Philippines auto parts production grows 15% annually

MVPMAP President Ferdi Raquelsantos said the projected growth in local assembly completely knocked down (CKD) units is reason enough for the local parts producers to be optimistic about 2013 because this would mean corresponding equivalent increase in parts production.

"It shows that with the coming motorization and ASEAN integration, local auto production from completely knocked-down (CKD) kits will increase by about 15% annually, thus provides an equivalent increase in local auto parts production," said Raquelsantos.

He, however, did not specify clearly the base figure but statistics showed that total motor vehicle industry in 2012 registered total sales of at least 185,000 units of which 156,649 units came from the members of the Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI), a 16-member organization composed of assemblers and traders, and 28,400 units from the Association of Vehicle Importers and Distributors Inc. (AVID), a 6-member all car traders' group.

The share of imported completely built up (CBU) packs was expected to account for over 50 percent of total market while the CKD units have fallen below 50 percent, a reversal from what it used several years ago.

Raquelsantos cited that for the last few years, the country's local CKD productions were badly battered from two fronts: the increasing importation of brand-new CBU vehicles and the increasing importation of used vehicles by the so-called informal sector.

According to Raquelsantos, of the new vehicles registered with the Land Transportation Office in 2011 the bulk of 44% were for CBU, an astounding 26% from the informal sector and only 30% from local CKD production. In all the 70% of the total new vehicles, there is no local value added in terms of local parts and labor.

Furthermore, while CBU grew from 94,000 in 2010 to 98,000 units in 2011 and the informal sector increased from 52,000 to 57,000 units, local CKD production dropped from 74,000 to 67,000 units. This has proven detrimental to both our local auto assembly and parts manufacturing industries," he said.

In terms of production against Asean neighbors, Raquelsantos said, "We locally produced only about 65,000 units. This pales in comparison with regional leader Thailand's 1.56 million units, Indonesia's 838,000 units and Malaysia's 534,000 units. Even the new kid on the block Vietnam has surpassed us with 100,000 units."

He, however, expressed hope that once the proposed "parallel" auto assembly industry roadmap that was presented last month to the Department of Trade & Industry is approved and implemented there would be improvements in local CKD and local parts production.

"The government cannot allow the auto industry to run on its own steam alone," he pointed out stressing that the auto manufacturing industry belongs to the Industrial sector which accounts for 31.5% of the total Gross Domestic Product (GDP). It supports some 70,000 employees: 30,000 in vehicle assembly including downstream and upstream industries and 40,000 in parts manufacturing.

The auto industry roadmap seeks to address the high cost of producing motor vehicles in the country through some government interventions.

"Our cost of locally assembling a vehicle is now about $1,800 or 14% higher than our Asean counterparts. To be competitive, we have to bring this down. This is where we immediately need government support in terms of viable incentives," he said.

"We are very optimistic though that all these concerns will be addressed and the proposed roadmap is approved, legislated and implemented in the soonest possible time. Because other than these, there are other things that are needed as proposed in the roadmap such as product testing facilities, joint ventures and transfers of technology with foreign principals, technology and management upgrading with corresponding funding, development of product technology, commoNike Air Jordan 1 Retro