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Industry leaders oppose proposed safeguard taxes on imported vehicles

Industry leaders oppose proposed safeguard taxes on imported vehicles

The sales momentum gained by the automotive industry in June and July screeched to a halt last month. 

In a joint report, the Chamber of Automotive Manufacturers of the Philippines, Inc. (Campi) and Truck Manufacturers Association (TMA) recorded a 12.8 percent decrease to 17,906 units total vehicle sales in August from 20,542 units sold in July.

The Association of Vehicle Importers and Distributors, Inc. (Avid) posted a 7 percent drop in August equivalent to 4,753 units sold compared to the 5,100 sold the previous month.

These figures formed a stark contrast to the 31.9 percent increase to 20,542 total vehicle sales in July from 15,578 units last June reported by Campi/TMA and the 38 percent hike claimed by Avid with 5,100 units sold in July versus 3,697 sold in June.

From May to June, sales surged 225.4 percent for Campi/TMA and 198 percent for Avid as the lockdown imposed to contain the coronavirus outbreak was lifted and more businesses reopened.

According to Campi/TMA, a year-on-year comparison indicates that industry sales fell by 39.5 percent from 25,599 units sold in August last year. Year-to-date August 2020, the industry has sold 123,489 units, a 47.6 percent decline compared with the same period a year ago.

Avid said that for the first eight months of the year, total sales reached 29,360 units, or a 48 percent drop amid the pandemic.

Re-imposed MECQ

Both Campi president Rommel Gutierrez and Avid president Ma. Fe Perez-Agudo attributed the August setback to the stricter Modified Enhanced Community Quarantine (MECQ) re-imposed from Aug. 4 to 18 in Metro Manila and nearby provinces due to a spike in COVID-19 cases.

Gutierrez said that while the industry’s players are keenly aware of the various economic factors that may constrain regaining growth momentum this September and for the rest of the year, they are turning to aggressive promotions to boost sales and to achieve the industry’s revised sales forecast of 240,000 units in 2020. “Our objective is to achieve if not outperform this new target. Otherwise, recovery will be even more difficult,” he averred.

Agudo, who concurrently heads Hyundai Asia Resources, Inc. as president and CEO, said Avid expects to resume its recovery mode in the “ber” months amid encouraging indicators with the gradual reopening of businesses, while the restoration of consumer confidence through strict health and safety guidelines plus rapid digital transformation remains key to the industry’s revival.

The industry has sought government support given the impact of the pandemic. Recommendations for industry support are under study by the Department of Trade and Industry (DTI).  

For Toyota Motor Philippines and Mitsubishi Motors Philippines Corp., the situation is complicated by their participation in the government’s Comprehensive Automotive Resurgence Strategy (CARS) program which requires them to locally produce a total of 200,000 units each of the Toyota Vios and the Mitsubishi Mirage by 2023. Gutierrez, who is concurrently 1st vice president of Toyota, said they may seek an extension of the 2023 deadline.

Safeguard duties

Gutierrez and Agudo are united in reiterating their concerns about the proposal to impose safeguard taxes on imported vehicles. In 2019, the Philippine Metalworkers Alliance filed a petition for safeguard measures to protect local auto assembly jobs that have been threatened by the increasing influx of imports over the years.

The DTI is investigating the unionized metalworkers’ petition. Regarding this, Gutierrez said in a press release that while economic recovery can be a gauge of the industry’s future performance, it also depends on the policy environment.

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“Any restrictive policies such as a safeguard duty will only limit the industry’s capability to navigate the current crisis,” he contended. “Campi hopes that the ongoing case evaluation by the DTI will consider the impact of the pandemic on the auto industry’s recovery.”

Agudo expressed the same concern. “Prior to the lockdowns, Avid conveyed our position that penalizing imports will not trigger investments nor address pressing issues faced by the local manufacturing sector,” she pointed out. “Rather, it is a disruptive measure which will further inhibit the growth of the automotive industry and reduce our competitiveness in the region.”

The metalworkers may be basing their petition on the fact that, as a DTI Undersecretary has noted, brand-new vehicle imports rose from 153,000 units in 2014 to more than 1 million units by 2018. The surge in new vehicle imports could have something to do with the Philippine Statistics Authority’s report that the number of auto assembly workers shrunk from 86,428 in 2015 to 57,982 in 2018, reflecting a 32 percent increase in jobs lost within a three-year period.

What’s more, the Asean Automotive Federation reported that in 2019, the Philippines produced 95,094 vehicles. Yet the Philippine auto industry claimed that 412,106 new vehicles were sold in the Philippines in 2019. This may indicate that more than 90 percent of the brand-new motor vehicles sold locally last year were imported models.

Same Top 10

Meanwhile, the list of the Top 10 Sales Performers remained the same in August as in the two preceding months.

Undisputed market leader Toyota Motor Philippines Corp. led with 52,525 units sold year-to-date (YTD) August 2020, followed by Mitsubishi Motors Philippines Corp. in second place with 20,903 units, Nissan Philippines, Inc. ranked third with 13,702 vehicles sold, Hyundai Asia Resources, Inc. is fourth with 10,199 and Suzuki Philippines, Inc. is fifth with 8,785.

Ford Motor Co. Philippines, Inc. ranks sixth with 7,791 units sold YTD August 2020, Honda Cars Philippines, Inc. is only 456 units behind Ford with 7,335, Isuzu Philippines Corp. retains eighth place with 5,963, Foton Motor Philippines, Inc. is a far ninth with 1,450 units sold while Adventure Cycle Philippines, Inc., the distributor of Kia, tried to catch up with Foton by scoring 1,271 unit sales.