Toyota PH chair Alfred Ty believes that a mix of CKD and CBU models is necessary to sustain the growth of the local auto industry
It was adding insult to injury; a financial bomb dropped on an already pandemic-riddled Philippine automotive landscape. That was the general sentiment shared by individuals and organizations in the industry when they learned of the impending imposition of new taxes on imported completely built units (CBUs).
Called the “safeguard measure” by the Department of Trade and Industry, these taxes are supposed to protect workers in local car assembly and manufacturing from a surge in imports. Specifically, the provisional safeguard duty on imported vehicles would come in the form of a cash bond amounting to P70,000 per imported passenger car and P110,000 per imported light commercial vehicle (LCV).
The collective groan arising from this oncoming new round of taxes is understandable. The industry is already reeling from a 40-percent sales slump as a result of the country’s ongoing battle with Covid-19. Now, with automotive companies set to start fresh and hopeful this 2021, the new taxes threaten to rain on an already delayed parade with what would almost certainly be increased prices on imported cars, which in turn would dampen the demand, and further delay industry growth.
A number of prominent auto executives had already spoken against the safeguard measure, airing their sentiments across the media. But there have also been voices in support, such as those coming from parts makers who wish for nothing more than to see the balance tipped more in favor of local automotive assemblers.
Such opposing views will be heard and considered during the Jan. 27 public hearing at the Tariff Commission, which will have the final say on the matter.
Before that, the discussions will inevitably continue, and sides will be taken. Probably it’s also best to sit back, relax, and hear what the leader of the country’s top automotive company, one of only two corporate giants that both imports and assembles cars, has to say about the issue.
On Jan. 12, Alfred V. Ty, chair of Toyota Motor Philippines Corp (TMP), shared with Inquirer Motoring:
“At this stage, we are still assessing the (safeguard measure’s) impact to the whole industry and to Toyota, as guidelines and definitions are being clarified. We are in a unique situation to be one of two companies that manufactures CKD (completely knocked down) and imports CBU models. We support the government’s initiative to promote local production and we have additional capacity available to increase local production of the Vios and Innova line.”
In a follow-up statement on Jan. 18, Ty added: “Over the years, TMP has consistently grown its local production capacity. To this end, we most recently invested over P5 billion in the CARS (Comprehensive Automotive Resurgence Strategy) program. Our rated capacity is over 60,000 units, more than enough to meet the current demand for Vios and Innova, which last year reached just under 36,000 units. We are thankful that DTI is considering the possibility of extending the CARS program to promote local production.”
Not one over the other
Ty explained that, in TMP’s 32 years, it has managed to grow both its CKD and CBU businesses to the advantage of all stakeholders.
“TMP is supportive of the government’s direction to promote local automotive production. We appreciate all the opportunities that we have been given over the past 32 years to strengthen our production capabilities in Santa Rosa.
“I believe that a mix of CKD and CBU models is necessary to sustain the growth of the Philippine automotive industry. It is not a case of one or the other. We have to remember that the country is only in the nascent stages of motorization. As such, the number and types of motor vehicles that the Filipinos need is becoming more diverse, ranging from personal transport solutions to commercial usage. It is improbable to produce every type of vehicle locally because there are insufficient economies of scale for each one. Therefore, in order to meet the rising and diverse motoring needs of the nation at the most reasonable prices to consumers, locally produced models—that offer adequate economic volumes—need to be complemented by CBU models. We have to have a wholistic approach to our business.”
The chair has spoken, adding that circumspect voice to an otherwise polarized conversation.