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Overview of the PhilippinesOverview of the Philippines Auto Industry Policyy y

JARI Philippines Roundtable 2010Air Pollution Reduction and Energy Policies in Philippines

Hotel Mandarin Oriental, Makati CityFebruary 5 2010February 5, 2010

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Brief History – Philippine Auto IndustryBrief History – Philippine Auto Industry

h b f h d b d b k h l• The beginnings of the auto industry can be traced back to the commercial importation of CBU cars and trucks from 1916 to 1950.

1916

1950

1916

CBU Importation

1972Progressive Motor V hi l P

Import Control Law/ Foreign Exchange Controls

1987

1996

Vehicle Program

Amended MVDP 

MVDP (MO 136, MO 157, MO 160)

1996

2002

(MO 346)New MVDP (EO 156)

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Pre MVDP Automotive SectorThe vehicle assembly sub‐sector is an import‐dependent industry and theproduct coverage of the parts manufacturing sub sector is limited to

Pre‐MVDP Automotive Sector

product coverage of the parts manufacturing sub‐sector is limited toreplacement parts.

Automotive Sector

Vehicle Assembly Parts Manufacturing

19 assemblers few manufacturers

> 60 models Replacement parts

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Auto Industry Development Programs

i

Auto Industry Development Programs

Progressive Motor Vehicle Manufacturing 

Program

• Local Content Requirement• Foreign Exchange Requirement• Prohibition of vehicle importation

MVDP(MO 136 157 & 160)

p

• Local Content Requirement• Foreign Exchange Requirement(MO 136, 157 & 160)

Amended MVDP

Foreign Exchange Requirement• Prohibition of vehicle importation

• Termination of Local Content and FOREXAmended MVDP (MO 346)

Termination of Local Content and FOREX Requirements based on GATT‐WTO TRIMS

• Import liberalization of brand new CBU

New MVDP (EO 156)• Phase‐out of Local Content and FOREX requirements under the TRIMS Extension

• Prohibition of used vehicle importationp

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EXECUTIVE ORDER NO. 156EXECUTIVE ORDER NO. 156

Providing for a Comprehensive Industrial Policy and Directions for the Motor Vehicle Development Program (MVDP) and its 

I l ti G id liImplementing Guidelines

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Existing Policies under E.O. 156Existing Policies under E.O. 156

• Prohibition of Used Vehicles Importation• Restructuring of Most Favored Nation (MFN) Tariff RatesR ti li ti f E i T• Rationalization of Excise Taxes

• Provision of Export Incentives• Regional Complementation of AICO SchemeRegional Complementation of AICO Scheme

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MVDP Features and Privilege

FEATURES:

MVDP Features and Privilege

• Investment Requirement:Motorcycle – US$2.0M

FEATURES:

yCommercial Vehicles – US$8.0MPassenger Cars – US$10.0M

• TLA: Only CKD – OEM parts and componentsTLA: Only CKD  OEM parts and components• Unlimited models/variants• No local content requirement

PRIVILEGE:

Allowed to import CKD at CKD tariff ratep

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PERFORMANCE:Investments showed no expansion for the past 10 years; Participants: 24 from 2002 to 47 in 2009 but mainly from motorcycles

YEAR # OF MVDP PARTICIPANTS INVESTMENTS

20091/ 2 Php 0 188B

INVESTMENTSINVESTMENTS

2009 2 Php 0. 188B

2008 3 5.950 B

2007 8 4.292 B

2006 3 2.651 B

2005 2 3.411 B

2004 1 0.153 B

2003 1 0.115 B

20022/ 3 0.293 B

TOTAL 23 Php 17.053 B

1/ January to August 2009 only

*Indicators 2002 2009

NUMBER OF PARTICIPANTS 24 47

INVESTMENTS Php68 Billion Php85.053 Billion1/ January to August 2009 only             

2/ Start of Motor Vehicle Development Program    * Cumulative Investments

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PERFORMANCE:

Industry has not yet reached pre‐Asian Crisis Sales level; AGR Sales for 4‐wheels is 

4 4 ‐‐WHEEL SALES WHEEL SALES PRE ASIAN 2009 Sales

modest at 7.5% from 1999; high AGR Sales for MC at 27%

140,000

160,000

180,000 (1993(1993‐‐2009)2009)

AGR: 7.5%

FINANCIAL CRISIS162,097

2009 Sales132,444

START OF EO 156

34 653 units{80 000

100,000

120,000

Volu

me (In

Uni

ts) Last 10 years

34,653 units{

40,000

60,000

80,000

Sales Vo

0

20,000

Sales 83,811 108,471 128,162 162,097 144,968 80,211 74,414 83,949 76,670 85,594 92,336 88,077 97,064 99,541 117,903 124,449 132444

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Source of data: CAMPI, TMA

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PERFORMANCE:

Industry had a high AGR Sales for MC at 27%

600 000

700,000

22‐‐WHEEL SALES WHEEL SALES 

500,000

600,000

Uni

ts)

(1993(1993‐‐2009)2009)

300,000

400,000

les Vo

lum

e (In

U

AGR: 27%Last 10 years

100,000

200,000

Sale

0M o to rcycle 91,795 106,957 127,095 178,095 225,279 170,733 168,324 200,000 230,000 224,501 257,401 409,581492,883 518,196 549,106 594,989 636,792

