EDITORS DESK
Just last month, we saw the entry of yet another car brand into the Philippine market. To the surprise of many, it’s not another Chinese car brand, but actually one from Vietnam: VinFast. VinFast is building and exporting electric vehicles from its native country to nations like the US, Europe, and Asia.
VinFast is actually a subsidiary of the Vin Group, one of the largest conglomerates in Vietnam with a portfolio of businesses in retail malls, real estate, telecommunications, energy, leisure resorts, and so much more.
Whether their cars will be a sales success has yet to be seen, yet the ambition and task of exporting and selling their vehicles in tough markets like the US and Europe is certainly no small feat.
With the arrival of a global car brand from a neighboring country once seen as at par with the Philippines (if not behind some decades back), it certainly leads some to ask, why can’t we make one? The answer is not as simple as yes or no.
To understand why, it’s important to look at how we’ve treated the brands that have made the investment to manufacture cars in the Philippines.
History of local assembly
Some decades ago, the Philippines was a car manufacturing hub, boasting assembly of such prestigious brands as Ford, Chevrolet, Mercedes-Benz, BMW, Volkswagen, Toyota, Nissan, Mitsubishi, Honda, and Isuzu to name a few. Granted, much of this was for local consumption. Yet clearly, the demand was high enough to justify the investment into local assembly. These assembly operations began to close shop one by one towards the early 2000s, prompting the government to come up with a plan to encourage local assembly once again.
The Comprehensive Automotive Resurgence Strategy (CARS) Program was conceived to offer global car brands incentives for establishing local manufacturing in exchange for meeting certain targets. There were many interested parties, but few showed confidence in meeting the 200,000 units in five years target. Three slots were allotted, but unfortunately, only two were taken up by Toyota and Mitsubishi for their Vios and Mirage models.
Poorly timed tax
Some years after, a vehicle excise tax was proposed by the Department of Finance to help meet the country’s growing budget shortfall. One would think that the local assemblers would be exempted, as their operations are providing thousands of jobs, and the vehicles providing Filipinos with affordable mobility. Nonetheless, the new tax pushed through and even the locally-made vehicles were slapped with an excise tax.
Not surprisingly, the CARS program is already passed the five-year mark but the participants are unable to meet the target. Whether it’s the tax, the pandemic, or changing consumer tastes to blame has yet to be seen. The move to apply an excise tax, however, has certainly not helped.
The CARS program is a vital step toward encouraging assembly, but it’s not going to spur car manufacturing all on its own.
Peripheral industries
Contrary to what many think, cars are not built 100-percent from the ground up in these assembly plants. Rather, they’re put together from many smaller components sourced from other suppliers.
Granted, the vehicle manufacturing industry is the pride of many nations, but if many of the components have to be sourced abroad, can it rightly be called “made in the Philippines?”
Local suppliers — whether they’re supplying powertrain components, upholstery, wiring looms, wheels and tires, or electronics — must also be given similar support from the government, allowing them to scale up their operations in order to meet the large volumes of product required by these assemblers. This will allow car assemblers to integrate more local components and drastically bring down the vehicle’s price.
Logistics
Finally, logistics has to be greatly improved, allowing all these companies to easily deliver their parts and the finished product from one point to another. VinFast has quite the innovation in this field, setting aside a large part of their property for component suppliers to set up shop. This allows them to partially assemble some parts right beside the plant, speeding up delivery.
Indeed, we have industrial parks and economic zones dedicated to industries like these, but with many in far off provinces, some even far from proper highways. As a result, transporting parts or finished products to the port or showroom is another point of inefficiency. Trains or proper highway connections can greatly help in this matter.
Local patronage
Finally, Filipinos must want and need the vehicles produced locally. Export should not be an immediate priority. If we look at Toyota’s lineup of locally produced vehicles, the Vios, Innova, and the upcoming Tamaraw are all models that have historically sold well. If we are to create our own car brand, it must appeal to the average Filipino, meet their needs, and come at an agreeable price. A Philippine-made sports car would certainly be a nice dream, but realistically, a small truck or MPV would appeal to more buyers, and better fund the R&D needed to create more models.
It’s certainly enviable to see Vietnam now with its own car brand, yet if we are to follow in their footsteps, there’s still a lot about our own industry we have to fix first.
(Iñigo S. Roces is the Motoring Editor of Manila Bulletin)