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When having a local manufacturing facility is a disadvantage

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Don’t Drink And Write

I’m a fan of automakers that put up and operate a manufacturing plant in the Philippines in spite of the many challenges that come with it. Even if electricity and labor are relatively more expensive in this country than in other Asian territories, some car companies doing business here still choose to assemble a vehicle or two locally.

For sure, having a manufacturing facility in the Philippines has its advantages, too (including certain tax breaks and the huge PR points earned from the perception that the undertaking is helping generate jobs for Filipinos), but it does seem the disadvantages outweigh them. Especially if you’re a brand whose limited product line doesn’t have the multi-model flexibility of, say, Toyota or Mitsubishi.

Take Isuzu Philippines, for instance. In the first quarter of 2018, the company stopped its Crosswind production in Santa Rosa, Laguna. Which actually made sense as the popular MPV had been around for many, many years already. The problem was that Isuzu essentially retired a vehicle without introducing a new-generation replacement. Remember that the Japanese commercial-vehicle maker had already been suffering from an abysmal lack of passenger-car offerings — besides the Crosswind, the brand only had the D-Max pickup and the Mu-X SUV. The rest of its products were commercial trucks that weren’t really volume sellers.

The result? Isuzu Philippines’ numbers took a drastic dive in 2018. After moving a total of 30,086 vehicles in 2017, the distributor managed to sell just 16,729 units last year — a truly depressing 44% decline. To be fair, nearly all automakers saw their sales go down in 2018, but among those with a sales volume of at least 1,000 units, only Kia (-57%) did worse than Isuzu. But the Korean firm had an excuse: It was going through a tough transition period in the wake of a new distributor acquiring the rights to it in our market.

But what was Isuzu’s excuse?

Besides the company retiring its old MPV, which had still been selling in healthy numbers, the D-Max, a perennially top-selling model in the pickup capital of Asia (Thailand) and even in our very own market, underachieved in 2018. That was even after the release of the more fuel-efficient and cleaner RZ4E Blue Power diesel engine. Maybe it was consumer fatigue: The current D-Max model had been in the market for far longer than its rivals. Maybe it was stiff competition: There was a preponderance of excellent newer players in the segment. Whatever it was, the D-Max struggled mightily in the sales department last year.

To be specific, Isuzu sold 3,870 D-Max units in 2018. By comparison, Toyota sold 18,287 Hilux units and Nissan sold 16,140 Navara units. Even the pre-facelift Mitsubishi Strada sold more with 4,725 units. Without the Crosswind, Isuzu Philippines was left with just one other passenger vehicle.

And now comes more unfortunate news: The manufacturer is also shutting down its local assembly of the D-Max in July this year. After that, the pickup will be sourced from Thailand, just like the Mu-X. With this latest development, the company has no choice but to let go of workers. Note that the automaker has already parted ways with 44 employees from the first wave of assembly-line closure. Inside word has it that Isuzu is preparing to offer a new round of retirement packages to its existing workforce.

So my point is this: Local manufacturing is nice and all. But when business goes bad — even for just a short period of time — the company is easily sent reeling against the ropes versus a competitor that simply imports completely built-up units that don’t require the organization to pay salaries and operational expenses.

My other point is this: If you’re getting a brand-new vehicle and it’s a choice between two nearly similar models, go for the one that is locally manufactured. I just feel that automakers that invest in our country deserve to be prioritized by Filipino consumers. That’s assuming, of course, that the locally made vehicle is a good product to begin with.

Which Isuzu vehicles are. I’m truly rooting for the brand this year. I hope the distributor recovers and does well in 2019. We need to keep the good guys in the auto industry.





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