By Catherine N. Pillas
Malacañang has approved the much-awaited Comprehensive Automotive Resurgence Strategy (CARS) Program, which will provide the local auto industry a total of $600 million worth of incentives over a six-year span.
The program seeks to ramp up the competitiveness of the local auto industry amid the Asean integration and attract P27 billion worth of vehicle-manufacturing investments into the Philippines.
“The program is designed to build and grow the parts-making capability of the auto industry, for without a robust parts-making industry, our carmaking industry will remain uncompetitive. The CARS Program is about building capabilities and jobs to make our automotive manufacturing industry competitive in the Asean,” Trade Secretary Gregory L. Domingo said in the statement.
The program will stimulate economic activity estimated at P300 billion over the six-year period starting 2016. The resulting contribution to gross domestic product (GDP) is estimated at about 1.7 percent.
The annual dole-out of $100 million, or an average of P4.5 billion yearly from 2016 to 2021, will be used to support three vehicle models. This is also expected to attract more than P27 billion in new parts-manufacturing investments and allow the local production of at least 600,000 vehicles.
The $600 million will be sourced from the national budget. According to Trade Undersecretary and Board of Investments (BOI) Managing Head Adrian S. Cristobal Jr., the amount can still be added in the 2016 national budget as deliberations in Congress for the new budget bill have yet to start.
The CARS Program, an initiative of the Department of Trade and Industry (DTI) through the BOI, calls for the grant of fiscal and nonfiscal incentives to the automotive industry to entice manufacturers to initiate more operations in the country.
Chamber of Automotive Manufacturers of the Philippines Inc. President Rommel Gutierrez, in a previous interview, said the cost gap in producing a vehicle in the Philippines versus producing in other countries, such as Thailand, stands at $1,000 to $1,800, making the country, a less attractive destination for manufacturers.
With a set of time-bound and performance-based incentives in place, the country hopes to attract new investments in the production of parts currently not available in the Philippines, including large car body panels, bumpers, instrument panels, head lamps, shock absorbers, plastic fuel tanks, automotive fabric and others.
The technology “spillover” will help develop basic support industries for manufacturing, such as casting, forging, machining, and tool and die.
The program is part of the BOI’s broader stroke to revive the country’s manufacturing industry.
Nissan Philippines Inc. President Antonio Zara and Isuzu Philippines Marketing Head Joseph Bautista deferred comment on the Malacañang-approved CARS Program until they have seen the document.
Earlier, the DTI said to qualify for incentives, auto firms must meet an annual production goal of 40,000 units of a particular model.
The approval is a timely achievement for the Aquino administration, as it is set to embark on a trade and security mission to Japan today. Domingo and other trade officials are expected to meet with auto brands’ principals during the visit.
Japanese automakers have been waiting for three years for the CARS Program. They have put their investment plans in the Philippines on hold as it was then unclear what kind of government support they will get through the CARS Program.
The Philippines has been a laggard in the Asean in terms of auto production, the Asean Automotive Federation reported. The Philippines’s local production stood at 88,845 motor vehicles in 2014, compared to 1.88 million in Thailand; 1.3 million in Indonesia and 596,418 in Malaysia.
“After thorough study, extensive stakeholder consultations and interagency coordination, the government’s CARS Program will be implemented with the signing of the executive order [EO],” Cristobal said.
The EO operationalizing the CARS Program is expected to be published in newspapers of general circulation in the next few days.