Auto parts makers seek policy support, local content mandate

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The Philippine Parts Makers Association (PPMA) called on the government to provide policy support to the automotive components sector, particularly a mandate for local content sourcing. 

PPMA president Ferdinand Raquelsantos said in an interview yesterday the group is asking for government issuance of a policy that will set at least 51 percent local content for car manufacturing. This will mandate local sourcing for small parts manufacturers, such as stamping parts, plastic and rubber parts and interiors like seat belts.

There is currently no mandated local content for assemblers, and this has impaired their competitive edge, Raquelsantos pointed out. 

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Previously, the Comprehensive Automotive Resurgence Strategy (CARS) set a 51-percent local content on Toyota Vios and Mitsubishi Mirage, but this program ended in 2024 without any follow-through.

Raquelsantos said small parts makers have suffered the most, given that they are not part of the global value chain of assemblers.

“Without a clear roadmap, financial incentives, and policies that prioritize local content, we risk losing this critical industry altogether,” he said. 

Raquelsantos said that in 2023, the automotive parts industry generated export revenues of approximately $4.14 billion but comparative figures were not yet available. 

Raquelsantos said the figures represented sales of big exporters like Yazaki Torres Manufacturing, which exports 90 percent of its wiring harness production.

Wiring harness exports in 2023 rose 12 percent to $2.66 billion from $2.38 billion in 2022.

The Toyota Group contributed significantly, accounting for $1.26 billion of the $4.14 billion total industry exports.

Small players, he said, have lost 20 to 40 percent of their sales in recent years, but he did not elaborate.

Raquelsantos said in the heydays of the industry in 1997, about 80 of automotive parts were locally manufactured.

That figure plummeted to just 20 percent, as the sector had to contend with shrinking demand, global competition, and a lack of comprehensive government support, Raquelsantos said.

From 128 in 1997, the members of PPMA shrank to 40.

Other components for export included transmission and engine parts which were related to vehicle powertrains; electronic parts and components including sensors and control units; metal parts and components such as body panels and chassis parts.

Raquelsantos said over the years, the Philippines has seen a decline in the manufacture of automotive parts, losing the business to neighboring countries, particularly Thailand and Indonesia.

Several factors have contributed to this shift in sourcing, among them increased production cost in terms of labor, electricity, and logistics as well as lack of economies of scale, Raquelsantos said.

“Countries like Thailand have developed extensive automotive industries, benefiting from economies of scale while the Philippines has struggled to achieve. These challenges have made the Philippines less competitive than   to its regional neighbors,” he said.

PPMA called on policymakers to explore measures such as an incentive scheme similar to the CARS where perks are granted to those that reach a certain volume of production and those which invest in heavy parts.

PPMA also said another measure is to provide competitive incentives for automotive assemblers for original equipment manufacture  far better than what Thailand, Indonesia or Vietnam is providing.

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According to Raquelsantos, local parts makers also need support technology and skill upgrades to enhance their advantage.

The PPMA “believes that revitalizing the automotive parts manufacturing industry is vital to boosting local manufacturing, creating jobs, and contributing to the country’s economic growth.”

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