The Federation of Au-tomotive Industries in the Philippines (FAIP) said the country can become the third automotive hub in the Association of Southeast Asian Nations (Asean) due to its bright growth prospects and the spiking labor cost in Thailand.
“We are telling our [auto] brand principals that, for risk mitigation, don’t be satisfied with two hubs, because, let’s face it, Indonesia and Thailand are already production hubs. But, it’s logical that there is a third [hub] because the labor cost in Thailand is already high. But more than that, there is the lack of required talent for parts-making,” FAIP President Vicente T. Mills said in an interview with reporters.
The Philippine government
has recently released Executive Order 182, or the Comprehensive Automotive Resurgence Strategy (Cars) Program, aimed at boosting local manufacturing through the grant of fiscal and nonfiscal incentives.
The country’s economic growth prospects—now coupled with a clear policy direction for the auto industry—should entice the principals of vehicle brands to further expand operations in the country.
“With the Asean zero tariff, the tendency of brand principals is to expand where they already are, which is Thailand and Indonesia. But with this program, the Philippine government is saying basically that we’re not giving up,” Mills said.
“Indonesia is a much bigger market, so growth will be slow. But again, for risk mitigation, we can be a third hub,” he added.
Challenges, however, that should be addressed are the low- vehicle density in the Philippines and the poor road infrastructure.
Data from the Asean Automotive Federation (AAF) showed that the Philippines stands in the middle of the pack as of June in terms of automotive sales. Indonesia’s sales volume was at 525,458 units; Thailand 369,109 units; Malaysia 322,184 units; and the Philippines 131,465 units.
In terms of growth, however, the Philippines stood out as one of the three countries that registered a year-on-year increase in auto sales in June.
The AAF surveyed seven nations. In terms of production, however, the Philippines is still a laggard. The country only produced 45,662 units from January to June 2015, while neighboring countries produced over 100,000 units already.