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IDEA

The Institute for Development and Econometric Analysis

The Philippine Automobile Industry


Industry Overview
In general, it is safe to say that any countrys automotive industry displays a
strong linkage with its process of industrialization. Upon close inspection, the historical
performance of economies of developed countries such as the United States, Germany
and Japan profess to this claim. According to the Technical Education and Skills
Development Authority (TESDA), the solid role of the auto industry to industrialization
could be seen in 4 different points, in a global scope.
First, it is one of the biggest industries worldwide in terms of economic value. In
the 1990s, its production value reached more than $1 trillion and the total production
was estimated at more than 50 million units per year. Second, it has linkages to the basic
industries and materials such as iron and steel, petrochemicals, rubber, glass, electronic
and other major industries. Third, it makes use of a wide spectrum of technologies, which
is always in a continuous process of evolution as consumers preferences for vehicles
change, and fourth, its products are essential for economic growth and development.
Needless to say, from its production processes to the marketing of its products, the
industry exhibits a great deal of connection with (the performance of the) other sectors of
the economy, being highly-intensive when it comes to capital and technology.
The history of the automotive industry in the Philippines can be summarized into
three phases, with the first phase beginning from the rubbles left in the country by the
Second World War, and the third phase ending in the late 1980s, after which the
government began introducing the industry development programs that continued on until
the present.
The Philippine Automotive Industry: A Brief Backgrounder
First Phase
Post Second World War. Recovery from the war required the imposition of
import restrictions on non-essential items to save on foreign exchange.
Automobiles were included in the non-essential item list (most are brought
from the United States as CBUs)
The need for transporting people and produce encouraged the people to
modify the military jeeps left behind by the Americans into mass transport
utility vehicles.
The vehicles were mostly manufactured by Ford and Willys Overland.
Second Phase
1950s and 1960s. A local company, Fabar Inc., started importing semiknocked-down (SKD) and completely knocked-down (CKD) units. There was
a shift from the importation of CBUs to knocked-down units.
The Philippines became the first Asian country to embark on a plan to
localize automobile production from the standpoint of import replacement

IDEA Institute for Development and Econometric Analysis, Inc.

and foreign exchange savings.


Automakers from the United States and Japan had begun establishing local
operations in the form of joint ventures and technical tie-ups. From the initial
government plan of 2-3 assembly plants, plants reached 35 in number.
(which eventually dwindled into 19)

Third Phase

There were 36 different models serving the Philippine market, the size of
which is very little at that time. Nevertheless, the growth potential attracted a
lot of investors, both local and foreign.
1970s and 1980s. The government implemented programs such as the
Progressive Car manufacturing Program (PCMP) for passenger vehicles,
the Progressive Motorcycle Manufacturing Program (PMMP) for motorcycles
and the Progressive Truck Manufacturing Program (PTMP) for commercial
vehicles.
These years were considered as a fruitful decade for the industry, as the
aforementioned programs aimed the promotion of the local assembly of
vehicles and the establishment of manufacturing facilities, the transfer of
technology and the promotion of exports.
Unfortunately, the 1979 oil crisis drove the industry into a recession. Firms
either started going bankrupt or removing their businesses from the
Philippines. This was further exacerbated by the foreign exchange crisis
during the 80s.
Sales dwindled, as well as the number of manufacturers. Between 19831987, about 92.7% of the workforce was displaced.
In a study made by Tolentino and Ybaez in 1983, it was highlighted that the
localization of components led to higher costs for a locally manufactured
vehicle. Nevertheless, it is recognized that the programs above made
significant achievements for the industry.

Source: Technical Education and Skill Development Authority, Region IV

As the economy began to recover in 1987, there was the urgent need to help the
industry get back to its feet. The government began its series of development programs as
substitutes for the past ones, which will then be discussed later in this study.
Structure of the Industry
According to the Technical Education and Skills Development Authority, there are
two main segments in the present automotive industry that can be identified. These are
the a) brand new segment or the formal assemblers segment and b) rebuilt vehicle
segment, or the informal assemblers segment.
The Brand New Vehicle Segment, in terms of structure, is mostly characterized
by joint venture arrangements between local foreign automakers and local firms. These
partnerships usually save both entities from bearing the entire brunt of high capital
requirements. The Philippine automobile industry is primarily concentrated on the
assembly operations mode. Usually, the foreign firms handle the design and engineering
costs with their more advanced operations overseas, while the local assemblers import the
SKD or CKD kits, unpack these imports and assemble them. The importation of parts and
components is further justified with the fact that these items cannot be produced locally.

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Unfortunately, the insufficient materials available for assembly have also hindered the
industry from being as competitive as its foreign counterparts.
The Rebuilt Vehicle Segment, on the other hand, is primarily involved in
producing low-priced vehicles by using a large proportion of the reconditioned
components to produce the likes of owner-type jeeps, AUVs and PUJs. Players in the
rebuild segment operate at varying levels of vertical integration and may consistently
involve the end-user or customer at each stage of the vehicles production. This
involvement is due to the products themselves being predominantly customized.
Figure 1 (Source: TESDA)

Figure 2

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The Production Process


The production process involved in building the running unit involves two
separate processes. These are a) the preparation of the body assembly, and b) the
installation of underchassis and power train components to the chassis assembly. The
outputs of these two independent processes (painted body assembly and chassis assembly
with mounted components) are then merged for final assembly operation. The final
assembly operation involves the installation of mechanical and electrical components and
accessories. Further, upholstery and trimmings are installed into the unit. After all the
necessary components are installed, testing and rectification are performed. The unit is
then cleaned and prepared for delivery.
The following lists the processes for vehicle assembly:
a.

Body Assembly
Mounting on jig
Grinding of rough portions
Preparation and sealing of metal
Application of primer coating
Oven baking and drying

1.
2.
3.
4.
5.
b.
1.
2.
3.
c.

Chassis Assembly
Mounting on jig
Installation of underchassis component
Installation of power train components

Final Assembly
1. Dropping of body assembly onto chassis assembly
2.
Installation of mechanical accessories
3.
Installation of electrical accessories
4.
Installation of upholstery and trimmings
5. Testing of engine
6. Alignment of tires
7.
Performance of road test
8.
Rectification
9.
Finishing of top coat, cleaning
10. Delivery

The following illustrates the basic body structural assemblies and underchassis
assemblies for a motor vehicle.

IDEA Institute for Development and Econometric Analysis, Inc.

Source: TESDA

Motor Vehicle Classification


Basically, motor vehicles in the Philippines are classified into three, according to
the type of vehicles that are assembled. These are 1) passenger cars 2) commercial
vehicles and 3) motorcycles. For the past year, passenger vehicles dominate the
Philippine market for motor vehicles, with about a 55% share.
According to Executive Order 156, which restructures the Motor Vehicle
Development Program (MVDP), the classification of motor vehicles is as follows:
Classification I: Passenger Cars
Passenger Cars shall refer to any four-wheeled motor vehicles, which is propelled by
gasoline, diesel, electricity or any other motive power and principally designed to
transport persons and not primarily to transport goods.

IDEA Institute for Development and Econometric Analysis, Inc.

Classification II: Commercial Vehicles


Commercial vehicles refer to any four- or more wheeled motor vehicle, which is
propelled by gasoline, diesel, electricity and any other motive power and principally
designed to transport persons and/or goods/cargoes, such as light commercial vehicles,
buses, trucks, and special purpose vehicles (for example, ambulances, fire trucks and
the like.)
Light Commercial Vehicles shall refer to vehicles whether four-wheeled drive or not,
which may be classified under but not limited to the following: utility vehicles, sports
utility vehicle (SUV), Asian utility vehicles (AUV), commuter vans and pick-ups, which
are designed to carry both passengers and goods/cargoes.
Classification III: Motorcycles
Motorcycles shall refer to any two- or three-wheeler vehicle fitted with an auxiliary
motor, with or without sidecars.
Industry Players
The market for automobiles is dominated by the Japanese manufacturers. As of
2001, these firms account for an 80% share in the market for new vehicles, and a 70%
hold in the commercial vehicle segment with its sale of Asian utility vehicles. US
manufacturers, on the other hand, is still yet to gain ground, with most of their sales
coming from the SUV and the luxury car segments.
1. Toyota Motors Philippines Considered as a consistent market leader in the industry,
Toyota Motors, being the largest automobile manufacturer in Japan, also boasts of being
the included in the top three automakers in the world. After being incorporated in the
country in 1989 as Toyota Motors Philippines (TMP), they started their operations which
placed their Corolla model among the top favorites in the automobile market. They were
also credited for expanding the Asian Utility Vehicle (AUV) market in the country with
the launching of their Tamaraw FX, which were eventually used as Mega taxis.
Nevertheless, their current bestseller is the Revo.
Toyotas export engine is the Toyota AutoParts Philippines, which manufactures G-type
transmissions for vehicles such as the LiteAce and Hilux, as well as constant velocity
joints (CVJs) for passenger cars. Toyota Motors Philippines is also the first auto firm in
the country that received the ISO 14001, which certifies a firms commitment to the
highest standards in environmental quality.
2. Mitsubishi Motors Philippines Mitsubishi Motors Philippines is only a part of the
larger Mitsubishi group of Companies, the members of which are involved in different
industries in various parts of the world. First established as Chrysler Philippines
Corporation, it has stayed in the automobile market for 41 years, marketing over 16

IDEA Institute for Development and Econometric Analysis, Inc.

different types of vehicles that encompass four different segments: the passenger cars, the
LVCs, buses and trucks. Their most popular products are the Galant, Lancer (for the PC
category), Pajero and Mitsubishi Adventure (for the LCV category). Their main plant is
located in Cainta, Rizal which is capable of producing thousands of vehicles a year.
3. Honda Cars Philippines Participating in the Motor Vehicle Development Program,
Honda Cars Philippines started its operations in the country on October 1990. Jointly
shared by Honda Motors Philippines, Ayala Land Corporation, Mitsubishi Corporation
and Rizal Commercial Banking Corp., it has 9 dealers in Metro Manila with 11
dealerships in the provincial areas. The Philippine subsidiary also boasts of having
received the first annual Best Quality Award from its mother company, as well as an ISO
9002 for its rigorous testing methods which assure quality products.
Honda Cars Philippines is also known for its relentless pursuit of performing their
operations while protecting the environment, such as their multi-million investments in
their Wastewater Treatment facility and Universal Carbonizer thermal treatment system.
Aside from their environmental policies, the corporation also offers training and
scholarship programs to Filipino engineers and students in technological institutions.
4. Isuzu Philippines Corporation A joint venture of Isuzu Motors Limited (Japan),
Ayala Corporation, RCBC and Mitsubishi, Isuzu Philippines Corporation is the result of a
long history dating back to 1950, where its brand first found its way in Philippine roads
as a truck brand. It started its operations during 1995 after changes in management
operations from the old Isuzu Motors Pilipinas. Carrying on its slogan of Your
Responsible Partner, Isuzus products include Crosswind, Trooper, Fuego, D-max and
some other passenger vans and trucks. It has 20 dealerships all over the country and
exports Crosswind units to Vietnam, which is its only export market to date.
5. Nissan Motors Philippines Nissan Motors Philippines, together with Universal
Motors Corporations, is the production arm of Nissan Motors Co., Limited in the Asian
region. The firm produces models such as the Cefiro and the Sentra (Sunny). Its mother
companys alliance with Renault marked the first of its kind between French and
Japanese automakers, wherein both companies cooperate in all major areas of the
business. Nissan is also known for its environmental policies in conjunction with its
production processes. The company has been publishing an Environmental Report since
1998, which had been changed into Environmental and Social Report in 2001.
Likewise, the manufacture and assembly of motorcycles in the country is
dominated by Japanese firms.
1. Honda Philippines Honda Philippines remains to be the largest assembler of
motorcycles in the country. It dominated the local market in 2004 by cornering more than
half of total sales, capturing 51%. A subsidiary of Tokyo-based Honda Motor Co. Ltd., it
was known as Mariwasa Honda Inc. when it established in 1973 through a joint venture
between Honda Motor Japan and Mariwasa-Distributors Inc. It was renamed to Honda

IDEA Institute for Development and Econometric Analysis, Inc.

