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November 8, 2006


[SIZE=5]Local parts makers push for PhUV incentives[/SIZE]

[SIZE=4]Local parts makers are pushing for the government to grant incentives to all the participants in their proposed Philippine Utility Vehicle (PhUV) Program. The PhUV Program proposes the production from completely-knocked down (CKD) kits of brand-new vehicles at the price of a used vehicle but with a high level of value-added local parts.[/SIZE]

[SIZE=4]They cite as an example Malaysia, which imposes zero percent import duty on vehicles produced from CKD kits but charges a higher 5% for vehicles imported as completely-built units (CBU). CKD kits have value-added local parts while there is none in a CBU kit. Local parts makers believe this could also be done as a PhUV Program incentive to help the ailing local parts industry.[/SIZE]

[SIZE=4]Thailand on the other hand, which is the biggest auto industry in the Asean region, decided to focus on a niche market: the one-ton pickup and its various variants, some of them SUVs. While they imposed a 30% excise tax for passenger cars, they charged only a very low 3% for the pickup. [/SIZE]

[SIZE=4]It also imposed a very stiff 80% tariff for passenger cars imported CBU outside of the Asean region while only a lower 30% is charged for the same vehicle imported in CKD form from outside of the Asean region. Even its future MFN rates under AFTA/CEPT are 40% to 80% for CBU and only 30% for CKD.[/SIZE]

[SIZE=4]These incentives made Thailand the biggest pickup market in the world outside of the USA. The local parts makers think that the same could also be done for the PhUV Program to reduce its price and make it affordable.[/SIZE]

[SIZE=4]Furthermore, Thailand also offers excise tax incentives for vehicles with energy saving devices (10% instead of 30%) and those running on alternative fuel (20% instead of 30%). Again, the local parts makers say this could be an incentive for users to decide to buy a PhUV. Other incentives they have in mind would be lower LTO registration fees and lower interest rates from banks for car financing so as to spur PhUV sales.[/SIZE]

[SIZE=4]Next door neighbor Indonesia has a Taxes & Tariff Liberalization Program that charges CKD kits taxes and tariff over 50% lower than CBU importations. Examples are for sedan type cars, it is only 25% for CKD but 60% for CBU; for SUV and pickup, it is only 20% for CKD but 45% for CBU and for buses, it is only 20% for CKD but 40% for CBU. This large disparity in taxes and tariff could be applied locally so that assemblers can be encouraged to import and manufacture vehicles in CKD form and thus help revive the moribund local parts industry.[/SIZE]

[SIZE=4]Local parts makers are pinning their hopes on the government adopting some of these incentives granted by the Philippines’ Asean neighbors to its auto industry. For a start, they are proposing that in the meantime, BOI incentives be given to local parts makers participating in the PhUV Program similar to those extended to BOI-registered enterprises under the Investment Priorities Plan (IPP) of 2004. The incentive package includes income tax holiday for up to six years, duty-free or duty reduced importation of capital equipment, tax and duty-free importation of spare parts and supplies and tax credit on raw materials and supplies. [/SIZE]

[SIZE=4]For the last few successive years, Philippine vehicle industry sales are not expected to grow or even surpass the 100,000-unit sales level, and with the expected increase in assemblers’ CBU importations, local parts makers and some 28,000 workers dependent on them are hoping that the PhUV Program can finally take off with a package of incentives and ease their burden.[/SIZE]