Domestic car manufacturers and traders slammed the decision of the Philippine government to slap a punitive safeguard duty on imported completely built up (CBU) cars and light commercial vehicles (LCVs), citing short and long-term risks to the industrial sector, price hikes, deferment of expansion plans, delayed recovery and further disruption due to potential trade retaliation moves by concerned exporting countries.
The Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI) and the Association of Vehicle Importers Inc. (AVID) have issued separate statements decrying the issuance of the punitive import duty by the Department of Trade and Industry (DTI).
“As if the adverse impact of the pandemic is not enough, the decision to impose provisional safeguard measures against imported vehicles is yet another blow to the automotive industry. This will further derail the recovery efforts of industry players and stakeholders,” said Rommel Gutierrez, president of the Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI) in a strongly worded statement.
AVID President Ma. Fe Perez-Agudo said the move will further dampen the recovery outlook of the industry at a time when all players and stakeholders are appealing for government support.
“The measure will aggravate the already anemic demand and make it harder for Filipinos to afford personal mobility with the projected price hikes. The provisional safeguard measures on imported vehicles is like pulling the rug from under the auto sector that is still struggling to get back on its feet with a 40% drop in sales in 2020,” said Agudo.
But the Philippine Metalworkers Alliance (PMA), which petitioned the DTI to impose the safeguard measure, welcomed the decision. “DTI together with PMA have the same purpose: Protect the workers,” said PMA President Ruel Punzalan.
With the imposition of provisional safeguard duty, CAMPI projected further reduction in sales volume which in turn poses risk of employment downsizing, not to mention government revenue loss. This will also encourage revival of grey market/used vehicles, the group of more than 20 automotive players in the country said.
“With much uncertainty, investments in dealer expansion and parts localization may be deferred,” CAMPI added.
In the short term, CAMPI said the risk will be disruption in regional production and supply. In the medium to long term, this will further slowdown regional economic growth because of chain reaction to other industrial sectors. Furthermore, this could potentially weaken trade and economic relations triggered by retaliation by concerned exporting countries to the Philippines.
CAMPI, which is composed mostly of motor vehicle importers and a few assemblers, said they support the development of local vehicle manufacturing but has consistently opposed to the imposition of safeguard duty against imported CBUs.
AVID, an all-vehicle importers group, said the group has always aimed for the long-term development of the automotive sector, including the advancement of manufacturing as an inclusive means for growth.
“We have clearly and consistently expressed our position that penalizing imports will not trigger investments or create more jobs, much less address issues on the regional competitiveness of our local manufacturing sector. Alternatively, we call for long-term policies that will further improve the ease of doing business which would open opportunities for investments, create jobs for our workers, and provide the Filipino reliable and affordable means of transport,” said Agudo.
Meantime, consumer group Laban Konsyumer Inc. (LKI) proposed that any safeguard measure on imported cars should be billed as a separate item in the purchase price and should be paid by the importers, not by the consumers.
“This should be strictly implemented. In this instance the objective of the safeguard duty is achievable. Otherwise looks Moro-Moro,” said LKI President Atty. Victorio Mario Dimagiba.
“Consumers should be forewarned as such and should complain to authorities when importers shift the burden of the SGM from them to the consumers.”
Dimagiba, however, noted that this particular SGM will not adversely impact the poor because they are not likely to buy cars or LCVs in the near future.
Trade and Industry Secretary Ramon M. Lopez ordered the imposition of the provisional safeguard duties in the form of a cash bond amounting to P70,000/unit for imported passenger cars (AHTN Code 8703) and P110,000/unit imported for light commercial vehicles (AHTN Code 8704.21 and 8704.21.29).
The punitive duty will take effect 15 days from Jan. 5 publication or by the 25th this month. The Bureau of Customs will collect the duties for 200 days while the Tariff Commission will determine if there is merit to the DTI decision and recommend to the DTI Secretary a definitive safeguard duty if their determination is positive.
Lopez explained that safeguards are imposed to protect local manufacturers and producers and to prevent other companies from leaving the country. He recalled the discontinuation of the production of Isuzu D-Max in July 2019 and the assembly plant closure of Honda Motors Philippines in the first quarter of 2020 affected local jobs and the Philippine economy. He expressed hopes that the safeguard measure would attract vehicle manufacturers to operate in the country and create more jobs.
DTI’s findings show that imports of passenger cars have increased by an average of 35% during the period of investigation (POI) from 2014 to 2018 while the share of imports relative to production showed that imports exceeded domestic production from 295% in 2014 to 349% in 2018. Imports of light commercial vehicles which includes pick-up trucks, on the other hand, significantly increased during the POI from 17,273 units in 2014 to 51,969 units in 2018. Likewise, its share of imports relative to domestic production also significantly increased from 645% in 2015 to 1,364% in 2018.
Despite the efforts of the domestic motor vehicle industry to defend its market share and compete with foreign motor vehicle suppliers by increasing its domestic production and sales, Lopez said it was not able to take full advantage of the growth of the domestic market that occurred during the period.
He pointed out that the market share of domestic passenger cars’ sales contracted to a range of 22% to 25% while the share of imports captured more than 70% of the market. The share of the light commercial vehicles shrank from 18% in 2014 to 7% in 2018 while imports accounted for an increasing proportion at about 82% (2014) to 93% (2018) of the Philippine market.
The domestic industry lost sales even as the market grew. Further, data from the Philippine Statistics Authority show that employment in the manufacturing sector of motor vehicles which includes the manufacture of motor vehicles, bodies, parts and accessories decreased by 8% in 2018 compared to the 2017 level of 90,275 employment.