Philippines in 1983 and was tasked to import, manufacture, and distribute Honda
motorcycles and power products.
2. Suzuki Philippines Suzuki Philippines is a wholly-owned company of Suzuki Motor
Company, Ltd. of Japan, engaged in the manufacturing of both automobiles and
motorcycles in the country. It is interesting to note that the company originated from a
business of a Filipino family, which was later sold in 1985 to its present mother company.
It was also the first firm to address the demands for motorcycles outside the country, as it
began its export operations in 1990 in Guatemala. Its motorcycle models, which include
Raider 150 and Shogun Pro 125, are being sold in about 31 motorcycle dealerships in the
country.
3. Norkis Trading Company Norkis, owned by the Quisimbings and based in Cebu, is
one of the oldest partners of Yamaha Motors Co. Ltd. of Japan, the worlds leading
motorcycle manufacturer. Consequently, the company is the exclusive distributor of
Yamaha motorcycles in the country, along with its other product lines including
automobiles, parts and air-conditioners.
3. Kawasaki Motors Philippines Kawasaki Motors (Philippines) is a subsidiary of
Kawasaki Heavy Industries, Ltd. The latters most visible consumer product line is its
motorcycles and ATVs business, as well as tractors, trains, industrial robots and
aerospace equipment including military aircraft. In the country, Kawasaki is mostly
known for its motorcycle models, and is popular for improving its products with regular
enhancements.
SELECTED FINANCIAL ACCOUNTS, IN '000
TOP INDUSTRY PLAYERS
Manufacture of Motor Vehicles
FUCHS LUBRICANTS PHILIPPINES INCORPORATED
DEMO POWER PHILIPPINES INCORPORATED
FAR EAST INDUSTRIAL SUPPLY AND COMPANY
INCORPORATED
COMMERCIAL MOTORS CORPORATION
MIMINA MOTORS INCORPORATED
MILLENNIUM CARS MINDANAO INCORPORATED
JAGUAR PHILIPPINES INCORPORATED
JAGUAR CARS INCORPORATED
JIANSHE MOTORCYCLE INDUSTRIAL PHILIPPINES CORP
KEIHIN PHILIPPINES CORP
NIDEC PRECISION PHILIPPINES CORPORATION
HYUNDAI ASIA RESOURCES INCORPORATED
FORD GROUP PHILIPPINES INCORPORATED
ISUZU PHILIPPINES CORPORATION
MITSUBISHI MOTORS PHILIPPINES CORPORATION
HONDA CARS PHILIPPINES INCORPORATED
TOYOTA MOTOR PHILIPPINES CORPORATION
Manufacture of bodies (coachwork) for motor vehicles
METALS ENGINEERING RESOURCES CORPORATION
ALMAZORA MOTORS CORPORATION
MEGASTAMP INDUSTRIES CORPORATION

2003
TOTAL
ASSETS

TLIABS

SEQUITY

REVENUE

GPROFIT

RE

61136
50176

120264
17166

-59128
33010

103543
118666

29808
118666

-79539
18895

74649
1237659
23277
75134
93700
39891
710374
595174
1137820
408352
1335296
1946263
5991463
3814453
7551592

41095
1256108
156
27000
117861
72322
740788
182858
891696
299834
1136904
1105040
3042563
1573509
3020260

33554
-18449
23121
48134
-24161
-32431
-30414
412316
246124
108518
198392
841223
2948900
2240944
4531332

128179
145175
219790
317074
320774
364443
448863
701897
898610
1383421
5991373
10785886
10864689
15570742
20768956

25614
22320
5793
14057
41528
37933
-94
102296
-108807
160448
1217321
960592
517177
1839697
1681017

6028
-212196
-1954
-2766
-29249
-37288
2952
44888
-59130
2051
96413
-539665
977361
957121
1588858

81645
213193
96145

33884
218672
89637

47761
-5479
6508

104560
197469
199532

17939
34027
11570

-2939
-14788
1705

IDEA Institute for Development and Econometric Analysis, Inc.

STA ROSA MOTOR WORKS INCORPORATED


138155
METALMAN STEEL FORMING CORPORATION
114896
MEGAPOLITAN MARKETING INCORPORATED
26606
Manufacture of parts and accessories for motor vehicles and their engines
BAKERSON MARKETING CORPORATION
32494
SHOSHIBA FILIPINA INDUSTRIA INCORPORATED
111620
BIG OS TIRE CORPORATION
83382
PHILIPPINE PRECISION TECHNOLOGY INC
64348
FORMTECH INCORPORATED
18897
PHILIPPINES MANSHO INCORPORATED
64039
KYOEI KOGYO PHILIPPINES CORPORATION
32794
EMICOR INCORPORATED
138314
HKT PHILIPPINES INCORPORATED
110700
AUTOLIV IZUMI PHILIPPINES INCORPORATED
109788
PHILIPPINE NAKAMURA CORPORATION
68910
REMCOR INDUSTRIAL AND MANUFACTURING CORPORATION
60811
S C KYMCO PILIPINAS INCORPORATED
192044
LINE SEIKI PHILIPPINES INCORPORATED
95831
HOKEI SUBIC CORPORATION
420835
OGAMI CORPORATION
83992
PHILIPPINE HKR INCORPORATED
364523
JABEZ MOTOR CORPORATION
41121
GUNMA GOHKIN PHILIPPINES CORPORATION
191378
ROBERTS AUTOMOTIVE AND INDUSTRIAL PARTS
611353
MANUFACTURING CORPORATION
MEINAN PHILIPPINES INCORPORATED
225602
MORIROKU PHILIPPINES INC
279012
JECO AUTOPARTS PHILIPPINES INCORPORATED
145050
AUTOLIV QB INCORPORATED
129467
NORKIS AUTOMOTIVE RESOURCES CORPORATION
297142
PHILIPPINE NAGANO SEIKO INCORPORATED
276673
DAIWA SEIKO PHILIPPINES CORPORATION
793108
TS TECH TRIM PHILIPPINES INCORPORATED
399050
TECHNOL EIGHT PHILIPPINES CORPORATION
501463
TAKANICHI PHILIPPINES CORPORATION
181762
PHILIPPINE TECHNO TAKATSUKI INCORPORATED
256868
KEIHIN AUTO PARTS PHILIPPINES CORPORATION
143201
ZPI PHILIPPINES INC
213299
ADVAN MOTOR INCORPORATED
120484
MITSUBA MANUFACTURING PHILIPPINES CORPORATION
563446
FCC PHILIPPINES CORPORATION
597720
HONDA PARTS MANUFACTURING CORPORATION
1512337
PHILIPPINE ALUMINUM WHEELS INCORPORATED
415977
IMASEN PHILIPPINE MANUFACTURING CORPORATION
489147
TS TECH PHILIPPINES INCORPORATED
520872
LAGUNA AUTO PARTS MANUFACTURING CORPORATION
755196
BRIGGS AND STRATTON INTERNATIONAL EAST ASIA INC
741528
MITSUBISHI CORPORATION
2461556
TRP INCORPORATED
845442
FURUKAWA ELECTRIC AUTOPARTS PHILIPPINES
INCORPORATED
1780710
MITSUBA PHILIPPINES CORPORATION
1549190
ISUZU AUTOPARTS MANUFACTURING CORPORATION
2260494
TOYOTA AUTOPARTS PHILIPPINES INC
2623775
ASIAN TRANSMISSION CORPORATION
1813694
TAKATA PHILIPPINES CORPORATION
3500215
JIDECO MANUFACTURING PHILIPPINES INC
3349405
FORD MOTOR COMPANY PHILIPPINES INCORPORATED
4730603

59248
83953
22093

78907
30943
4513

206631
235091
280254

25027
6286
14048

25948

16972
102134
84632
20451
22630
75386
12673
96697
81385
11045
35062
38722
170947
15366
447946
40764
194933
10756
176389

15522
9486
-1250
43897
-3733
-11347
20121
41617
29315
98743
33848
22089
21097
80465
-27111
43228
169590
30365
14989

79480
82461
86635
87306
92138
92782
104290
107707
129291
132530
135306
142623
145728
159465
161217
162578
172084
181167
203797

19300
22985
11221
20006
14920
5731
11992
29436
24002
16606
14858
13115
40804
23259
-22674
31065
40313
10491
18794

1102
-29686
-5441
11535
-4667
-21167
627
3311
-969
41603
11840
0
1984
17937
-20968
12454
11413

580366
134264
205408
87059
98432
266411
116788
515409
40649
149086
80596
222100
103043
157250
84058
66183
43778
366443
258845
121168
183155
233085
636823
448660
513211

30987
91338
73604
57991
31035
30731
159885
277699
358401
352377
101166
34768
40158
56049
36426
497263
553942
1145894
157132
367979
337717
522111
104705
2012896
332231

219947
221273
232414
246107
265152
274882
317419
328833
341778
344193
344501
363135
451537
474440
557422
601894
651550
704663
716543
787335
846474
1158879
1159102
1380543
1439634

11579
58719
43467
53603
43965
20781
60105
-39422
105341
63445
91028
77138
88143
54545
46172
256832
220459
183584
92567
144710
166022
141320
129860
131615
142245

7160
25693
76050
47476
-25712
-14424
45864
-217382
95706
79115
-51419
7

1679696
497048
850126
386709
1152700
552575
2664731
4150413

101014
1052142
1410368
2237066
660994
2947640
684674
580190

1611921
2345937
3397450
3411695
3813211
4785377
5276278
11664491

110760
222639
743795
418965
320789
1759633
202428
600139

-32553
568932
482896
900404
244726
1172728
3557
-371566

IDEA Institute for Development and Econometric Analysis, Inc.

