Local auto parts makers expect an additional 20 percent increase in their plants’ capacity utilization from the current 40 percent once the new Motor Vehicle Development Program under Executive Order 877-A is fully implemented.

Local auto parts makers comprising the Motor Vehicle Parts Manufacturers Association of the Philippines (MVPMAP) said the EO signed by then President Gloria Arroyo weeks before her term ended will provide incentives for parts and auto manufacturers to give them a boost and expand beyond the current industry’s 40% operation vis-à-vis rated plant capacity.

MVPMAP spokesperson Rommel Juan said they are targeting an additional 20 percent increase in capacity utilization of their plant’s rated capacity to 60 percent from the current 40 percent.

Juan said that auto parts plants are expected to improve their utilization capacity once the automotive assemblers improved their performance.

On EO 877-A being a midnight EO, MVPMAP President Raffy Villarreal said that EO 877-A was just an update of the circa 2002 EO 156.

“EO 877-A is therefore just part of an evolving program and merely brings up-to-date and makes relevant the MVDP with the current times, this era of free trade. We now operate in a borderless economy and we have to face some business realities, painful though it may be. This EO was intended to help level the playing field in the Asian region. This was the result of various industry consultations conducted by the Board of Investments during the last few years with all the stakeholders, even going down to the formation of various technical working groups to help craft and recommend specific portions of the EO,” Villareal said.

The EO hopes to address the global competitiveness or non-competitiveness of the Philippine parts and auto manufacturing industry that is currently uncompetitive against the likes of its Asian neighbors Thailand, Indonesia , Malaysia and even Vietnam, the statement added.

“The Philippines is at the bottom of the list, a poor fifth in the Big 5. Sadly enough, we have been left behind and will continue to be so unless we confront the issues and resolve them,” Villareal said.

MVPMAP sees EO 877-A as a ray of hope for the over 65,000 employees of upstream and downstream companies dependent on the local auto industry. It hopes to address the issues that make the Philippines uncompetitive, which MVPMAP has outlined as follows:

1. Shut down all entry points for used cars as this eats up the local market and reduces its universe for locally-assembled cars

2. Provide incentives for parts and auto manufacturers to give them a boost and expand beyond the current industry’s 40% operation vis-à-vis rated plant capacity

3. Assist local auto parts makers with an industry fund to allow them to buy tools, upgrade equipment, go into R&D, improve product quality and help them break into the export market.

4. Create a Motor Vehicle Industry Council to look after the Philippine auto industry and propel it to growth with enabling regulations.

Villarreal said that MVPMAP has long been open about its support for EO 877-A as it provides a lot of support for local auto parts makers to redeem lost grounds.

“For the last 12 years, our membership has been reduced from 250 to the current 125 member-companies. Most of our members have to close shop and those that survive are now operating at only about 40% of rated plant capacities. Local parts makers have long been reeling from the inability of the local auto industry to register any substantial sales growth, coupled with the increase in the importation and sale of vehicles in completely built-up (CBU) form, which have no value-added local parts and labor in them. Needless to say, we have worked long and hard, not just overnight, for the passage of EO 877-A,” Villareal said.