1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

1993 - 2008 Data Sales for MotorcycleSource: MDPPASource: MDPPA

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PERFORMANCE:

CBU sales dominating the domestic market

CKD SALES VS. CBU SALES CKD SALES VS. CBU SALES 44‐‐WHEEL VEHICLESWHEEL VEHICLES

g

80%

100%

44 WHEEL VEHICLESWHEEL VEHICLES

60%

80% RATIO: 92:8

20%

40%

RATIO: 48:52

0%

20%

2002 2003 2004 2005 2006 2007 2008 2009

CKD CBU CKD to CBU RatioSource of data: CAMPI, TMA

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CKD SALES VS. CBU SALES CKD SALES VS. CBU SALES MOTORCYCLESMOTORCYCLES

100%

80%

60% RATIO: 77:23RATIO: 81:19

40%

0%

20%

2002 2003 2004 2005 2006 2007 2008

CKD CBU CKD to CBU RatioSource of data: CAMPI, TMA

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Used Vehicle ImportationUsed Vehicle Importation

• Bans the importation of all motor vehicles h h b ll d dexcept those that may be allowed under 

certain conditions

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MFN RestructuringMFN Restructuring

• Restructure tariff rates for raw materials and parts and components at rates that will encourage the development of the industry

• Executive Order No. 262 (local parts only) ‐Required submission of Parts Development Plan (PDP)

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Excise Tax Restructuring• Republic Act No. 9224 restructured the excise tax rates on 

t hi l

Excise Tax Restructuring

motor vehicles • BIR Revenue Regulations No. 25‐2003 (Implementing rules of Republic Act No. 9224, issued 16 September 2003)Republic Act No. 9224, issued 16 September 2003)

• Shift from ad Valorem based on engine displacement and type of fuel to value‐based taxation

Net Manufacturer’s/ Importer’s Selling Price

Tax Rate

Up to P600 000 00 2%Up to P600,000.00 2%

Over P600,000.00 to P1,100,000.00P12,000 plus 20% of the value

in excess of P600,000.00

P112 000 plus 40% of the valueOver P1,100,000 to P2,100,000.00

P112,000 plus 40% of the value in excess of P1,100,000.00

Over P2,100,000.00P512,000 plus 60% of the value in excess of P2 100 000 00in excess of P2,100,000.00

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Export IncentivesExport Incentives

• Incentives provided by E.O. 244 as amended by E.O. 312• Incentives in the form of Net Foreign Exchange Earnings • With fixed annual export performance 5 years incentive availment

• 4 categories: 1. Developmental; 2 Ni h2. Niche; 3. High‐Value, Low‐Volume and, 4 Regular4. Regular 

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AICO SchemeAICO Scheme

• 0 – 3% Tariff on approved projects (advanced CEPT)

Participants 15p

Agreements 22

Period 1998 ‐ 2008

TOYOTA MOTOR PHILIPPINES CORP.TOYOTA MOTOR PHILIPPINES CORP.

HONDA CARS PHILIPPINES, INC.HONDA CARS PHILIPPINES, INC.

HONDA PARTS MANUFACTURING CORP.HONDA PARTS MANUFACTURING CORP.

PHILIPPINE AUTO COMPONENTS, INC.PHILIPPINE AUTO COMPONENTS, INC.

Period 1998  2008

MITSUBISHI MOTOR PHILIPPINES CORP.MITSUBISHI MOTOR PHILIPPINES CORP.

FORD MOTOR COMPANY PHILIPPINES, INC.FORD MOTOR COMPANY PHILIPPINES, INC.

NISSANMOTOR PHILIPPINES INCNISSANMOTOR PHILIPPINES INC

ASIAN TRANSMISSION CORP.ASIAN TRANSMISSION CORP.

ISUZU AUTOPARTS MANUFACTURING CORP.ISUZU AUTOPARTS MANUFACTURING CORP.

MITSUBA PHILIPPINES CORPMITSUBA PHILIPPINES CORPNISSAN MOTOR PHILIPPINES, INC.NISSAN MOTOR PHILIPPINES, INC.

ISUZU PHILIPPINES CORP.ISUZU PHILIPPINES CORP.

AUTOBUS INDUSTRIES, INC.AUTOBUS INDUSTRIES, INC.

TOYOTA AUTOPARTS PHILIPPINES INCTOYOTA AUTOPARTS PHILIPPINES INC

MITSUBA PHILIPPINES CORP.MITSUBA PHILIPPINES CORP.

REPUBLICREPUBLIC‐‐ASAHI GLASS CORP.ASAHI GLASS CORP.

LAGUNA AUTO PARTS MANUFACTURING CORP.LAGUNA AUTO PARTS MANUFACTURING CORP.

TOYOTA AUTOPARTS PHILIPPINES, INC.TOYOTA AUTOPARTS PHILIPPINES, INC.

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P i i A f I d hPriority Area of Investment under the Investment Priorities Plan (IPP)

• Motor Vehicle and its Parts and Components

• Entitled to Incentives under E.O. 226 and  E.O. 528

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Overview of the PhilippinesOverview of the Philippines Auto Industry Policyy y

DIRECTOR RUDY B. CAÑABoard of InvestmentsSpecial Programs Department