1139

-144030

28936
-29541
117431
224536
313303
-16901
146157
112159
261990
59005
41337

TEMIC AUTOMOTIVE PHILIPPINES INCORPORATED


Manufacture and assembly of motorcycles
MASUDA PHILIPPINES INCORPORATED
SUZUKI PHILIPPINES INCORPORATED
NORKIS TRADING COMPANY INC
KAWASAKI MOTORS PHILIPPINES CORPORATION
Manufacture of motorcycle engines and parts thereof
JIANSHE PHILIPPINES INCORPORATED
PORTA COELI INDUSTRIAL COMPANY INCORPORATED
HONDA PHILIPPINES INC

3021485

1461351

1560134

12042601

494508

405040

422670
1010478
1201288
1994832

268801
138010
612711
1570257

153869
872468
588577
424575

503237
1538454
1589024
2849941

121693
152696
267645
301241

27467
570517
184028
85293

50044
152141
2376636

46905
93514
1123432

3139
58627
1253204

86197
204018
1447398

14941
21152
142947

10250
570060

NORKIS INDUSTRIAL AND ENGINEERING INCORPORATED

1202550

1160136

42414

1675470

121341

12299

Source: IDEA, Inc. and CIBI, Inc.

Demand
2004 Total Automotive Industry Sales
(in units)
6,000
Total Passenger Cars

Total Commercial Vehicles

5,000

4,000

3,000

2,000

1,000

0
Jan.

Feb.

Mar

Apr

May

June

July

Aug

Sept

Source: CAMPI

The demand for motor vehicles can be summarized into five points, according to a
study done by TESDA. These are 1) family income and expenditure, 2) the performance
and features of the vehicle, 3) pricing, 4) car-financing schemes and 5) the availability of
parts and services (or after-sales).
Family Income and Expenditure. Based on the Family Income and Expenditure Survey
of 2000, the total family income for was estimated at P2.2 trillion, up by 25.8 percent
over the P1.7 trillion in 1997. This translates to an average annual increase of 8.0 percent.
The total family expenditures, on the other hand, reached P1.8 trillion higher by 27.5
percent over the P1.4 trillion level in 1997.

IDEA Institute for Development and Econometric Analysis, Inc.

On the average, family income reached P144,039 in year 2000, increasing by 16.9
percent over the P123,168 in 1997. From its trend, there has been less expenditure on
food by most families. Family expenditure for Transportation and Communication has
rose from a 5.8% share from 1997, to a 6.3% share in 2000.
Robust spending on the transportation and communication sector is most evident
on the third quarter of 2003, caused by the implementation of the amended taxes on
motor vehicles. Sales of passenger cars, motor vehicle parts and accessories, tires and
batteries also increased. A downturn on 2004 is most attributed to the full impact of the
new taxes imposed on motor vehicles.
Percentage Distribution of Total Family Expenditure
by Major Expenditure Group 1997 and 2000
(at current prices)

Source: NSCB.

Performance and Features. According to the BusinessWorld, automobile manufacturers


take great pains to develop certain aspects of the vehicles, such as the engine
performance, the interior features and in-car entertainment (ICE). Engine performance
has improved greatly from its beginnings. The cars in the country have evolved into gasguzzling, carburetor-linked muscle cars to fuel-efficient, electronic-fuel injection-linked,
computer-controlled, camshaft-laden power plants. Both the interior and exterior
features of vehicles has become major consideration among buyers, such as the large
spaces inside to accommodate a larger number of passengers as well as cargo. The
exterior appearance, on the other hand, appeals more to image-conscious owner-drivers.

IDEA Institute for Development and Econometric Analysis, Inc.

ICE, or in-car entertainment, has been continuously developing to meet the


audio/video demands of the passengers. From the typical radio-speaker combination
found in older vehicles, the entertainment accessories of todays vehicles have included
CD players, advanced speakers and even small television sets.
Pricing. The price of the vehicles undoubtedly remains as a very crucial factor in
assessing the sales performance of the industry players. The bulk of the Philippine auto
market is price-sensitive, in general, as indicated by the family income structure.
The development of the peoples car, defined as small vehicles that could carry
around 4-5 passengers, allowed many families to acquire their own vehicles, since it
provided the market with low-cost vehicles that was primarily intended for personal use
(though later, it evolved into for-hire vehicles such as cabs etc.) The introduction of the
peoples car is actually a component of the governments liberalization efforts during the
1990s.
Nevertheless, manufacturers/ dealers have come up with financing schemes to assist
potential buyers in acquiring their vehicles. Thus, aside from banks where consumers
could avail of loans to make their purchases, dealers now have their own in-house
financial services corporations to help consumers and consequently, boost their sales.
Car Financing Schemes. According to the Economist, low interest rates and attractive
financing schemes have led to an increase in the number of car loans: outstanding car
loans rose by 10.5% in the year to end-June 2003, to P44.6 billion (around US$800
million), according to the Bangko Sentral ng Pilipinas. The share of loans for the
purchase of second-hand cars in total car loans has been rising, although loans for the
purchase of new cars still account for the majority of car loans. There are also in-house
financial services provided by dealers themselves, such as Toyota Financial Services
Philippines, which helps TMPC push Toyota sales by offering vehicle financial packages
affordable to the consumers.
After-sales service/ Availability of Parts and Services. As stated before, there is a large
potential in the replacement market, as evidenced from the number of registrations
involving used cars. According to TESDA, for the personal market segment, the purchase
of a vehicle is the result of cumulative savings over the years. Hence, the purchase is
expected to last a lifetime. Owing to this, the availability of cheap spare parts and an
efficient servicing network is a must. For the business segment, a vehicle lying idle is
wasted capacity and higher operating costs. Therefore, the need for spare parts and
timely servicing would be of utmost importance.

IDEA Institute for Development and Econometric Analysis, Inc.

Automotive Industry Sales,


by category, 2002-2004 Sept

2002 PC SALES

2003 PC SALES

2004 PC SALES

2002 CV SALES

2003 CV SALES

2004 CV SALES

8000

7000

6000

5000

4000

3000

2000

1000

Source: CAMPI and IDEA, Inc..


0
n
Ja

b.
Fe

ar
M

r
Ap

ay
M

n
Ju

l
Ju

Au

pt
Se

Oc

v
No

c
De

Compared to the demand for utility vehicles, demand for passenger cars has
remained relatively low over the years. This trend is primarily attributed to the
characteristics of AUVs which make them very appealing to Filipino households.
Before the imposition of the Auto Excise Tax Law, these utility vehicles were
relatively more affordable than their passenger car counterparts. Also, the sturdy
build and the spacious interior of these utility vehicles perfectly accommodate the
large size of the Filipino household. With the entry of new models and new
financing schemes in the market, consumers are now demanding for higher
quality and better value for money.

The low rates of car ownership, as well as the preference for utility vehicles, can
be primarily attributed to the condition of Philippine roads, given the state of its
infrastructure that has been suffering from years of underinvestment. Demand is
also affected by the countrys increasing population and household size, as well as
the rising personal incomes of the Filipinos.

In terms of growth rate, the demand for utility vehicles has been expanding faster
than that for passenger cars. For example, out of 539,845 new vehicles registered
during 2003, 142,686 are new utility vehicles while only 30,032 are passenger
cars. Trucks, buses, motorcycles and trailers share the remainder.

Market share has also been expanding for utility vehicles. Among the registered
cars from 1981 to 2003, the average yearly market share for utility vehicles stand
at 31% compared to the PC categorys average share of 16%. Over the same

IDEA Institute for Development and Econometric Analysis, Inc.

period, however, both utility vehicles and passenger cars experience negative
average annual growths at -3% and -9%, respectively.
The imposition of the Auto Excise Tax Law in October 2003 created a bias
towards the passenger car and luxury car segments, shifting consumer demand
away from utility vehicle purchases. The new excise tax, which revised the
scheme from being engine size-based into one based on the vehicles selling price,
essentially made the PC category and luxury cars more affordable for consumers.
This can be observed from the drop in the sales of commercial vehicles from the
onset of 2004.

Based on historical performance, the automobile industry has a high potential for
further growth. Over the past decade, new vehicles only account for 12% of the
total vehicle registrations, while the rest are for renewed ones. Nevertheless, this
88% registration share of renewed vehicles show the increasingly growing market
for automobile parts and replacements.

The poor condition of the road networks in the country, unless properly addressed,
will remain as a significant contributor when it comes to the sales performance of
passenger cars vis--vis utility vehicles. According to the Department of Public
Works and Highways, only 61% of the roads were paved with concrete or asphalt
in 2001. However, some of these infrastructure problems are now being addressed
with the help of the private sector through build-operate-transfer (BOT) schemes.

The economic recovery in the United States and other trading partners of the
Philippines will spur the demand for exports, as well as improve the level of
overseas remittances, thus increasing personal incomes and spurring consumption.
45

20

2004 Level and Growth of Motorcycle Sales

15

40

Total
Growth Rates

35

10
5

30

Level

0
25
-5
20

Growth Rate

Thousands

-10
15

-15

10

-20

-25

-30
Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

IDEA Institute for Development and Econometric Analysis, Inc.

Nov

Dec

Sales of motorcycles showed strong growth over the last ten years as the economy
flourished and the purchasing power of the average Philippine citizen increased
sharply. The industry had been significantly affected by the Asian economic crisis,
observable through the drastic decline in motorcycle sales. Nevertheless,
registration data from the Land Transportation Office shows that new registrations
have grown at an annual average of 9.19% from 1996 2002, although negative
growth was recorded for the years 1997-1998. Since then, registrations for new
motorcycles have picked up. During the 2003-2004 period, motorcycle sales
increased significantly from 502,450 units from 312,000 units, or a jump of 61%

According to a study by the Stanford Technology Ventures Program, the demand


for motorcycles in developing countries are mostly comprised by that of
middleweight and lightweight models (as classified by its engine capacity). Given
with a lower income and the primary goal of having cheap transportation,
individuals in countries such as the Philippines, have the tendency to buy scooters
or lightweight models that entail the most minimal expenses for maintenance. The
tendency to buy bigger bikes usually comes with an increase in income.
Consequently, it is not surprising that the local market is dominated by Japanese
motorcycle makers, who themselves dominate the global market for these kinds of
vehicles.

