The proposed new automotive roadmap should consider continuity of programs, inclusion of the parts manufacturing sector as an integral component and a strong government support scheme based on targets and performance.

This was contained in the automotive study labeled “Shared Growth Study Milestone: May 2009 Note of the Shared Growth Roadmap“ by Dr. Max Maquito of the University of Tokyo in coordination with the University of Asia and the Pacific.

Maquito said the academe-backed proposed automotive roadmap would take into account the lessons learned in the previous automotive programs of the government.

“The past programs have one-shot entry requirements. Once they are in that’s it, there are no clear targets,” Maquito told reporters after a presentation of his study to the automotive industry players.

He noted in particular the Asian Utility Vehicle (AUV) program, which was not sustained. He said that the Tamaraw FX, a high volume but low value vehicle was replaced leaving the low-income group with no option as manufacturers move up into the production of sleeker and more expensive AUV models that could not really replace the niche market for Tamaraw FX.

On the other hand, Indonesia has maintained its Tamaraw FX counterpart model – Kijang.

“Perhaps, we did not produce the right vehicles for this market. The answer for cheap imports is to produce cheap counterpart products,” he said. On parts manufacturing, Maquito said the past automotive programs are assembler-centric. “There was not much thought of the parts suppliers,”
Maquito noted.

In terms of government support, the Maquito study has specified for a tax relief program that would grant participants import duty credit based on the value of production of motor vehicles, engines and engine components and the value of new investments in plant and equipment and research and development.

The excise form of the tax relief has yet to be worked out but Maquito said it should be based on performance and targets. He said the industry’s incentive scheme in the current Motor Vehicle Development Program is not based on targets and performance.

The Maquito study also emphasized against the grant of import duty credits on completely built-up vehicles either high-end or low-end CBUs.

The study stressed that granting import duty credits to high-end CBU imports effectively subsidize high-end buyers, which goes against the principle of shared growth while granting import credits to low-end CBU imports effectively subsidize products that directly compete with the domestic auto manufacturing industry before it is ready to take on foreign competition.

Maquito also proposed for a tripartite (government, industry and civil society organizations) monitoring of the automotive programs under the planned roadmap, but warned against constant program revisions stressing it is difficult to monitor something that keeps on changing.

Maquito also emphasized for a strong support by all industry players and the government in the planned development of a roadmap noting that the Chamber of Automotive Manufacturers of the Philippines Inc. and the Philippine Automotive Competitiveness Council Inc. do not see eye to eye.

In his “Shared Growth Study”, Maquito offers some proposals picking up from Japan’s phenomenal automotive industry and why Thailand’s automotive industry has outgrown other ASEAN countries’ automotive developments.

Maquito, however, noted a JETRO survey which showed that Japanese businessmen do not really find much difference between the Philippines and Thailand as an investment destination but why is it that more investments are going to Thailand than the Philippines.

“Based on the JETRO study, I think we have a strong case to build on,” he said.

The Maquito study was funded by the Toyota Motor Philippines Corp. It is aimed at facilitating the local automotive industry players help craft a new industry roadmap in light of a liberalized trading regime in ASEAN.

As tariffs on products traded in the ASEAN region go down to zero starting January next year, the local automotive industry is at a crossroads on what their next move will be whether they have to keep their completely knocked down operation here or just import CBU packs from one ASEAN production.

The Maquito study is expected to be considered once the Board of Investments come up with a new motor vehicle development program before end this year.