MVPMAP

 

3,780 reasons to turn slumping auto parts industry around

 

By Tessa R. Salazar

 

The whir of auto machinery is increasing in Asia. South Korea, the fifth largest car manufacturing country in the world and the auto parts mecca in this side of the globe is slugging it out with automotive powerhouse Japan and emerging dragon China.

 

Thailand's auto industry, meanwhile, is one of the country's top performing sectors, as 1,800 auto parts maker/suppliers/service providers thrive. It is the main auto hub of South East Asia.

Not to be outdone is Malaysia, which has its own Proton (Iswara pegged at about $8,000 and above) and Perodua/Daihatsu (Kancil priced at $6,500 onward) to sell and its 590-strong auto component manufacturers. Both the manufacturers were granted the national car status and were given certain tax duty exemptions.

 

Healthy numbers

The rest of Asia shows healthy numbers in the car parts and auto sales sectors: Indonesia has 260 auto components makers.

 

On the other hand, the Philippines' total auto parts and components maker, from 256 in 1996, has dwindled to 173 this year. What gives?

 

The Motor Vehicle Parts Manufacturers Association of the Philippines, one of two organizations of auto parts makers, analyzes the diminishing role of local auto parts makers. It explains that most parts for completely knocked down vehicles (CKDs) now comes with a package kit abroad, rendering local content from local parts manufacturers unnecessary.

 

MVPMAP adds that sales of completely built-up vehicles (CBUs) are on the rise.

60% local content

The increasing independence of CKDs from local parts manufacturers and the rising sales of CBUs are now forcing local auto parts manufacturers to venture into largely uncharted territory just to survive.

Though the details are still quite murky at this time, it's quite clear that MVPMAP is working on locally built utility vehicle with 60 percent local content in cooperation with the Chamber of Automotive Manufacturers the Philippines, Inc. (CAMPI), Truck Manufacturers Association and the Board of Investments. This development was ascertained when the four groups recently created a working group called the Philippine Automotive Industry Development.

The working group has worked on a price sensitivity analysis and a Filipino market study and has come up with a plan to provide a new brand of utility vehicle priced at P350,000 or less. The design of the new vehicle has been said to closely resemble that of an Asian utility vehicle.

Ferdi Raquelsantos, MVPMAP spokesman and the working group's chair, said the group plans to initially produce 30,000 units in 2007.

 

‘Gawad Kalinga'

Raquelsantos described the MVPMAP- initiated Philippine utility vehicles as the “Gawad Kalinga” of the auto industry, revealing that the group would target farm-to-market suppliers and cooperatives.

The local parts makers are set to lower the price by 30 percent for this particular project. Such drastic price reduction would entail redesigning the parts to make them affordable but still safe and roadworthy.

“A lot of simplification on the design should bring the cost down,” Raquelsantos added.

But will the unit sell? “Our study has revealed that the market for this particular vehicle is big enough,” he assured.

MVPMAP admitted, though, that it would be impossible to create a 100 percent local content vehicle in the near future. Thus, the group is negotiating with certain Japanese car manufacturers and Chinese auto parts makers to possibly supply essential body parts and the engines.

The entry of 350K “Philippine utility vehicle” is seen to have a positive effect on the local auto industry. “Instead of buying imported secondhand vehicles, the people now have the option to buy a brand-new utility vehicle at an affordable cost,” said Rommel Juan, MVPMAP chair of exhibits and missions.

 

QS9000 or TS16949 certified

In an attempt to dispel the image of locally made products as inferior, Raquelsantos stressed that most local parts makers are now QS9000 or TS16949 certified.

 

For several years, MVPMAP has been exporting wiring harnesses, filters, gear boxes (transmissions), radiators, tires, silencers, batteries, exhaust pipes, brakes, clutches and alloy wheels, to name a few. As of 2005, major export markets are Japan (32 percent), United States (23 percent) and Thailand (17 percent), Canada (4 percent), Indonesia (3.75 percent).

The local auto and parts industry had its heyday in 1996, when CKDs peaked at 141,000 units (87 percent of the total market) and CBUs numbered 21,000.

Last year, there have been only 57,000 CKD units (59 percent) and 39,500 CBUs for a total of 97,000 units – representing a sales level that has gone flat for eight straight years.

 

Silver lining

Local auto parts maker, at least those that are still around, see a silver lining among the clouds. They said there are 3,780 solutions – representing the number of car parts and components inside vehicle – to turn the slump around.

John T. Lee, MVPMAP director, said the reason why Korea reached its status was its nationalism and pride as a people. This included patronizing Korean-made products and being proud of it.

Perhaps local parts makers should also do a bit of tinkering with the Pinoy psyche while embarking in its ambitious people's utility vehicle.

 

 

(Source: Manila Bulletin, 2 August 2006)

 

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