This year for the Philippine automotive industry has been a troubled one. Back to back natural disasters (storms, Taal), fears of an outbreak (Covid-19), and the closure of a major automobile assembly plant (Honda) are just some of the trials that the auto industry is facing in 2020, and we're not even done with the first quarter yet.
For the auto parts industry of the Philippines, their fortunes could turn around in the future: they're looking to tap a major market to supply with Philippine-made auto parts.
During our conversation with Ferdi Raquelsantos, the president of the Philippine Parts Maker Association (PPMA), we were informed that his organization is making a bid to expand their reach in the auto industry of the United States.
"We have to look at other markets," said Raquelsantos. "We have a generally preferential status with the US, and that means we could be exporting with zero tariffs."
The PPMA president said they weren't aiming to supply OEM (original equipment manufacturers) which would be automakers like Ford, General Motors, or Chrysler. Instead, they will be focusing their efforts on the automotive aftermarket industry in America.
"Actually I'm flying over to the US to pitch our parts industry to prospective clients there,” continued Raquelsantos. “Even their automotive aftermarket is huge."
Currently there is a trade issue (trade war, really) between the US and the PRC, and that means a tariff of up to 50% could be (or is being) imposed Chinese-made parts being imported into the US market. Also, the current situation regarding the Covid-19 outbreak in mainland Asia is also playing a significant role. The Philippine parts industry is jockeying to position itself as a viable source for parts to the automotive aftermarket industry in the United States.
The parts industry of the Philippines is currently enduring troubled times given the current economic situation. Complete built-up units (CBU) imported from foreign countries, particularly from within the ASEAN free trade area as well as from countries that ASEAN has agreements with, are dominating the Philippine auto industry by sheer volume. Case in point: for every 5 units sold in the Philippines in 2019, only 1 is locally-assembled.
Domestic car manufacturing is taking a big hit because of the zero (or near zero) tariff status on imported cars from FTA-covered countries. The better economies of scale and the larger parts industries in those countries also make it difficult for local manufacturing to compete on cost, and it makes more business sense to import than produce cars in the country.
Ford made the decision to close their Santa Rosa, Laguna manufacturing plant in 2012 and sold the facility to Mitsubishi Motors when the latter decided to move from Cainta. Isuzu decided to stop assembling the D-Max in Binan, Laguna but still operate the factory to assemble trucks. Honda is closing their assembly plant this month.
All of these factories had parts supplied from local parts manufacturers.