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December 27, 2015

Auto Parts Makers Laud IRR for CARS Program

In a press statement, the Philippine Part Maker Association lauded the issuance last December 19, 2015 by the Board of Investments of the Implementing Rules and Regulations for Executive Order 182 or the Comprehensive Automotive Resurgence Strategy (CARS) Program. This is the new version of what used to be the old Motor Vehicle Development Program.

PPMA President Ferdinand Raquelsantos said this was very much awaited by the entire auto industry as it provides for fiscal and non-fiscal incentives aimed at encouraging the local assembly of automotive vehicles. “Now, we expect the car assemblers to go full blast with their expansion and product developments plans that they have temporarily shelved while waiting for this IRR. We expect investments in the auto industry, both foreign and local, to now go full steam ahead”.

Raquelsantos said that the CARS Program was crafted and refined over the last three years and involves numerous consultations by the BOI with the various stakeholders of the domestic auto industry, the auto parts makers included. Under the CARS Program, two prospective local car assemblers may apply for fiscal support not exceeding P 27 Billion by locally assembling three vehicle models or P 9 Billion per model with a commitment to produce 200,000 units for each model during its six-year model life.

He said that this is the lifeline that the struggling local auto parts making industry has long been waiting for. “Since this will mean an increase in local auto assembly and production of an average of 100,000 units per year or more than double last year’s local production of 88,000 units, this will result in the same increase in the demand and local manufacture of auto parts. This bodes well for us, the local auto parts makers”.

“Add to this the opportunity for local auto parts makers to forge joint venture partnerships or technical licensing agreements with foreign Original Equipment suppliers to localize the manufacture and assembly of vehicle components and parts. This will result in both an inflow of foreign investments and ultimately, a transfer of technology that will benefit the local parts making industry”, Raquelsantos says.

He adds that EO 182 and its IRR even specify that the body shell assembly, large plastic assemblies, common parts and strategic parts will now be the local activities in the program. “So, even though most of the big body shell parts will be done by the car assemblers, it is the desire of local parts makers to get some of the small sheet metal components like brackets, stiffeners, latches and the like for them to press, stamp and fabricate, while at the same time providing the tools, dies, molds and fixtures required”.

Raquelsantos says that PPMA is elated that the CARS Program also provides support for shared testing services and facilities which local parts makers badly needed.  “For so long, this has been a missing link. Now, local parts makers can complete their product design and development with the tests required that can now be done locally. Noteworthy is the initiative made by the Department of Science & Technology and the Metal Industry Research & Development Commission in providing their new sets of testing tools and equipment to complete the much-needed testing validation that local parts makers used to farm-out to other ASEAN countries. Needless to say, this will mean savings and faster product development time for us”.

He concludes by pointing out that as the Philippines enters this year at the threshold of what is perceived to be the third wave of ASEAN Motorization, we are in a very good position to capture and use this wave to surf our way to an unprecedented auto industry growth. “It has been validated that motorization or an increased demand for automotive products usually starts at a GDP per capita level of US$2,500. We are now at almost the US$3,000 level so the growth of the domestic auto industry is imminent. This can happen with the support of government. We just need to play our cards right”.

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