Auto industry in RP is still OK but teetering - CAMPI

By IRA V. PANGANIBAN

Posted at Feb 15 2009 10:50 PM | Updated as of Feb 16 2009 06:51 AM

Chamber of Automotive Manufacturers of the Philippines Inc. or CAMPI announced that the situation of the automobile industry in the country is still in good shape but is on the brink of being affected by the global economic collapse.

CAMPI President Elizabeth Lee said they are asking government help through lower excise taxes, permanent investment incentives and acquiring locally assembled vehicles.

In an interview, Lee said the CKD or completely knocked down business component of the auto industry needs to be strengthened since this is where the biggest bulk of jobs in the industry are in.

About half a million families are supported by the auto industry according to Lee as they employ a total of 74,00 workers, industry wide. CAMPI has met with the Board of Investments last month and talked of ways to help cushion the industry from the effects of the global economic slowdown. One of the results of the talks was a proposal to lower the excise tax imposed by the government on them.

A two-percent excise tax is placed on 600,000 units, 12 percent up to 1.2 million units and 20 percent on everything over. Lee says this “is pretty hefty. We are asking if it can be shaved.”

However, because the government is getting its money for the economic stimulus fund from taxes, Lee said they have also proposed other measures. She said they have asked the BOI to permanently include the industry in the government’s Investments Priorities Plan (IPP).

The IPP, which is changed annually, lists industries that can qualify for tax breaks. No industry is permanently included in the IPP. For this year, Lee said they are hoping that they will remain in the IPP to encourage capital infusion.

Likewise, Lee said the government must prioritize buying locally-assembled vehicles for their re-fleeting program. “This is similar to President Arroyo’s buy Pinoy, buy local program, which encourages local government units to prioritize locally made products over imported ones,” she said.

Aside from this, Lee appealed to the Bangko Sentral ng Pilpinas (BSP) to amend its rule that requires 20-percent down payment for vehicle purchases. Lee explained that whenever car companies offer a zero downpayment scheme, the firm must shoulder the initial cash outlay.

“Reducing the required down payment will help us. At the same time, maybe they (BSP) can also lower the interest rates,” she added.

‘Worst is flat growth’
Despite the call for help from the government, Lee stressed that auto industry is not in a crisis. She said the worst-case scenario for the industry is a flat growth. Initial industry projection was at two- to four-percent growth for this year.

But despite these pronouncements, local manufacturers are starting to feel the pinch of the economic crunch with a slight drop in their sales the month of January. CAMPI records show the industry sold only 8,791 units last month, 0.19 percent lower than the 8,808 units sold in January 2008.
A month-on-month data shows that the January 2009 car sales dropped by 11.06 percent against 9,885 units sold in December 2008. Lee rationalized the performance by stressing that January is traditionally a slow month for car sales as consumers cut down on their expenditures after a usually massive spending during Christmas.

However, considering the rate at which the car industry contracted last month, Lee said the Philippine market is still in good footing. “First month performance is still relatively better compared to other markets where January 2009 sales tumbled 37 percent year on year in the US as China, for the first time in history, now takes the lead, overtaking what used to be the largest car market in the world,” Lee said.

Sales of passenger cars went up by 14.2 percent in January as compared to last year. They were led by Honda Cars Philippines Inc., selling 1,278 units, followed by erstwhile local leader Toyota Motor Philippines Corp. with 1,273 units.

Commercial vehicles, however, continue to dominate overall sales with 5,407 units sold in January. “Sales are expected to be sustained in the coming months although an increase in prices may be seen should the year continue to remain strong against the US dollar,” Lee said.

Toyota led the segment with sales reaching 1,930 units, followed by Mitsubishi Motors Philippines Corp., which sold 1,390 units. “Commercial vehicle sales are expected to pick up in the coming months as fleet sales are realized and stocks normalize. Demand for dual purpose vehicles such as vans and pickups will continue and sales of AUVs (Asian Utility Vehicles) will stabilize as well,” Lee proclaimed.