The government’s Comprehensive Automotive Resurgence Strategy (CARS) Program has yielded P4.6 billion in investments from local automotive parts makers and created 9,000 additional jobs since it started last year.
“Parts makers have invested some P4.6 billion. This is mostly in power press machines and plastic-injection moulding machines. This is ongoing as we’re continuously adding equipment,” said Ferdinand I. Raquelsantos, president of the Philippine Parts Maker Association Inc. (PPMA) in an interview last Friday.
This and the increase in production of local assemblers, Toyota Motors Philippines and Mitsubishi Motors Philippines Corp. (MMPC), also resulted in the need for more workers in the local automotive sector. According to the Department of Trade and Industry’s Policy, small and medium businesses are the main beneficiaries of the CARS Program, which directs major car assemblers to source more local parts for the vehicle model they have enrolled.
The CARS Program requires an increase in local content to around 50 percent of the parts of every locally assembled vehicle, including “strategic” vehicle parts not being produced in the Philippines at the moment.
MMPC First Vice President and Corporate Secretary Dante Santos said most parts of a vehicle are protected under proprietary licensing.
Under the CARS Program, to be able to localize these parts, the license holders (the foreign parts makers supplying to the mother company of the assemblers) have to conclude a technical licensing agreement or joint-venture agreements with Philippine parts makers and produce them here.
This would enable much-needed transfer of technology to local parts makers.
But the identification of parts to be assembled locally is dictated by the two car-assembler participants, Toyota and Mitsubishi.
Raquelsantos said nine local parts makers have concluded JVs or technical licensing agreements with foreign suppliers, but a big portion of the mandatory auto parts to be made locally are still made in-house by Toyota and Mitsubishi.
“The big body shells and large plastic parts are still made in-house, but small and medium parts makers in PPMA have made an arrangement with the large parts suppliers-members of PPMA supplying to the assemblers to subcontract their smaller parts to other members,” Raquelsantos added.
The PPMA conceptualized this solution, as car assemblers were reportedly giving more importance to parts made in-house, which tends to edge out smaller parts makers in the supply chain.
Initially, parts makers had hoped that a lot of the auto parts mandated in the CARS Program could be localized. Raquelsantos said he had expected that at least 31 JV agreements or technical licensing agreements would be concluded between local parts makers and foreign suppliers last year.
The PPMA chief said in a previous interview that 90 percent of auto-parts suppliers are considered small and medium businesses. Prior to the program, Raquelsantos added some small parts makers were being considered as microenterprises due to low production.
