Local Parts Makers Claim SMEs Left Behind in CARS Program

January 25, 2017

The Philippine government's Comprehensive Automotive Resurgence Strategy (CARS) is barely a year old and already, it is embroiled in a bit of controversy. The Philippine (Auto) Parts Maker Association (Previously known as MVPMAP, Motor Vehicle Parts Manufacturers Ass’n of the Phils.) alleges that Small and Medium Enterprises (SMEs) are being left behind. Below is an open letter by the president of PPMA, Mr. Ferdinand Raquelsantos, airing their plea: 

"Last April 10, 2012, the Technical Group of Motor Vehicle Parts Manufacturing Association of the Philippines (MVPMAP) started to craft the Auto Parts Industry Roadmap. In its SWOT Analysis, it concluded that the main ingredient to boost the Production and Supply of Local Parts Makers, especially the Small & Medium Enterprises (SME), is to have Joint Venture or Technical Agreement with foreign OE Suppliers.

After four years of deliberations and conceptualization between the Government and the Auto Assemblers and Local Parts Makers, the CARS program was approved in May of 2016. Two approved applicants, Mitsubishi Mirage and Toyota Vios, started its localization program.

Incentivizing the local production of parts, these two OE Assemblers established the sourcing of components by planning in-house parts production and having some of their foreign suppliers to go Technical Licensing Agreement (TLA) with some local Parts Suppliers.

By November 2016, Mitsubishi has awarded certification to 25 local companies to be the initial batch of suppliers for the Mirage Model which is slated to make production by April 2017, while Toyota has announced last December 2016 that 30 local Parts makers will be supplying 317 part numbers for the Vios Model that will start volume production by August 2018.

Noteworthy is the fact that, none of these local suppliers are registered under the SME category. Mostly are Japanese locally established companies with the rest having TLA with Local Filipino Large companies.

The question now is, “What happened to the objective of boosting the local production and supply of SME’s?” It seems that the Local Car Assemblers have totally ignored the local SME supply chain and have just focused on their own Japanese-affiliated suppliers. When Toyota was asked on the possibility of other local parts maker to be a supplier, they said, it will take 4 years for the development and if it gets approved, supply phase-in would be in the middle of production life which will be sometime by the end of 2021.

As for Mitsubishi, a scheduled Wave 1 to 3 phase-in, is targeted for the year 2018. Unfortunately right now, no plan for local development of SME suppliers is apparent or forthcoming.

The local parts association acknowledges a forecast of increase in employment, including the new in-house production activities that the two Car Assemblers has embarked on. However, there has been a noticeable downsizing in the operations of Small and Medium Enterprises that may be considered tantamount, if not near, to closure.

When the 20 invited Japanese suppliers visited MMPC in March of 2016, the Local Parts Association urged them to, not only take over our local businesses, but also to enter into a Joint Venture Agreement or TLA with local parts maker, especially the SME’s.

While it seems that said Japanese suppliers complied with aforementioned proposition, it can be gleaned from the circumstances that they only partnered with their Japanese comrades who are already operating in the Local Auto Industry or with some Filipino Large Companies.

Some Filipino Local Parts Suppliers were dislodged in favor of the Japanese companies which were established in the Philippines and were offered TLA by the original foreign suppliers. The PPMA appreciates the efforts of DTI-BOI in supporting and promoting SME’s to the OE Car Assemblers. The Association are hoping that the car assemblers recognize the importance of developing the SME Local Parts Makers.

Our Large Companies-Members are preparing and looking forward in making true forecast of increase in production of about 55%. They will definitely be benefitted from this CARS Program while the SME’s will continuously strive for their existence."


About the Author

Mr. Gerard Jude Castillo
Gerard has been a self-confessed car nut ever since he was a little boy. As a grown-up, he indulges in his passion by collecting toy cars (which he started since childhood) and reading up on the latest cars out there.  As Associate Editor, he will ensure that you get your fill of the latest cars in the market, as well as a load of automotive features.