THERE is a “big industrial automotive phase” that the Philippines can take advantage of, if it wants to prop up its local vehicle manufacturing sector.
According to George Chua, president of the Federation of Philippine Industries (FPI), the major car brands in the United States and Japan have already been “taken” by Thailand, but no country in Asia has wooed Chinese car firms to put up manufacturing hubs outside of the mainland.
“Thailand has gotten a big lead on us. They [car firms]saw Thailand as having a better managed economy and there was government support and incentives,” he said, adding 1.15 million vehicles were sold in the Thai domestic market last year.
“China does not have a manufacturing base outside [of China]. Why China? Because China is also left-hand drive [like the Philippines]. So we must convince them [Chinese car firms] to establish manufacturing facilities here,” said Chua, who is also the president and chief executive officer of Bayan Automotive Industries Corp. that sells the BAIC Chinese car brand in the Philippines.
In 2014, there were 24 million vehicles sold in China, and indigenous Chinese brands like BAIC and BYD, among others, have cashed in on the growing market.
Last year, about 270,000 vehicles were sold in the Philippines. But industry sources said only 70,000 to 100,000 vehicles were assembled in the Philippines, which means a bigger percentage of the vehicles sold were imported as completely built-up units (CBUs).
Chua said the percentage of vehicles actually assembled in the Philippines has been declining in the past years. On the other hand, Thailand exported $1 billion worth of vehicles to the Philippines in 2012, according to a brochure on the Thailand car industry published by the country’s Board of Investments.
The same brochure showed Thailand produced 2.45 million vehicles in 2012.
“Where does the leave us? We have another big industrial automotive phase that has not been tapped. That is China,” he added.
Political will, incentives
Chua, however, said that to attract Chinese car investments, the Philippine government must demonstrate its political will. He said that the traffic mess in the Philippines is one proof of the poor government’s poor political will.
“In the Philippines, we do not have political will. In the streets we see many jeepneys that are karag-karag [dilapidated]. The jeepney was cute in the 1950s but it’s now 2015,” he added.
Chua believes that even if China and the Philippines are at odds over territorial claims in the West Philippine Sea (South China Sea), it can still do business together.
“Even the US and China do a lot of business. Why can’t we be like them?” he added.
The FPI president emphasized that car manufacturing or assembly is a “superior multiplier” or can create numerous upstream and downstream industries.
He cited the case of Thailand which has more than 1,700 firms supplying manufacturers and assemblers.
“Thailand has approximately 709 Tier 1 auto parts suppliers and 1,700 Tier 2 and 3 suppliers. More than half of the Tier 1 suppliers are car part companies. Of the top 100 auto parts manufacturers in the world, 50 percent have factories in Thailand; the country’s manufacturing base is strong enough to supply all of the necessary parts, from engine parts to interior and body parts,” a brochure on the Thai automotive industry said.
Thailand is also generous in extending incentives to automotive firms. Based on the website of the Trade department of Thailand, its government extends the following incentives to car manufacturers and parts suppliers: a five-year 50-percent reduction of corporate income tax on net profit following the expiration of the corporate income tax holiday; 10-year double deduction of transportation, electricity and water supply costs; and deduction from net profit of 25-percent of investment in infrastructure installation and construction costs.