By Jenina P. Ibañez

THE government should consider raising the duty on imported cars to protect local assemblers, according to Trade Secretary Ramon M. Lopez.

This comes after Honda Cars Philippines, Inc. announced over the weekend that it was shutting down its production facility starting next month.

“We really have to study the need to impose a safeguard duty and other measures to provide at least a level of support to the local assemblers,” Mr. Lopez told reporters in a group message on Sunday.

The car maker, no. 6 in the Philippines in terms of market share, said it had considered “optimization efforts” in production operations in Asia and the Oceania region.

The company, whose Sta. Rosa, Laguna plant produces Honda City and BR-V models, said it would continue selling cars in the Philippines through its regional network.

Mr. Lopez said Honda might have been facing challenges in keeping costs down.

“The cost structure of their local car assembly, which has about 380 workers, is basically challenged,” he said. “There’s no tariff protection, thus making imports of vehicles as a cheaper alternative.”

George N. Manzano, University of Asia and the Pacific economist and a former Tariff commissioner, noted that “depending on the share of imports, one can make a case for safeguards.”

But it would be better to boost the competitiveness of local manufacturing through a program that develops the local car part sector, among other things, he said in a mobile phone message.

Honda might have chosen to export automobiles from some countries that enjoy zero tariffs in the Philippines, according Michael L. Ricafort, an economist at Rizal Commercial Banking Corp.

The Philippines does not impose tariffs on vehicle imports from Thailand and Indonesia.

Safeguard duties on imported vehicles could be justified to convince car makers to continue their local assemblies, he said in a mobile phone message.

He added that the country has a program to narrow the cost gap of importing vehicles.

The Comprehensive Automotive Resurgence Strategy (CARS) program offers fiscal support to car companies that invest in local production for six years.

Only Toyota Motors Philippines Corp. and Mitsubishi Motors Philippines Corp. have availed themselves of the state support.

Mr. Manzano said the Honda closure could have been a matter of economies of scale.

“It’s cheaper to produce in one country in huge amounts and export the whole car to another country,” he said.

Some economists said the closure could have been driven by a novel coronavirus outbreak that has killed about 2,400 people and sickened about 77,000 more, mostly in China.

Ateneo de Manila University economist Ser Percival K. Peña-Reyes cited the effects of the coronavirus disease 2019 (COVID-19) outbreak on economic growth.

“Greatly affected are the tourism and manufacturing sectors in China, and there are spillover effects on other countries,” he said in a mobile phone message. “Manufacturing has global value chains that have been disrupted by recent events in China,” he added.

As the world grapples with the economic impact of the epidemic and a probable escalation to a pandemic, “this optimization decision of Honda signals the challenges of the manufacturing sector in the midst of external environment uncertainties,” said Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines.

Honda had a 5.5% market share in the Philippines last year, with sales falling 12.7% to 20,338 vehicles.

Total vehicle sales rose by 3.5% to 369,941 units last year, according to the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI) and Truck Manufacturers Association (TMA).

Imported vehicle sales dropped by 0.5% to 87,984 units last year, according to the Association of Vehicle Importers and Distributors, Inc.

The Trade department notified the World Trade Organization on Feb. 18 that it was investigating possible safeguard restrictions on automotive imports based on a petition by the Philippine Metalworkers’ Association (PMA).

PMA said increased car imports hurt the domestic industry. Trade Undersecretary Ceferino S. Rodolfo last year said imports had surged to 207,000 units in 2018 from 153,000 in 2014.