Consumers in developing countries, on the other hand, use motorcycles both for
transportation and recreation, thus the bigger desire to invest in them. As a result,
the study says that . . the demand for the heavy and super heavyweight custom,
touring and performance models was significantly higher than in the developing
countries. Last year, only 30% of the market was cornered by non-Japanese
motorcycle makers.

The demand for motorcycles in the Philippine market has already undergone
various changes. At present, it is mostly utilized as a means of transportation
especially by messengers. However, motorcycles have also assumed the status of
being a fashion trend, especially in the late 1990s. Firms have recognized this
such that they have come up with models that appeal to women or to teenagers.
Although demand for motorcycles is skewed towards business use, there is the
emerging market coming from solo buyers. At present, makers are also
targeting the youth market, a big portion of which purchase scooters for
commuting or personal use.

The rising price of oil in both the global and local market, as well as the road
congestion, has encouraged motorcycle companies to further expand and intensify
their operations. As an example, Norkis Trading Co., the distributor of Yamaha
motorcycles in the country, is hoping for a shift to motorcycles among car users
from the lower B and upper C income classes for the abovementioned reasons.

Sales in the short-term for the motorcycle segment is very encouraging, based on
target figures of both industry players and the government. With the 61% growth

IDEA Institute for Development and Econometric Analysis, Inc.

in 2003-2004, the Motorcycle Development Program Players Association expects


the industrys sales this 2005 to be between 16 to 25% more than what had been
achieved last year. The Board of Investments had set a sales target of 1.5 million
units sold by 2008, although the industry association has a lower figure set at one
million units by the year 2010.
Share of Industry Players to Total Sales, 2004
Victoria
1%

Eastworld
2%

SC Kymco
8%
Yamaha
13%

Honda
51%

Suzuki
10%
Kawasaki
15%

IDEA Institute for Development and Econometric Analysis, Inc.

2004 AUTOMOTIVE VEHICLE SALES


Jan.

Feb

Mar

Apr

May

June

July

Aug

Sept

YTD

% Market

TOYOTA
Vios

524

585

593

547

471

554

727

563

449

5,013

Corolla

524

559

684

597

510

688

707

512

534

5,315

Camry

155

139

111

100

116

104

64

138

110

1037

1,203

1,283

1,388

1,244

1,097

1,346

1,498

1,213

1,093

11,365

Total Passenger Cars


Coaster
Previa
Rav-4 - (CBU)(4x4)

47

34

38

41

32

35

32

35

26

320

133

162

213

184

169

205

130

167

146

1,509

23

26

24

34

22

21

23

38

30

27

245

143

135

122

118

125

171

138

154

80

1,186

68

54

26

39

41

137

52

38

15

470

614

884

820

875

384

985

768

632

6,787

Landcruiser - (CBU)(4x4)
Prado - (CBU)(4x4)
Hi-ace - (CBU)
Hi-lux - (CBU)

46.81%

Tamaraw FX

825

Total CV

1,245

1,024

1,318

1,227

1,264

956

1,376

1,201

936

10,547

26.18%

Toyota Total

2,448

2,307

2,706

2,471

2,361

2,302

2,874

2,414

2,029

21,912

33.93%

140

155

169

464

HONDA
Jazz
City

546

471

284

202

334

317

265

153

238

2,810

Civic

186

134

333

178

273

203

222

130

232

1,892

36

167

55

49

87

58

27

45

73

597

Total Passenger Cars

768

772

672

429

694

578

654

483

712

5,763

CR-V 2.0 AT/MT (AUV)

17

CR-V 2.0 AT/MT (SUV)

234

437

324

251

442

324

Accord

Total CRV
Honda Total

236

23.73%

24

337

242

273

190
190

253

2,525

237

337

242

274

253

2,549

6.33%

1,019

1,214

996

666

1,031

820

928

673

965

8,312

12.87%

219

230

170

86

110

138

128

115

187

1,383

MITSUBISHI
Lancer
Galant - 2.0
Total Passenger Cars
Space Gear - (CBU)
L300 F/B/WT/AF
L300 Exceed - Diesel (CBU)
L300 V/V
L300 C/C

27

221

234

173

87

115

143

130

116

191

1,410

30

53

41

41

28

47

25

34

30

329

184

154

239

238

134

195

227

227

126

1,724

16

26

45

30

30

30

46

32

17

272

39

23

25

10

12

25

37

48

37

256

102

107

134

71

75

108

87

105

104

893

Outlander

42

23

30

30

22

34

21

23

23

248

L200

16

23

21

14

16

102

L200 Strada(4x4)

28

31

16

25

23

39

24

17

21

224

340

334

307

146

369

494

411

498

599

3,498

Trucks

32

46

41

31

48

31

26

36

30

321

Buses

16

Pajero (4x2) / (4x4)

Adventure

Total CV
Mitsubishi Total

5.81%

830

823

904

636

757

1,015

908

1,024

990

7,887

19.58%

1,051

1,057

1,077

723

872

1,158

1,038

1,140

1,181

9,297

14.40%

NISSAN

IDEA Institute for Development and Econometric Analysis, Inc.

350Z

Verita

4
3

Sentra Exalta

25

54

54

42

47

52

79

70

102

525

Sentra

20

45

52

70

82

149

121

159

206

904

Cefiro

10

29

22

12

10

15

34

30

38

200

Total Passenger Cars

55

130

130

124

139

218

235

346

1,636

Serena QR-V

18

20

33

X-Trail

192

113

194

151

275

286

210

198

272

1891

Total CV

210

133

227

151

275

286

210

198

272

1,962

4.87%

Nissan Total

265

263

357

275

414

504

445

457

618

3,598

5.57%

259
-

6.74%

71

COLUMBIAN AUTOCAR
Mazda

KIA-CD5

GTX

LX

Picanto

56

56

15

24

19

24

11

32

142

15

24

19

24

11

88

198

15

24

23

24

11

88

202

0.31%

BMW

74

81

45

42

84

102

46

86

92

652

2.69%

Asian Total

74

81

45

42

84

102

46

86

92

652

1.01%

Rio
Total Passenger Cars
Sportage - (CBU)(4x4)
Columbian Total

0.82%

ASIAN CARMAKERS

PROTON
Audi - (CBU)

36

VW - (CBU)

18

Total Passenger Cars

10

54

VW Caravelle VR6 - (CBU)

VW Caravelle 2.5 TDI - (CBU)

0.22%

VW Caravelle 2.4 Synchro - (CBU)

Total CV

0.00%

Proton Total

10

54

0.08%

25

35

31

21

27

48

32

34

31

284

1.17%

SCANDINAVIAN MOTORS
Volvo
SM Total

0.44%

COMMERCIAL MOTORS
SL559 AMG

S350

E200 K A/T (CBU)

E320 A/T

E220 (CKD) CDI

E240 Mercedes (CKD)

Indent Orders (CBUs)


Total Passenger Cars

MB Vito L CDI

SSangyong Musso (4x2)

MB-100 Van - (CBU)

IDEA Institute for Development and Econometric Analysis, Inc.

0.01%

Trucks

Trucks-Indent

Total CV

15

0.04%

Commercial Total

18

0.03%

997

UNIVERSAL MOTORS CORP.


P/U

100

55

84

94

104

131

111

147

171

Terrano(4x4)

Urvan Shuttle

84

81

87

104

91

125

84

109

122

887

Nissan Patrol (4x2)

14

22

21

19

33

49

49

45

65

317

Total CV

198

158

192

217

228

305

244

301

358

2,201

5.46%

Total UMC

198

158

192

217

228

305

244

301

358

2,201

3.41%

PHIL-HINO
Suzuki Esteem Wagon - (CBU)
Bravo (SK410-KA)
Super Carry (SK410-SR/HR)

28

79

96

19

30

14

288

41

Samurai (Long Body) (SJ413-LB)

Vitara (SE416-JLX) - (CBU)(4x4)

10

Vitara SQ (CBU)(4x4)

11

10

10

69

5N JX/JLX

14

18

27

21

16

18

18

143

Trucks/Bus

29

21

17

22

116

Phil-Hino CV

79

128

162

30

45

71

36

47

68

666

1.65%

Total Phil-Hino

79

128

162

30

45

71

36

47

68

666

1.03%

FORD MOTOR. CO. PHILS.


LYNX - LSI / MT 1.3

21

12

24

49

26

19

GSI / MT 1.6

-2

10

11

37

155
91

GSI / AT 1.6

18

12

10

14

21

28

122

GHIA / MT 1.6

13

13

50

GHIA / AT 1.6

15

18

39

38

10

151

RS Centennial

16

23

19

15

11

16

13

124

Sub-Total

116

134

54

62

51

51

85

693

63

125

195

13

-3

27

68

72

Ecosport

Lincoln Town Car / Mustang

Mazda 3

Mazda 6

Total Passenger Cars

68

74

122

147

51

63

60

116

214

915

Ranger

51

105

91

62

82

89

76

27

61

644

F150 Super Cab(4x4)

180

143

174

189

142

237

264

256

180

1765

Expedition XLT (4x2)

34

31

33

32

24

20

192

Club Wagon XLT

10

17

11

67

134

135

150

131

208

221

151

106

110

1346

33

14

15

39

48

36

26

217

Everest

Sport Trac (4x4)


Escape
Mazda CV (Tribute 4x2/RX8)

3.77%

Total CV

409

429

498

416

456

596

574

453

402

4,233

10.51%

FORD Total

477

503

620

563

507

659

634

569

616

5,148

7.97%

129

127

41

92

253

184

159

201

233

1419

ISUZU PHILS. CORP.


DMAX

IDEA Institute for Development and Econometric Analysis, Inc.

Trooper(4x2)
Highlander AUV

11

26

19

12

17

103

419

407

679

392

441

451

487

571

348

4,195
587

P/U Crew Cab

55

43

46

77

76

63

96

48

83

Trucks

75

82

57

63

59

58

49

65

83

591

686

670

849

632

848

768

792

886

764

6,895

Isuzu Total
Total Industry

17.11%
10.68%

GENERAL MOTORS
Opel Astra

12

13

Aveo

12

11

11

81

Optra

113

188

132

132

128

185

1380

Zafira

46

Impreza WRX

141

212

158

146

144

Total Passenger Cars

167

188

208

Venture

14

15

42

28

34

Silverado

SubUrban

Forester

Tahoe

54

2
199

1563

19

241

43

45

20

Trailblazer

6.44%

55

45

41

141

Total CV

46

52

27

24

18

62

104

87

79

499

1.24%

GM Total

213

240

235

165

230

220

250

231

278

2062

3.19%

Nissan Diesel (T)

10

22

12

12

11

11

10

103

MAN 14.223 FOC

10

14

4X2

87

83

77

64

39

68

69

135

75

697

4X4

14

11

10

10

11

11

83

Carnival/Sedona

10

11

10

12

11

16

86

Pregio - (CBU)

33

18

38

36

36

37

41

25

21

285

Sorento

17

10

19

12

13

21

14

17

21

144

Sub-Total Kia

161

133

154

127

111

140

144

195

130

1,295

Columbian Total

173

155

166

143

120

152

155

206

142

1,412

COLUMBIAN MOTORS CORP.

