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Auto parts makers see 15% growth equal with assemblers

Automotive parts manufacturers are expected to ramp up their output by 15 percent per year with a similar increase in the production of completely knocked down (CKD) vehicles in the country.

Ferdi Raquelsantos, president of the Motor Vehicle Parts Manufacturers Association of the Philippines (MVPMAP), yesterday said the 2013 proposed automotive parts roadmap shows that with the coming motorization of the country and the integration of ASEAN economies, local CKD auto production will grow about 15 percent annually, driving an equivalent increase in local auto parts production.
Raquelantos said local CKD production in the last few years has been badly battered by the increasing importation of brand-new completely built-up (CBU) vehicles and the growing importation of used vehicles by the so-called informal sector. 
Raquelsantos cited one pressing matter that the auto and parts manufacturing industries and the government will have to address. 
“Our cost of locally assembling a vehicle is now about $1,800 or 14 percent 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,” said Raquelsantos.
Citing records, Raquelsantos said last year alone, of the new vehicles registered with the Land Transportation Office, 44 percent were CBU, 26 percent from the informal sector and only 30 percent from local CKD production. 
While CBU output grew from 94,000 units in 2010 to 98,000 in 2011 and the informal sector increased from 52,000 units to 57,000, 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,” said Raquelsantos.
He said that in terms of production in 2011, the Philippines lagged its ASEAN neighbors. 
The Philippines produced only about 65,000 units compared with regional leader Thailand’s 1.56 million units, Indonesia’s 838,000 units and Malaysia’s 534,000 units. 
Even Vietnam has surpassed the Philippines with 100,000 units. 
Raquesantos said that, if approved, the proposed “parallel” automotive assembly industry roadmap presented last month to the Department of Trade and Industry would change the landscape of the CKD production..
“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. Government cannot allow the automotive industry to run on its own steam alone,” said Raquelsantos.
He said the auto manufacturing industry belongs to the industrial sector, which accounts for 31.5 percent of the total gross domestic product.  The industry supports some 70,000 employees: 30,000 in vehicle assembly including downstream and upstream industries and 40,000 in parts manufacturing.
Other issues raised by the MVPMAP that should be incorporated in the roadmap are: product testing facilities, joint ventures and transfers of technology with foreign principals, technology and management upgrading with corresponding funding, development of product technology, common development facilities, an Automotive Excellence Center, adoption of a national standards and acquisition of international quality standards like ISO and TS, among others. 
“If these will all come to fruition, our long-suffering auto and parts manufacturing industries will soon come back to life, be regionally competitive and local and foreign investors will come in. All these give us enough reason to be optimistic about 2013,” Raquelsantos said.
There are no available statistics on the production volume of the parts industry. But the Philippine automotive parts sector is a net exporter earning for the country $3.8 billion in 2011 that accounted for 7 percent of total exports of the sector that year.
The industry has a comparative advantage in the production of wiring harness, propellers and shafts, transmissions, tires and auto electrical parts.
In the  lamps, mold and die, disc brake side of the business, the Philippines is second to Thailand in tie lamp manufacturing and second to China in die casting and at the bottom in brakes. 
The parts and components manufacturing sector has 256 players.
Collectively, they account for 5 percent of total manufacturing employment and 2.6 percent of value-added output.
The industry employed 50,858 workers as of 2009 with output of P115 billion and P25.5 billion in value-added; 60 percent of the parts manufactured are original equipment manufactures and the rest are replacement.
The parts sector has both large and small, local and foreign players. The large companies, domestic and foreign, are suppliers from Japan which were brought in by assemblers.
SMEs have varying capabilities, marked by real quality problems, and insufficient capital and technology.
More than 50 percent of local firms are domestic-oriented and more than 90 percent of exporters are multinational corporations.
The country is a key player in the automakers’ production networks: such as Toyota for its innovative multipurpose vehicle for the production of manual transmissions; Philippine Auto Components, a subsidiary of Denso, manufacturer of one of the most advanced auto parts for both domestic and export OEMs (aircon parts, instrument clusters, radiators) and Yokohama, which exports 96 percent of its production, and which is expanding its operations from 7 million to 17 million tires by 2017.
The domestic parts industry hopes to increase exports of parts to $6 billion by 2015.
(Source: Malaya Business Insight)

Motor Vehicle Parts Manufacturers Association of the Philippines (MVPMAP)