MANILA is losing out to Bangkok in the race to become the automobile center of Southeast Asia, and proof of this is Honda’s closure of its assembly plant here and the eventual transfer of production to Thailand.
Trade Secretary Ramon M. Lopez on Monday admitted the Philippines lost Honda’s production to Thailand, where the vehicle assembler is now producing at a rate of 200,000 units annually. He also conceded the cost of production here is higher than in Thailand, and this is largely the reason Honda is shutting down its Laguna plant to transfer its manufacturing.
“If you read between the lines [based on] their statement, it has something to do with their allocation. In cases like that, it has something to do with cost competitiveness. That means it’s cheaper for them to produce in other countries where their production is on a high volume,” Lopez told reporters after meeting Honda executives.
“Case in point is the 200,000- plus units [made] in Thailand, while here it’s only 7,000 units to 8,000 units. There’s a huge difference in terms of spreading the fixed cost,” he explained.
Honda Cars Philippines Inc. (HCPI) on Saturday announced it is closing its assembly plant in Santa Rosa, Laguna, as part of its parent company’s decision to rationalize global production.
The Laguna plant manufactures Honda BR-V and City models and has a maximum production capacity of 15,000 units yearly. Honda’s decision to cease domestic production is expected to result in job losses for over 380 workers.
According to Lopez, Honda has no plans of selling its Laguna plant, although he bared that vehicle assemblers from all over the world, mostly from China, are inquiring about it.
“If you read between the lines [based on] their statement, it has something to do with their allocation. In cases like that, it has something to do with cost competitiveness. That means it’s cheaper for them to produce in other countries where their production is on a high volume.”
Trade Secretary Ramon M. Lopez
“Mostly, they are Chinese brands who entered the Philippine market,” Lopez said when sought who are the vehicle assemblers keen on doing local production. “We are not saying they will open up here, but they are the ones inquiring [our department].”
“There are Korean brands here, as well, but most of them really are Chinese brands that have recently entered. There are car firms who are addressing their issues and rationalizing their resources. On the other hand, there are those who are aggressive and expanding,” the trade chief said.
In spite of Honda’s decision to abandon its Philippine assembly, Lopez is hopeful the firm will make a comeback in the near future, when the business environment is conducive for the large-scale production of automobile units. He said it’s mainly the reason his agency is seriously considering imposing a safeguard measure on vehicle imports to protect local assemblers.
“Honda expressed apprehension if there will be a safeguard duty placed. That’s really more of an advantage to local assemblers because the safeguard duty will hit imported units. I hope it could be a factor for them to decide to stay, but it’s beyond the local operations,” he said.
“Maybe the headquarters can consider that in the future. We are not saying they will come back here, but considering all factors there’s a possible basis for that,” Lopez added.
The Department of Trade and Industry is investigating a petition to apply safeguard measure on motor vehicles. The petition, filed by trade union Philippine Metalworkers’ Alliance, seeks to increase tariff rates on cars to prevent the further loss of jobs in the motor vehicle manufacturing sector.
Based on records, imports of passenger cars rose 17.85 percent to 180,939 units in 2015, from 153,531 units in 2014; jumped 31.53 percent to 237,995 units in 2016; and went up a little over 2 percent to 243,129 units in 2017. It dropped nearly 15 percent to 207,248 units in 2018, which was attributed to the new tax policy.
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