Toyota Japan says PH safeguard duty won't lead to more local production

Toyota Motor Corporation (TMC) Japan, which local subsidiary Toyota Motor Philippines (TMP) imports 39 completely built up (CBU) models, said the Philippines’ imposition of safeguard measures on imported CBU passenger cars and light commercial vehicles (LCVs) will not lead to increased investments in auto assembly and localization of CBU models in the country.

This formed part of the comments by TMC in response to the exporter’s questionnaire of the Department of Trade Industry to its in its preliminary investigation for purposes of the implementation of the safeguard measure.

 On Monday (Jan. 4, 2020), Trade and Industry Secretary Ramon M. Lopez issued an order slapping provisional safeguard duty of P70,000 per unit of imported passenger cars and P110,000 per unit of imported LCVs that is expected to take effect on January 25 and will be implemented over a period of 200 days. During that period, the Tariff Commission will conduct its final determination. If the TC determination is positive, meaning the surge in CBU importation has caused serious injury to the domestic industry, it will recommend to the DTI Secretary a definitive safeguard measure that could last for years.   

 “The imposition of safeguard measures will not lead to increased CKD (completely knocked down) production or localization of CBU models,” the TMC stated.

This is because, TMC said, automotive is a highly-regionalized sector, having benefited from the early initiatives in ASEAN. Carmakers, such as Toyota developed their respective supply chains considering the specialization and efficiencies of each production base.  

At present, its local subsidiary TMP, one of two participants in the government’s incentive-driven Comprehensive Automotive Resurgence Strategy (CARS) Program, has invested P5.2 billion for the local production of passenger car Vios. TMP also assembles Innova in the country since 2016. As the country’s largest car company with a market share of more than 40 percent, TMP also  imports 39 various CBU models from Japan, Thailand, and Indonesia.

In addition, TMC said there is no guarantee that customers will shift to CKD production as a result of the increase in the cost of imported CBU vehicles. “Reduced consumer choice will only depress the demand for new vehicles,” it said.

It did not directly say that the Philippines’ move could result in job losses, but TMC said that the measure will dampen demand and overall sales that may affect not only future dealer expansion but pose challenges on labor productivity, as well.

The safeguard measure, which stemmed from the petition of the Philippine Metalworkers Association, was also meant to create more jobs and protect auto workers from declining jobs in the sector. The DTI said its preliminary investigation showed of declining auto workers from close to 100,000 to 86,000 jobs now because of the influx of CBU importation. The other goal of the measure is to support the government’s effort to revive local auto manufacturing.

Rather than adopting restrictive trade measures, TMC recommended that Philippines adopt a progressive approach to improve competitiveness to support long-term, sustainable manufacturing operations.

It urged the DTI to consider the automotive sector holistically across the whole value chain from upstream network that includes parts suppliers and auto-supporting industries to vehicle manufacturers to the downstream network that includes auto dealerships and service centers, insurance and financing companies.

 “The potential impact to the downstream network, which accounts for the majority of total industry employment should not be overestimated,” it warned.