Philippines took over Japan’s Car part dominance in Asean but cried for cheap imported Cars

According to Raquel Santos, the 127 members of MVPMAP who make 272 different car parts and components, are not exactly happy over the fact that imports of complete cars have over taken locally assembled units. He said the assemblers in the Philippines account for only 39 per cent of total car demand

Japan way behind; PH exports $3.5B car parts to ASEAN

The Philippines has beaten Japan in exporting vehicle transmission assemblies to the ASEAN (Association of South East Asian Nations) region. Every year, according to Ferdinand Raquel Santos, Japanese companies Toyota, Mitsubishi, and Isuzu export $3.5 billion compared to Japan's $1.1 billion.

Raquel Santos, president of the Motor Vehicle Parts Manufacturing Association the Philippines (MVPMAP), told Business Insight cars imported from the region, particularly Thailand, have transmission assemblies made in the Philippines.

The rest of the car parts - wire harness, tires made by Yokohama in Clark, carpets, plastic parts, leatherette seats, seat belts, plastic bumpers, are big in numbers but have smaller values.

He said in value terms the Philippines accounts for about 25 per cent in parts exported to the region. Nearly all of them are accounted for by transmission assemblies. He said a car has 20,000 parts and components. Very few of them, except transmission assemblies  come  from the Philippines.

He explained that Japan might have discovered that producing the assemblies in the region such as the Philippines has the advantage of Thailand.

According to Raquel Santos, the 127 members of MVPMAP who make 272 different car parts and components, are not exactly happy over the fact that imports of complete cars have over taken locally assembled units. He said the assemblers in the Philippines account for only 39 per cent of total car demand.

The rest is imported. Back in 1996, 90 percent of automobiles sold in the Philippines is locally assembled. Imports account for a negligible 10 per cent.

He explained that the reversal of the ratio negatively affects the business of local parts manufacturers in terms of loss of demand.

He said he hopes local assemblers will regain their dominance but pointed out that the tariff agreements are a high hurdle. Under the Asean Free Trade Association (AFTA) many items or products enter the region without a tariff.

He said the fact that a separate agreement with Japan (Japan Philippines Economic Partnership Agreement (Jepepa)) and the coming similar agreements with South Korea and Australia do not help the Philippine makers of auto parts and components improve their business.

Still, Raquel Santos said, there are two models Mitubishi's L-300-and the Crosswind of Isuzu that use 70 per cent local parts and components

A good number of members of the association export parts and components to Thailand and Indonesia. These parts, he said, are common to units assembled in the Philippines.

He laments the fact that the 70,000 workers employed by the association, have not increased precisely because the market of parts makers have been taken over by imported units. He stressed, though that these units also use Philippine-made components notably the transmission assemblies.

Rising volume of imports deny the parts makers the economies of scale. The high cost of power in the Philippines does not help the members of the association either, according to Raquel Santos.

However, he said, there is a necessity for economic groupings to create big bargaining unit with giants of North America and Europe. He said competition with these highly developed countries will force the emerging markets like the Southeast Asian countries to introduce innovation, improve technology and management to be able to compete globally.

Raquel Santos broadly hinted that while the growth of small car parts manufacturers is stymied by rising imports, there is the fact that the Philippines is becoming the hub of manufacturing transmission assemblies as shown by the fact that three Japanese companies are heavily involved in producing them here.

Slowly, Filipino minds and hands are absorbing the technology in making this major car component. This could well be the start of more major components being produced in the Philippines.

Raquel Santos himself has a company producing minor parts like seats. He continues to trying to improve his technology, knowing he said, that modern technology and management efficiency are the keys to any successful operation, production of car parts or any other manufacturing ventures. His hopes are high in the face of negative developments. So are the rest of the members of the association.

With report from Malaya Business Insights