Toyota eyes Vietnam as export destination for locally-made Vios

Posted on February 01, 2016

TOYOTA Motor Philippines Corp. is looking at Vietnam as the first export destination of its locally made cars under a government program that aims to make the Philippines a regional automotive manufacturing hub.

A vehicle is assembled at Toyota Motor Philippines’ factory in Laguna in this file photo taken on Jul. 8, 2013 -- BW File Photo
Richard B. Valdez, vice-president for Toyota’s purchasing division and planning department, identified the best-selling Vios as the model that the company will register under the Comprehensive Automotive Resurgence Strategy (CARS) program, the Trade department’s initiative to boost the manufacturing industry by offering incentives for locally assembled cars.

“Vietnam is a good market for Philippine-made Toyota Vios,” he said in an interview on the sidelines of a car parts suppliers workshop last Friday.

He said motorists in the Philippines and Vietnam drive on the right side of the road, which makes locally made cars viable for the country’s trading neighbor. Most countries in the Association of Southeast Asian Nations (ASEAN) are left-driving.

Car makers that are registered under the CARS program are entitled to receive a tax certificate from government regulators that they can use to defray their tax and duty obligations.

The Trade department’s industry development arm, the Board of Investments (BoI), is accepting applicants to the program until March 15. Only three applicants will be selected, with the obligation to each manufacture 200,000 of their car model of choice by 2022.

Mr. Valdez said the program translates to an incentive equivalent to $1,000 for each locally made car, which he described as attractive and could potentially encourage production. He said the incentive could be claimed after the car maker had produced the 100,000th vehicle.

Mr. Valdez said Toyota will start considering exportation of locally made cars once manufacturing costs have matched those of Thailand. The company previously said that under its new president, Satoru Suzuki, it was targetting to sell 200,000 cars by 2020.

Based on BoI statistics, manufacturing a car in Thailand is cheaper by $1,500-$1,800 than in the Philippines. That gap should close once the incentives come in, Trade officials said.

“This program really pertains to manufacturing and that it is important to strike a balance between purely importation and local manufacturing,” said Rommel R. Gutierrez, first vice-president at Toyota, said during Friday’s forum discussion.

“Our challenge is how to maintain the ratio between CBU (complete built up) and CKD (complete knock down), which has really eroded in the past several years,” he said.

“I think it’s already 70%-30%,” he said in favor of CBU, which means cars in the Philippines are largely completely built out of the country. “Ideally, it should be 50-50 or even 60-40.”

Trade Assistant Secretary Rafaelita M. Aldaba said the program should close the gap between the two. She said she was hopeful that by 2020, vehicles assembled locally should be able to catch. She declined to give a forecast ratio.

“The reason why we are doing this new industrial policy is because we want to take advantage of the opportunities arising from the regional economic integration via the ASEAN Economic Community (AEC),” she said.

“Under the AEC, we’ve already reduced the tariffs on auto and auto parts. Right now, they’re already at zero,” she said during the discussion on industry issues. “We’re really making use of these free trade agreements (FTA).”

The liberalized environment could be an advantage for Philippine car manufacturers, she said. AEC member countries are Brunei Darussalam, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.

She added that should the Philippines join the Trans-Pacific Partnership, a trading deal spearheaded by the United States, “then we would expect tariff rates to be eliminated as well and the tariff regime would be similar as what we have now under the AEC.”

“And the same is true if we’re able to forge an FTA with the EU [European Union],” she said. The Philippines and the EU agreed to start negotiations for an FTA in December last year.