KC 2700

Total Industry

3.50%
2.19%

FIL-DAEWOO
BV-120 L

Daewoo BF 105L

0
26

Daewoo BV113T

Daewoo-BH117L-Indent

26

Fil-Daewoo (T)

Total Industry

0.06%
0.04%

FRANCISCO MOTORS CORP.


Anfra/Jeep (AUV)

Mazda (LCV)

Mazda Cab Chassis

Francisco Total

Total Industry

0.00%
0.00%

MAN
13-220 HOCL

18-310 HOCL

IDEA Institute for Development and Econometric Analysis, Inc.

Man

Total Industry

0.02%
0.01%

HYUNDAI
Matrix

32

31

53

31

63

59

41

Coupe

28

20

19

87

XG
Sonata
Total Passenger Cars

32

345

61

52

57

34

72

79

44

32

438

4
1.80%

Starex

55

86

90

164

191

228

223

191

158

1386

Total CV

55

86

90

164

198

228

223

191

158

1386

3.44%

116

138

147

198

198

300

302

235

190

1824

2.15%

HYUNDAI Total
Source: CAMPI

Supply
Annual Production of the Automotive Industry
(As of 2003)

Passenger Car Assembly


Commercial Vehicle Assembly
Motorcycle Assembly

No. of
Participants

Annual Output

14
21
21

221,450 units
145,950 units
462,100 units
Source: BOI

According to the Board of Investments, the Philippine automobile market is


served by a total of 56 firms engaged in motor vehicle assembly as of 2003, under
the Motor Vehicle Development Program. There are 14 participants for the
Passenger Car Assembly segment and 21 participants each for the commercial
vehicle and motorcycle segments.

The Philippine market is dominated by Japanese manufacturers, where the local


firms are mostly concentrated/ restricted on assembly operations, and usually
working under the flagship of their foreign mother companies. American and
European carmakers, on the other hand, are known to dominate the luxury car
segment, although it comprises a negligible percentage of the total automobile
production. Nevertheless, the industry is characterized by cut-throat competition,
as major industry players compete for shares in the market that has a base of less
than 19,000 units.

U.S. Vehicle manufacturers are come competitive in the SUV segment than in the
passenger car and other commercial vehicle segments. In spite of the Filipinos
lower purchasing power, the more expensive Ford SUVs and vans are wellreceived by the local market.

The Philippine motor vehicle industry is less developed than that of its ASEAN
neighbors, with only 40% of its total capacity being utilized by its players. Both

IDEA Institute for Development and Econometric Analysis, Inc.

the motor vehicle assembly and the automotive parts and replacement segments
experienced a large drawback with the 1997 Asian Financial Crisis and have been
enjoying moderate growth since then. It is interesting to note that the year 1996
proved to be an outstanding year for the industry as its performance was strongly
backed-up by high investments, high domestic vehicle demand and high
purchasing power of consumers. It was only during 2002 when sales were able to
surpass the 1996-1997 levels. Registration figures for this year were at 490,881
units compared to only 476,235 new units registered in 1997.

Given the high potential for market growth, competition in the auto industry is
expected to intensify in the medium-term. As industry is forecasted to have
stronger sales growth, there is also a large remaining segment in the market to
penetrate, and firms will have to compete over consumers as they continue on
demanding for higher quality and better value for money.

Likewise, rivalry in the motorcycle segment will increase in the future, as the
market for these vehicles show promising signs of further growth. Some firms are
already eyeing the opportunities overseas, and readying their expansion and
export plans. Some, however, are focusing on the domestic market, creating their
own niche and exploiting the opportunities presented by the solo buyers.

As the competition intensifies in the market, tie-ups between firms have become a
familiar phenomenon in the industry, such as the Renault-Nissan Alliance and
Daimler Chrysler-Mitsubishi partnerships. These company tie-ups are viewed as
access points to improved technology and production processes, new products and
the expansion of a firms overseas market.

The current condition of the industry, being small and fragmented, is partly
caused by the fact that it has been characterized by protectionist policies as early
as 1972. However, the government has recognized the need for liberalization as a
part of its wider reform program for the Auto Industry. Unfortunately, the 1997
Asian financial crisis became a significant barrier to some of the governments
reform commitments. Nevertheless, liberalization measures had been undertaken
such as the lifting of tariffs and abolition of trade barriers on the import of
completely built-up units (CBU), automotive parts and components.

Suffering from low capacity utilization and thriving on limited export capacities,
the government is focusing on the export potential of the industry, aside from
building its domestic capacity. Incentives are to be given to carmakers that will
put up export-oriented manufacturing plants. In line with this, participation in the
Motor Vehicle Development Program (MVDP) for both the assembly of motor
vehicles and parts, and components manufacturing are actually open for local and
foreign investors.

One reason for the 2004 drop in sales of commercial vehicles is the inclusion of
Asian utility vehicles in the new excise tax scheme. Prior to the imposition of the

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Auto Excise Tax Law, AUVs, defined as those that have a seating capacity of 10
people or more, are exempted from the motor vehicle excise tax. However, the
new law now taxes Asian utility vehicles based on their selling price.
Auto Parts and Components Manufacturing
The Philippine has become some of the Japanese automakers production base for
auto parts and components aside from assembling and marketing motor vehicles, and
competition is high among more than 200 firms, as the number of components
manufacturers increase. Based on motor vehicle registration data, the market for parts and
components has a high growth potential. The overseas market is also being tapped as
firms forge tie-ups with foreign players in efforts to promote their products to a wider
market.

Motor Vehicle Registrations


1981-2003
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1981

1982

1983

1984

1985

Source: IDEA, Inc. and NSCB.

1986

1987

1988

1989

1990

1991

1992

Cars New
Utility Vehicles New
Trucks New
Buses New
Motorcycles New
Trailers New

1993

1994

1995

1996

1997

1998

1999

2000

2001

Cars Renewal
Utility Vehicles Renewal
Trucks Renewal
Buses Renewal
Motorcycles Renewal
Trailers Renewal

According to the Department of Trade and Industry, the Philippine market for
automotive parts and components has been performing unimpressively for the past five
years, from 1997-2001. This negative growth is considered as the remaining effects of the
1997 Asian financial crisis to the auto industry. In terms of trade performance, the
automotive parts and components manufacturing sector has exhibited an export surplus
for the past four years.

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2002

2003

Industry players
1. Yazaki-Torres Manufacturing Inc. Considered as a wiring harness giant in the
Philippines, it was established in September 1973 as a joint venture with F. L.
Torres. The company makes wiring harnesses, automobile instruments, battery
cables and other automotive parts. The company not only promotes employment
in the Philippines, but also contributes to the country's exports of industrial goods.
A product of Filipino-Japanese partnership, the company has 90% of its produce
shipped to the export market.
2. TEMIC Automotive Inc., - A partnership between Germanys AEG and
Telefunken Electronics, the company is focused on the production of electronic
components and systems for electronic brake systems and body electronics. It is
the leading manufacturer of electronic sensors and semiconductors for instrument
clusters such as speedometers, tachometer, oil and gas gauges. It is also known for
its automatic breaking system (ABS), the Philippine production of which accounts
for 41% of Temic Germanys total global production. Their consumers include
Daimler-Chrysler, BMW, General Motors, Volvo, Volkswagen, Audi, Renault,
Citroen, Peugeot, and Hyundai.
3. Lear Corporation Lear Corporation prides itself in being one of the largest
independent automotive suppliers in the world, and also one of the leading
suppliers of automotive interior systems in both the automotive interior market
and the automotive electrical distributions systems market. Its products include
commendable products for all five principal segments of the automotive interior
market: seat systems; flooring and acoustic systems, door panels, headliners and
instrument panels. Its Philippine arm, Lear Automotive (EEDS) Philippines, Inc.
(formerly United Technologies Automotive Philippines Inc.), is located in Mactan
Economic Zone II in Cebu. It is also a Fortune 500 company headquartered in
Southfield, Michigan, USA.
4. Asian Transmission Corporation Located in Canlubang, Laguna, ATC is
popular for its manufacture of gearboxes and automatic transmission units.
Established in 1973, it is the engine and transmission manufacturing arm of
Mitsubishi Motors Corporation (MMC) in the country, and a partnership between
MMC and Nissho Iwai Corporation of Japan. Its business lines include the
assembly of manual transmission, engines and axles and the machining of
transmission gears.
5. Honda Parts Manufacturing Corporation A subsidiary of Honda Motor
Company in the Philippines, it is involved with the manufacture of parts and
manual transmissions for Honda automobiles within the ASEAN region. The
completion of its latest plant in 2003 is expected to boost production and enable
Honda to supply their products to their automobile plants, particularly in Europe.
Established in 1992 at Laguna Technopark, it started its manufacturing of
automobile service parts in January 1994, followed by the production of manual

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transmissions on July 2002. By capitalizing on its highly competitive production


facilities in Asia, which produce both low cost and high quality components,
Hondas goal is to meet the increasing demand for automobile production while
further enhancing its global competitiveness.
Parts and Components Classification
In general, the auto parts and components market can be classified into three,
depending on the type of materials used in the manufacturing process. According to the
Department of Trade and Industry, the classification of these parts is as follows:
Metal Parts. The metalworking sector can be further subdivided into three subsectors: foundry and forging, stamping and fabrication, and machining, fabrication
and assembly. The metal parts group usually consists of small-type bracket and clips
and metal-based components such as clutch pedals and battery trays. Among the parts
and components manufacturers, this sector has the largest number of companies
compared to the rubber and plastics group. More so, the component manufacturing
arms of the vehicle assemblers belong to this group.
Rubber Parts. The main market of the rubber parts manufacturing is the
replacement market. These products include tires, rubber hoses for radiators, heaters
and air-conditioners, weather strips, glass runs, side moldings, assorted molded
rubber products such as pedal pads, steering gear, tube/boot, plugs, bumper bounds
and oil seals.
Plastic Parts. These parts include small plastic-injected parts and fiber-reinforced
plastic components. Like the rubber parts manufacturing sector, the main market of
the plastic parts manufacturers is the replacement market.
Electrical Parts. This sector consists of the manufacturing of wiring harnesses,
horns, lamps and relays, small motors and alternators and semi-conductor controls for
anti-brake systems, car stereos and speakers. Manufacturers usually have factories
with world-class level of technology and employing skilled workers.
The automotive parts manufacturing industry of the Philippines lists the following 91
types of automotive parts that were integrated into the high-volume car models in the
Philippines.
1. Alternators & Diodes
2. Aluminum Wheels
3. Arm Rest & Visor
4. Assist Grip
5. Backlight
6. Backlite Weather strips
7. Batteries
8. Battery

