EVERY LITTLE PART MATTERS

PPMA’s Edmund Araga talks about the impact of CARS Program on the local car industry

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Araga20160209The parts-making plant at KEA Industrial Corporation’s compound in Bacoor, Cavite resounds with mechanical clatter. Amid the constant whirring of machines, huge presses pound violently onto metal, the blows piercing the air and shaking the earth, to create the components that eventually go into some of the cars we buy.

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In an air-conditioned back office high above the noise, Philippine Parts Makers Association (PPMA) Vice President for Technical Edmund Araga – who is also the vice-president for manufacturing, corporate secretary and pollution control officer for KEA – told Fast Times how parts-production plants like his form the huge network of the association.

“It is an association of locally-produced parts makers who supply their items to the car assemblers, such as Toyota, Mitsubishi, Honda and Isuzu.” he said. “As you know, there are a wide array of car parts and components, such as plastics, metal stamps, rubbers, tires and the like. The PPMA brings these parts makers together and ensures good coordination with the carmakers.”

A graduate of commerce and marketing from San Beda College, along with completing numerous short courses on management and productivity abroad, Araga’s role in the PPMA is to coordinate with car assemblers and associates in the industry to further enhance the parts makers’ capabilities and production capacity. Although parts makers in the country aren’t as well-known as the companies that turn these parts into cars, they play an important role in nation-building.

An innovative industry
“For one, we create jobs for people,” he said. “We are sources of innovations. As we all know, even in other countries, if there is a car manufacturer, there are a lot of innovations being offered to the market. Also, we help maintain a high gross domestic product in terms of contributing to these locally manufactured cars,” he said.

Prior to free-trade agreements with other countries, Araga said nearly three-fourths of a car assembled in places like Santa Rosa, Laguna would have been Filipino-made, but now, he said that number is down to around 30 to 40 percent. The Comprehensive Automotive Resurgence Strategy (CARS) Program, which President Benigno Aquino 3rd approved by executive order in June 2015, aims to bring that number up to 90 percent.

“It’s like getting the mood of every manufacturer to support this program and produce their cars in the Philippines,” he said. “And considering the local supply chain this would develop, it is a big opportunity in our industry as it will enhance our productivity and allow our economy to compete with other Asean countries through a higher gross domestic product,” Araga added. Asean is the Association of Southeast Asian Nations.

Up to 200,000 new jobs
The CARS Program incentivizes car makers to ramp up their production in the Philippines. The three approved companies would be given around P9 billion each in incentives to produce a minimum of 200,000 units of a specific model over six years, equating to about 33,000 units a year. The program also gives incentives to parts makers, with the PPMA playing a vital role since Section 8 of the order allows only members of the association with good standing to qualify under the program.

According to the Department of Trade and Industry, the program is expected to create 200,000 direct and indirect jobs, boost vehicle-production levels in the Philippines to 100,000 units a year, attract about P27 billion in new investments in vehicle parts and components, and contribute up to 1.7 percent of the country’s gross domestic product.

“It’s a long route for us, though,” Araga said. “Thailand used to be in the agriculture industry only. But now, they are considered as the ‘Detroit of Asia’ since more models are being produced there.”

Besides helping the production side of the economy, Araga said the program would likely result into more car sales since qualified vehicles would be more competitively priced.

“It would be more affordable since the carmakers would be looking at a bigger volume,” he said. “They would enjoy tax perks under the CARS Program, along with an improved supply chain in terms of accessing the parts since they are here already. In addition, the development of every parts maker would foster continuous improvement.”

A purely Pinoy car brand
Araga said if there are further investments after the CARS Program, the Philippines could be well on its way to having a 100-percent Filipino car company, outside of the jeepneys produced by Sarao and Francisco Motors, along with the country’s growing electric vehicle or EV industry (which Araga talked about more in the sidebar below).

“It started with the jeepney,” he said. “We can come up with our own car, with our own brand, if we are being fully supported by the government and by private companies who would shell out the money for it. For instance, how did South Korea make Hyundai and Kia world-known brands? It concentrated on the local first before they entered the world market.”

Araga also said tapping into socio-cultural mindsets, such as colonial mentality, would greatly benefit the Philippine car industry. “If only people would know how to appreciate what is locally produced – that’s the start.”

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