After implementing the country’s Motor Vehicle Development Program (MVDP) under Executive Order 156 for the past five years, the Board of Investments has declared the automotive industry’s comprehensive program a failure.

This was the conclusion of the BoI review of the MVDP, which was implemented on December 12, 2002 under EO 156, and is now made as basis for the crafting of a new program that seeks to overhaul the current unresponsive program.

The BoI findings on MVDP as well as the policy framework it crafted for the proposed new MVDP were presented during the first workshop conducted by the industry last Friday.

According to the BOI findings, the current MVDP was “unable to achieve the desired growth of the completely knocked down assembly operations” as evidenced by the industry’s failure to regain the industry’s all time-high record sales of 162,097 units in 1996. Last year’s industry sales reached 124,449 units only.

The BOI also noted the highly underutilized plant capacity of the four-wheeled CKD assembly plants, which utilization rate is estimated at only 20 to 30 percent.

The other components of EO 156 - Used vehicle imports, Excise Tax, MFN restructuring and Asean Industrial Complement (AICO) scheme - also miserably failed or have limited success only in addressing problems that have hampered the industry’s growth.

For instance, the BoI paper said that the used vehicle imports component was not effective in cracking down used car imports because of the temporary restraining orders issued by the court against EO 156.

Since the issuance of EO 156 in 2002, its implementation was met with strong opposition from traders until the court ruled with finality in 2007 upholding the validity of the order.

The court ruling has not also completely eliminated the entry of used vehicles.

On the excise tax component, the BoI said the value-based excise tax on vehicles has “eroded the cost competitiveness of the Asian Utility Vehicles.”

Prior to the current MVDP, the AUVs, deemed as the country’s competitive edge, were not subject to excise tax, which was then based on engine displacement.

When the new excise tax shifted to value-based in 2003 with the intention of generating more revenues from the luxury car segment, the AUVs lost its privilege.

As a result, the AUV segment has lost its competitiveness in terms of pricing. With the imposition of excise tax on this segment, AUVs have become expensive. AUVs are supposed to be distinguished from the rest of the segments by its sheer pricing.

At present, there is no distinction anymore as to what really is an AUV. Some models that claimed to be AUVs are actually compact sports utility vehicles.

There was also no distinction between CKDs and completely built-up under the value-based excise taxation system. The shift even favored the CBUs, BoI said.