9. Battery Carrier
10. Bound Bumper
11. Brackets
12. Brake Drums
13. Brake Hoses
14. Brake Pedal Assy.
15. Brake Tubes
16. Bushings & Rubber Parts

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17. Carpet & Silencer Pad


18. Center Pillar Garnish
19. Clamps
20. Clips and Clamps
21. Clutch Housing
22. Clutch Pedal
23. Coil Springs
24. Disc Brake
25. Door Opening Trim Mould
26. Door Weatherstrips
27. Emblem & Name Plate
28. Exhaust Manifolds
29. Exhaust Pipes
30. Flywheel
31. Forgings
32. Front & Rear Door Glass
33. Front Seat Assy.
34. Front Seat Back
35. Front Seat Cushion
36. Fuel Pipes
37. Fusible Links
38. Gears & Shafts
39. Head Rest
40. High Tension Cables
41. Hood Seal
42. Horn
43. Hub Cap
44. Interior Lamps
45. Lower Radiation Shroud
46. Mat & Silencer Pad
47. Moulding
48. Mufflers
49. Oil Dip Stick
50. Package Tray Trim Panel
51. Pedal Pad
52. Qtr. Panel Glass

53. Qtr. Windw. Weatherstrips


54. Quarter Trim Panel
55. Radiator & Cap
56. Radiator Grille
57. Radiator Hoses
58. Radiator Shroud
59. Rear License Plate Brkt.
60. Rear Seat Back
61. Rear Seat Back Board
62. Rear Seat Back Striker
63. Rear Seat Rear Seat Cushion
64. Rear Seat Stop
65. Roof Cover & Moulding
66. Roof Headlining
67. Roof Headlining Support
68. Room Partition Board
69. Rubber Hoses
70. Seat Covers
71. Seat Track
72. Seat Track Open Lever
73. Small Metal Brackets
74. Small Rubber Pipes
75. Stripe
76. Strut Insulator
77. Tires
78. Torsion Bar
79. Torsion Bar Cover
80. Transmission Case
81. Trim Board
82. Trunk Matting
83. Trunk Weatherstrips
84. Window Glass Run
85. Windshield
86. Windshields Weatherstrips
87. Wire
88. Wiring Harnesses

Parts and components manufacturing is listed as an investment priority area and is


entitled to incentives from the government, such as income tax holidays. More so,
the Motor Vehicle Development program also aims to develop a viable
automotive parts manufacturing industry.

The components manufactured in the country were generally limited to the small
and a few medium-sized parts. Furthermore, the main pressed components were
limited to the technically simple pieces. As of the mid-90s, the following
components were being manufactured in the Philippines:

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Suspension: tired, steel rims, aluminum wheels, leaf and coil springs
Interior: carpeting, seats, armrests
Electrical system: wiring harnesses, batteries, lamps, relays and fuses
Pressed components: mufflers, radiators, seat frames, seat adjusters, oil
and air filters, pedals
o Rubber and plastic components: fan belts, rubber hoses and small plastic
parts
o Mechanical parts: transmissions
o Cast and forged components: gear blanks, brake disks, brake drums
o
o
o
o

In terms of trade, automotive parts and components imports accounted for 3.3%
share of the countrys total merchandise imports in 2001, with this share being
valued at $US 1.3 billion. For the same period, exports were registered at $US
1.31 billion, accounting for 4.1% share in the total automotive parts and
components exports of the country.

Parts and components imports usually consist of Completely-Knocked Down


(CKDs) packs and components, which account for 50.5% share of total imports.
Nevertheless, tires, gear-boxes, batteries and assorted body parts and accessories
are also imported. On the other hand, the parts and components export consist of
only a few products, such as wiring harnesses, transmissions, abs control, alloy
wheels and players. Exportation activities are largely undertaken by the big
companies.

Japan remains as the Philippines top supplier of automotive parts and


components, which account for more than 50% of the countrys total imports.
These are then followed by Thailand, Indonesia and Taiwan.

For the period 1997-2001, the top ten Philippine export markets of automotive
parts and components (FOB value in $US) is led by Japan, cornering about 31%
of the total share in 2001. It is followed by the United States, Germany, Thailand,
Australia, Indonesia, Great Britain and Northern Ireland, Malaysia, Canada and
Taiwan.

Consisting of more than two hundred parts and components manufacturers, the
industry is mostly dominated by small and medium-sized companies. 70% of the
produce follows two directions the Original Equipment Manufacturing (OEM)
market, and the replacement market, whereas the remaining share is exported.
Ironically, local auto parts makers are estimated to supply less than 30% share of
the OEM market, as well as the replacement market.

The cost component of motor vehicle parts and components manufacturing can be
seen as follows:

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27

Cost distribution of motor vehicle parts and


components manufacturing
Materials and supplies
79
Services done by others
6
Others
6
Indirect Taxes
3
Fuel and Electricity
2
Interest Expense
2
Rent and storage
2
Research and development
0
Source: DTI

The most important cost component for this manufacturing sector goes to the raw
materials, most especially to its importation, since the bulk of the raw materials
are unavailable in the domestic market. These are plastic, steels, chemicals,
metallurgical coke and other materials needed for the production process.
Transportation costs and duties also add to the costs. On the other hand, services
are composed by those given by both the industrial and non-industrial sectors.
Other cost components include the fuel and electricity, interest expense, indirect
taxes and rent and storage.

According to the Department of Trade and Industry survey, there are general
import practices prevailing in the market. Importation is usually done by
indentors, who are concentrated to only a few players. They are the ones who deal
directly with the importers. On the other hand, there are also big importers who
purchase replacement parts directly from foreign suppliers.

The importation of replacement parts is concentrated to a few players. On the


other hand, the OEM market is attractive to part makers because of the regularity
of the business. Getting a contract to supply an assembler will take some time, but
once it has been established, a long partnership is assured. The partnership could
also mean technology transfer and production management assistance from the
assembler to part makers.

Estimated consumption of components/parts for OEM Markets (In CIF $US thousand)
1997
1998
1999
2000
2001
Ave. GR
Total Estimated Consumption

1,116,874

356,964 528,971 799,419 743,723 6.08

Actual Imports of
CKD/Components/Parts 1

781,812

249,875 370,280 559,593 520,606 6.08

Estimated local parts


manufacturers' sales 2

335,062

107,089 158,691 239,826 223,117 6.08

Source:
1 CKD components/ parts imports - NSO raw data
2 Local Parts - Estimated at 30% of Actual Imports of CKDs/Components/Parts

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28

Trade performance
The Expanded Philippine Automotive Export Program
Category

Regular CBU Exports


(high-volume direct CBU exports)
Developmental CBU exports
(completely new basic models for
exclusive export to at least the ASEAN)
Niche CBU exports
(low-volume exports, basic or variant
models must not be in local production
currently
High-value, low-volume exports

Total Annual Export Volume

Freight on Board (FOB value)

10,000 units

$5,000 each

5,000 units

$5,000 each

2,500 units

$10,000 each

2,500 units

$10,000 each

The participants of the Motor Vehicle Development Program are entitled to a tax
credit for five years: $400 per unit for the first two years; $300 per unit for the
third year; 200$ per unit for the fourth year, and S100 per unit for the fifth year.

Starting 2006 until six to seven years after, the Philippines will increase CBU
production to 200,000 to 250,000 units, of which two-thirds will be exported in
the ASEAN countries.

Meanwhile, exports of auto-parts and components are projected to rise to $2.75


billion in the next three years. In February 2004, motor vehicle exports gres by
22.2% primarily due to a 16.2% growth in wire harness exports valued at 89.5
million.

The value of exports is estimated at $ 200 million to $240 million yearly while the
value of local parts purchases is projected at P5.5 billion yearly.

To date, the Philippines supplies 20% of the worlds wire harnesses. Forty
thousand workers are employed in the car assembly and parts manufacturing.

The expanded export program is geared towards auto parts and CBU exports for a
steady growth of the auto industry. In addition, it will also boost the job prospects
in the auto industry. However, the Department of Finance (DOF) raised concerns
regarding the possibility of losing tax revenues as a result of the said program.

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29

Value of RP Imports of automotive parts/components vs. total RP Imports


1997-2001 (FOB value in $US Millions)
45,000

Total RP Imports
Automotive Parts and Components

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

0
1997

1998

1999

2000

2001

Source: IDEA, Inc. and DTI

Value of RP Exports of automotive parts/components vs. total RP Imports


1997-2001 (FOB value in $US Millions)
40,000

Total RP Exports
Automotive Parts and Components
35,000

30,000

25,000

20,000

15,000

10,000

5,000

0
1997

1998

1999

2000

2001

Source: IDEA, Inc. and DTI

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30

Financing: Auto Loans

AUTO LOANS
Quarterly Total
(in billion Php)

50

(2001 Q1- 2004 Q1)

40
30
20

20

01
20 Ma
r
01
-J
2 0 un
01 e
-S
20 ept
01
-D
20 ec
02
20 Ma
r
02
-J
2 0 un
02 e
-S
20 ept
02
-D
20 ec
03
20 M a
r
03
-J
20 un
03 e
-S
20 ept
03
-D
20 ec
04
-M
ar

10

Source: IDEA, Inc. and BSP

One of the primary sub-sectors of consumer financing is the auto-loans sector.


Since automobiles are too expensive for most individuals to purchase with cash, most
new car purchases, or even of second-hand cars, are made with the assistance of
automobile loans. This type of consumer lending typically has a maturity of 8 months,
although maturities of 60 months and longer are not common.
Automobile loans may be direct or indirect. Direct automobile loans are made to
the consumer to purchase an automobile and are secured by a chattel interest in the auto.
Indirect automobile loans are made by the auto dealer. Under this arrangement, the
dealer collects the required information from the consumer and furnishes it to the bank.
The bank then either accepts or rejects the applicant. Usually, the dealer packages the
loan in bundles and sells them to the banks; these loans tend to have higher delinquency
rates than direct loans since banks relatively have stricter and more competent pool of
credit analysis.
Based on their historical performance, the domestic demand for auto loans has
been on the rise as the local banking industry reported an improvement in its auto-loan
business despite economic slowdown. Alongside the number of car models rolled out
every year in the country, banks have come up with innovative car loan packages to
further entice the consumer market.

