position to capture and use this wave to surf our way to an unprecedented auto industry growth.”

“It has been validated that motorization or an increased demand for automotive products usually starts at a GDP per capita level of $2,500. We are now at almost the $3,000 level, so the growth of the domestic auto industry is imminent. This can happen with the support of government. We just need to play our cards right,” he said.

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