Trade Secretary Ramon Lopez said the limited business activities in China arising from the corona virus disease (COVID-2019) stresses the need for local manufacturers to source more inputs locally.
The automotive assembly in the Philippines is no exception although industry officials said regional sourcing is shielding their operations from the slowdown in China.
“The learning to many manufacturers is (for them) not to put all eggs in one basket… (that) it’s really important to diversify your sourcing so that when things like this happen, you’re not too much affected,” Lopez said.
Lopez said manufacturers can (have) a backup strategy by sourcing from alternative sites other than China such as the Philippines.
China was the biggest supplier of imported goods in 2019, with a 22.9 percent share of total imports or $24.54 billion.
“Hopefully, there will be a positive effect (for the) Philippines, like for auto(motive) parts. If we have the capabilities, then they can source here,” Lopez added.
Reacting to the possible effect on the Philippine manufacturing of China factory shutdowns, Lopez said: “There will probably be challenge as to the supply chain, but just like people, companies cope up. We don’t know yet how many more days or, hopefully, not more weeks, (but just) days.”
Localization, he said, should be part of business continuity planning.
“One should always try to have that balance and diversify the approach,” he said.
This view is shared by the country’s top automotive company, Toyota Motor Philippines Corp. (TMP) .
“The efforts have always been there to strengthen the local parts suppliers. Even in the CARS (Comprehensive Automotive Resurgence Strategy), (parts suppliers) were invited,” said Rommel Gutierrez, TMP senior vice president, referring to program’s mandatory local parts production which increased the local content of Vios to 58 percent.
Gutierrez said TMP does not source directly from China where the second tier and third tier parts are made. These parts go to the first-tier parts makers.
“Our suppliers are from Asean. We don’t even know what these particular (second and third tier) parts are, but so far we have not seen the impact (of China shutdowns),” he said.
Gutierrez said TMP is part of the regional complementation of parts where they exchange parts with affiliates in Indonesia, Malaysia and Thailand.
For example, transmission is being produced in the country by Toyota Auto Parts and exported to affiliates in the region.
Gutierrez, president of the Chamber of Automotive Manufacturers of the Philippines Inc., said he has not received any report the group’s members are affected.