IDEA Institute for Development and Econometric Analysis, Inc.

31

AUTO LOANS
by Financial Institution
(in billion Php)
(2001 Q1- 2003 Q1)

D
ec
M
ar
-0
3
Se
pt

Se
pt

ec
M
ar
-0
2
Ju
ne

M
ar
-0
1
Ju
ne
Se
pt

Univ ersal and Commercial Banks

D
ec
M
ar
-0
4

Source: IDEA, Inc. and BSP

45
40
35
30
25
20
15
10
5
0

Thrift Banks 1/

The biggest players in the auto loan sector are the local thrift banks and thrift
bank subsidiaries of commercial banks. Next in line are the commercial banks
themselves.

The Auto Industry

10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
-

50
40
30
20
10
0

Total Vehicle Sales

60

20
0
20 1 -M
01 a
r
20 -J u
01 ne
20 -S e
01 pt
20 -De
0 c
20 2 -M
02 a
r
20 -J u
02 ne
20 -S e
02 pt
20 -De
0 c
20 3 -M
03 a
r
20 -J u
03 ne
20 -S e
03 pt
20 -De
04 c
-M
ar

Auto Loan (in million Php)

(2001 Q1- 2004 Q1)

Auto Loans

Vehicle Sales
Source: IDEA, Inc., CAMPI and BSP

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32

Source: Bangko Sentral ng Pilipinas

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33

Issues and Concerns


Motor Vehicle Development Program
The government has relentlessly pursued in its efforts to rebuild and develop the
industry. As such, authorities have pushed for the restructuring of the Motor Vehicle
Development Program (MVDP). Some of the salient points of Executive Order 156
include:
o The banning of the importation of all types of used motor vehicles, parts
and components, except those that may be allowed under certain
conditions
o The restructuring of the Most Favored Nation (MFN) tariff rates for motor
vehicles and their raw materials, parts and components, at rates that will
encourage the development of the industry.
o The restructuring of the current excise tax system for motor vehicles, with
the end view of creating a simple, fair and stable tax structure.
o The continuing application of the AICO (ASEAN Industrial Cooperation)
scheme as maybe adopted by the Association of Southeast Asian Nations
(ASEAN) consistent with the implementation of the ASEAN Free-Trade
Agreement Common Effective Preferential Tariff (AFTA-CEPT)
o The provision of incentives to assemblers and parts and component
makers for the export of CBUs and parts and components, as allowed by
law and international commitments
The Motor Vehicle Development Program is actually the collective name for three
development programs, discussed as follows:
I. Car Development Program (1987)
Replaced the Progressive Car Manufacturing Program (PCMP)
This program was aimed in the promotion of passenger car manufacturing, such
that its original target (from being PCMP) was car assembly based largely on locallyproduced car contents. Under the CDP, passenger cars were classified into three
categories:
Category 1 or the peoples car category. This category includes passenger cars with
engine capacity of up to 1500cc.
Category II, the main CDP category. This category covers passenger cars with engine
displacement between 1500cc and 2200cc.
Category III. This category includes the luxury cars with engine displacement greater
than 2200cc.

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34

II. Commercial Vehicle Development Program (1988)


Replaced the Progressive Truck Manufacturing Program (PTMP)
This program aimed to revitalize the commercial vehicle manufacturing industry
with emphasis on rejuvenating the production of commercial vehicles such as the Asian
Utility Vehicles (AUVs), light commercial vehicles (LCVs), trucks and buses. The focus
was also on manufacturing parts and components locally. There were four categories to
this program.
Category I. All AUVs up to 3000 kgs. GVW. These SUVs come in the form of wagons,
pick-ups, crewcabs and jeepneys.
Category II. All LCVs up to 3000kgs. GVW. There was no real product differentiation
between LCVs and AUVs except that the latter was supposed to have a higher local
content of manufactured components.
Category III. All vehicles from 3001 kgs. to 6000 kgs. GVW. These were composed of
the light trucks and mini-buses.
Category IV. All vehicles from 6001 kgs. to 18000 kgs. GVW. These were composed of
the heavy trucks and buses.
III. Motorcycle Development Program (1998
Replaced the Progressive Motorcycle Manufacturing Program (PMMP)
Investment Requirements

Car Development Program (CDP) Category I and II participants must earn 50


percent of their foreign exchange requirements for CKD imports through the
generation of parts exports earnings.
CDP Category III must earn 100 percent of foreign exchange requirements in
this manner.
The Philippine Board of Investments (BOI) may cancel the registration of a
participant if the company fails to meet at least 20 percent of its production
commitment in a one year period.
The foreign exchange requirements for CKD kits are 50 percent for passenger
cars and 7.5 percent for commercial vehicles.
Prior to the issuance of a Certificate of Registration, the BOI requires
applicants/participants to establish a new plant, which can be 100 percent foreign
owned.
The Car Development Program requires an investment of $10 million in parts
and components manufacturing for export and domestic markets as a mandatory
step to establish a vehicle assembly facility ($8 million for trucks/commercial
vehicles).
Foreign exchange self sufficiency regulations require assemblers to earn 5-100
percent of their foreign exchange needed for the importation of CKD kits through
the promotion of CBU exports.

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35

Regional Trading Agreements


ASEAN Free Trade Agreement Common Effective Preferential Tariff
(AFTA-CEPT)
Tariff on goods traded in the region were reduced to a range of 0%- 5% to pave
the way for the duty-free movement of goods in the ASEAN by 2010.
ASEAN Industrial Cooperation (AICO)
This was created to encourage companies located in ASEAN to cooperate with
each other in sourcing inputs and components. Approved projects immediately
enjoy AFTA-style preferential tariff rates of zero to 5% on imported materials.
Taxation
The countrys auto industry experienced significant changes as a new taxation
scheme came into implementation in late October 2003. Republic Act 9224, or the Auto
Excise Tax law, shifted the engine size-based scheme into a value-based tax system.
Old taxation scheme
a. Engine based tax system
b. Vehicles with a seating capacity of 10 regardless of the engine size are classified as
AUVs and exempt from excise taxes.
c. Excise tax on passenger cars and commercial vehicles for the transport of persons
dependent on engine displacement and seating capacity based on manufacture or
importers selling price.
d. Registration fee that is paid annually and varies depending on type of vehicle.
Engine Displacement (in cc.)
Gasoline

Diesel

Up to 1600
1601 to 2000
2001 to 2700
2701 or over

Up to 1800
1801 to 2300
2301 to 3000
3001 to over

Tax Rate
15%
35%
50%
100%

New Taxation Scheme


a. Price-based, rather than engine size-based, fuel type and seating capacity.
b. The new tax law benefits the passenger car segment, and to a certain extent, the
luxury car segment and compacted SUVs.
c. Commercial Vehicles: segment most adversely affected, since it increased their
selling price. Tax Rates based on RA 9224
Net manufacturer's price/
importers' selling price
Up to P600 Thousand
Over P600 Thousand to P1.1
Million

Rate

2%
P12,000 + 20% of value in excess
of P600 Thousand
P112,000 + 40% of value in excess
Over P1.1 Million to P2.1 Million of P1.1 Million
P512,000 + 60% of value excess of
Over P2.1 Million
P2.1 Million

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36

Illustration: The effect of new taxes as RA 9224 lowers prices for passenger cars

Passenger Car Sales vs. Commercial Vehicle Sales


45000
Passenger Car

40000

CV

35000
30000
25000
20000
15000
10000
5000
0
Jan-Jul 2003

Jan-Jul 2004

Market shares of PVs vs. CVs

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

62%

78%

38%

22%

CVs

Jan-Jul 2003

Jan-Jul 2004

PCs

Source: IDEA, Inc. and CAMPI

However, the sales of passenger cars cannot offset the decline in sales of CVs, given the
latters huge market.

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37

Porters Model: Industry Rating


Barriers to entry/exit: High
- The industry is highly capital-intensive, which makes entry difficult. Over the years,
meeting capital requirements have become easier as firms form partnerships with
other usually foreign auto makers. More over, major industry players already have
cornered their respective shares in the market, and consumers usually have their
favorite car brands when it comes to performance, features and affordability,
depending on their preferences.
Intensity of Rivalry: High
- Competition is very aggressive in the industry, which is further intensified by the
different marketing promotions, strategies and events employed by firms, as well as
the attractive financing packages offered to consumers. Industry authorities have
recognized that the automobile industry is indeed characterized by cut-throat
competition as new models are being launched in the market, both by the dominating
Japanese automakers as well as other international car firms.
Availability of substitutes: Medium High
- There are many brands for a single segment that is available in the market. More over,
the imports of cheaper car parts and components, as well as smuggled ones, remain a
pressing problem in the industry as they continue to eat a significant portion of
domestic demand. There are also the cheaper vehicle imports in the country, such as
those in Subic.
Power of buyers: High
- The Filipino buyer has a lot of options. The taxation scheme introduced in the latter
part of 2003 also gave way to the launching of newer models and model upgrades and
giving consumers a wider range of products to choose from. To push their sales, firms
have come up with different strategies to entice the buyers.
Power of sellers: Medium
- The competitive environment has left seller with razor thin margins, which has also
been further exacerbated by the unabated smuggling of vehicles. The fluctuation of
the peso has also continuously pressured sellers, since they import car parts and
accessories. Nevertheless, the existence of Executive Order 156, or the restructuring
of the Motor Vehicle Development Plan, has addressed some of these problems to
allow sellers to perform better in the market.
SWOT Analysis
Strengths: The automobile industry is strongly linked with a countrys industrialization,
and it finds itself connected with various sectors of the economy, from its production
processes to the end-users of vehicles. As the economy grows, demand for motor vehicles
is also expected to be sustained in the long-term. This growth will also be likely spurred
by the growth in the economies of the countrys trading partners, as well as the increase

IDEA Institute for Development and Econometric Analysis, Inc.

38

in OFW remittances, that will allow Filipinos further spending on items such as vehicles.
The replacement market, on the other hand, is also expected to see a higher growth path.
Weaknesses: The countrys automobile industry is highly dependent on imports of (the
larger) car parts and accessories, which makes it highly sensitive to the fluctuation of the
peso. More so, the industry remains at the assembly stage, as firms in the country import
SKD or CKD kits from other countries, unpack them and then begin with the assembly
processes. Raw materials are insufficient in the market.
Opportunities: The passing of Executive Order 156, or the restructuring of the MVDP, is
viewed as a silver lining for the countrys firms as it pursues for the tightening of the
importation of used vehicles in the country. Not only does it prohibit the importation of
used vehicles (with exception), but also provides for a development program for the
entire motor vehicle industry. The replacement market, on the other hand, will likely
grow as the number of renewed motor vehicle grows. Likewise, the motorcycle segments
rapid growth in the face of the booming consumer demand for its products will serve as a
significant driver to the overall growth of the economy. Aside from meeting domestic
demand, some players are already laying out their plans of expansion to be able to export
into neighboring countries. Local demand, now being propelled by fashion-conscious
individuals and teenagers who prefer the convenience and trendiness of motorcycles,
might also be affected by the rising oil prices, heavy street traffic and increasing
purchasing/ maintenance costs of other means of transportation.
Threats: Smuggling remains to be one of the major hindrances to the growth of the
industry. Industry insiders say that should the government successfully curb smuggling,
he domestic car industry would probably meet its target sales of 200,000 units by 2007.
However, the curbing of the illegal activity still remain a far-off dream as the industry
still suffers from excessive importation, as evidenced by the large discrepancy between
industry sales and new vehicle registrations.
Altman-Z score
Altmans Z-score is a measure of financial health that was originally developed in
1968 to ascertain if a certain listed US manufacturing firm will face immediate failure. It
earned the distinction of being a robust specification that it is still being used today as
initial assessment on the financial health of a company. Variants that were deemed
appropriate for private firms and those not involved in manufacturing were developed.
The components of the Altman Z-score equation are: Working Capital-Retained
Earnings Ratio, Retained Earnings-Total Assets Ratio, Earnings Before Taxes-Total
Assets Ratio, Stockholders Liability-Total Assets Ratio and the Sales-Total Assets Ratio.
The higher the Z-score, the less likely a company would default.
Z score = 0.012 (Working Capital/ Total Assets) + 0.014(Retained Earnings/ Total Assets)
+ 0.033 (EBIT/ Total Assets) + 0.006 (Stockholders Equity/ Total Liabilities) + 0.999
(Sales/ Total Assets)

IDEA Institute for Development and Econometric Analysis, Inc.

39

ALTMAN-Z SCORES
TOP INDUSTRY PLAYERS

WORCAP/
RE

Manufacture of Motor Vehicles


FUCHS LUBRICANTS PHILIPPINES INCORPORATED
0.7076654
DEMO POWER PHILIPPINES INCORPORATED
1.0707595
FAR EAST INDUSTRIAL SUPPLY AND COMPANY INCORPORATED
2.2791971
COMMERCIAL MOTORS CORPORATION
-0.791174
MIMINA MOTORS INCORPORATED
-10.14739
MILLENNIUM CARS MINDANAO INCORPORATED
-11.57737
JAGUAR PHILIPPINES INCORPORATED
-0.558446
JAGUAR CARS INCORPORATED
0.9479725
JIANSHE MOTORCYCLE INDUSTRIAL PHILIPPINES CORP
-20.4126
KEIHIN PHILIPPINES CORP
1.8482
NIDEC PRECISION PHILIPPINES CORPORATION
9.6310671
HYUNDAI ASIA RESOURCES INCORPORATED
34.805948
FORD GROUP PHILIPPINES INCORPORATED
1.6922925
ISUZU PHILIPPINES CORPORATION
-0.433045
MITSUBISHI MOTORS PHILIPPINES CORPORATION
0.614558
HONDA CARS PHILIPPINES INCORPORATED
0.9604376
TOYOTA MOTOR PHILIPPINES CORPORATION
1.6441199
Manufacture of bodies (coachwork) for motor vehicles
METALS ENGINEERING RESOURCES CORPORATION
4.4800953
ALMAZORA MOTORS CORPORATION
4.4746416
MEGASTAMP INDUSTRIES CORPORATION
4.744868
STA ROSA MOTOR WORKS INCORPORATED
2.7985201
METALMAN STEEL FORMING CORPORATION
0
MEGAPOLITAN MARKETING INCORPORATED
1.3538191
Manufacture of parts and accessories for motor vehicles and their engines
BAKERSON MARKETING CORPORATION
-0.369328
SHOSHIBA FILIPINA INDUSTRIA INCORPORATED
1.0243549
BIG OS TIRE CORPORATION
-7.809594
PHILIPPINE PRECISION TECHNOLOGY INC
2.1333333
FORMTECH INCORPORATED
1.6509535
PHILIPPINES MANSHO INCORPORATED
-0.720839
KYOEI KOGYO PHILIPPINES CORPORATION
17.027113
EMICOR INCORPORATED
4.5267291
HKT PHILIPPINES INCORPORATED
5.3126935
AUTOLIV IZUMI PHILIPPINES INCORPORATED
0.5771218
PHILIPPINE NAKAMURA CORPORATION
0.7293074
REMCOR INDUSTRIAL AND MANUFACTURING CORPORATION
0
S C KYMCO PILIPINAS INCORPORATED
6.7898185
LINE SEIKI PHILIPPINES INCORPORATED
3.1186375
HOKEI SUBIC CORPORATION
3.8095193
OGAMI CORPORATION
-0.29348
PHILIPPINE HKR INCORPORATED
-6.96355
JABEZ MOTOR CORPORATION
0
GUNMA GOHKIN PHILIPPINES CORPORATION
0.6741512
ROBERTS AUTOMOTIVE AND INDUSTRIAL PARTS
MANUFACTURING CORPORATION
-1.680168
MEINAN PHILIPPINES INCORPORATED
1.4268089
MORIROKU PHILIPPINES INC
-1.168258
JECO AUTOPARTS PHILIPPINES INCORPORATED
0.1170697
AUTOLIV QB INCORPORATED
-1.034381
NORKIS AUTOMOTIVE RESOURCES CORPORATION
-7.228439
PHILIPPINE NAGANO SEIKO INCORPORATED
1.6071865

RE/
TASSETS

EBIT/
TASSETS

SE/
TLIABLITIES

SALES/
T.ASSETS

2003
ALTMANZ

-1.301017
0.3765745
0.0807512
-0.171449
-0.083946
-0.036814
-0.312156
-0.934747
0.0041556
0.07542
-0.051968
0.0050226
0.0722035
-0.277283
0.1631256
0.2509196
0.2104004

0
0
0
0.0001018
0
0
0.0016222
0.002557
0
0.0500677
0
0
0.0011803
0.0405731
0.0246995
0.0518533
0.0139794

-0.4916517
1.9229873
0.816498357
-0.01468743
148.2115385
1.782740741
-0.20499572
-0.4484251
-0.04105628
2.254842555
0.276017836
0.361926933
0.174501981
0.761260226
0.969215757
1.424169801
1.500311894

1.6936502
2.3649952
1.7170893
0.1172981
9.442368
4.2201134
3.4234152
9.1359705
0.6318686
1.1793139
0.7897646
3.3878149
4.486925
5.541844
1.8133616
4.082038
2.7502752

1.6792844
2.3922893
1.7487521
0.1052016
10.199251
4.0871459
3.4077438
9.1225176
0.3860973
1.2165502
0.9054762
3.8043404
4.5048424
5.5331302
1.8278371
4.1032502
2.7796631

-0.035997
-0.069364
0.0177336
0.187818
0
0.0428099

0.0062098
0
0.0120651
0.0130433
0
0

1.409544328
-0.02505579
0.072603947
1.331808669
0.368575274
0.204272847

1.2806663
0.9262452
2.0753237
1.4956462
2.04612
10.533489

1.341305
0.9778933
2.1312689
1.5387835
2.0462853
10.541026

0.033914
-0.265956
-0.065254
0.1792597
-0.24697
-0.330533
0.0191194
0.0239383
-0.008753
0.3789394
0.1718183
0
0.010331
0.1871733
-0.049825
0.148276
0.0313094
0
-0.752594

0
8.959E-06
0
0.0503357
0.0026988
0.030825
0
0
0
0.0215871
0.0031055
0
0
0
4.99E-05
0.0018811
2.743E-05
0
0

0.914565166
0.092877984
-0.01476983
2.146447606
-0.16495802
-0.15051866
1.587706147
0.430385638
0.360201511
8.940063377
0.96537562
0.570450906
0.12341252
5.236561239
-0.06052292
1.060445491
0.869991228
2.823075493
0.084976954

2.44599
0.7387655
1.0390132
1.3567788
4.8758004
1.4488359
3.1801549
0.7787137
1.1679404
1.2071447
1.9635176
2.3453487
0.7588261
1.6640231
0.3830884
1.9356367
0.47208
4.4057051
1.0648925

2.4450743
0.7471531
0.9432569
1.3980714
4.8863778
1.4342236
3.391094
0.8351731
1.2325634
1.2725209
1.978606
2.3464261
0.8404302
1.7338225
0.4273605
1.9386799
0.3937045
4.4182379
1.061891

0.0117117
0.1138864
0.2725689
0.3273078
-0.198599
-0.048542
0.1657697

0
0
0.0251244
0
0.0290421
0
0.0036288

0.05339217
0.6802866
0.358330737
0.666111488
0.315293807
0.115351844
1.369019077

0.3597709
0.9808113
0.8329893
1.6967046
2.0480277
0.9250863
1.1472713

0.3397334
1.0026284
0.8249322
1.7049917
2.0336369
0.8374325
1.1760649

IDEA Institute for Development and Econometric Analysis, Inc.

40

DAIWA SEIKO PHILIPPINES CORPORATION


TS TECH TRIM PHILIPPINES INCORPORATED
TECHNOL EIGHT PHILIPPINES CORPORATION
TAKANICHI PHILIPPINES CORPORATION
PHILIPPINE TECHNO TAKATSUKI INCORPORATED
KEIHIN AUTO PARTS PHILIPPINES CORPORATION
ZPI PHILIPPINES INC
ADVAN MOTOR INCORPORATED
MITSUBA MANUFACTURING PHILIPPINES CORPORATION
FCC PHILIPPINES CORPORATION
HONDA PARTS MANUFACTURING CORPORATION
PHILIPPINE ALUMINUM WHEELS INCORPORATED
IMASEN PHILIPPINE MANUFACTURING CORPORATION
TS TECH PHILIPPINES INCORPORATED
LAGUNA AUTO PARTS MANUFACTURING CORPORATION
BRIGGS AND STRATTON INTERNATIONAL EAST ASIA INC
MITSUBISHI CORPORATION
TRP INCORPORATED
FURUKAWA ELECTRIC AUTOPARTS PHILIPPINES INCORPORATED
MITSUBA PHILIPPINES CORPORATION
ISUZU AUTOPARTS MANUFACTURING CORPORATION
TOYOTA AUTOPARTS PHILIPPINES INC
ASIAN TRANSMISSION CORPORATION
TAKATA PHILIPPINES CORPORATION
JIDECO MANUFACTURING PHILIPPINES INC
FORD MOTOR COMPANY PHILIPPINES INCORPORATED
TEMIC AUTOMOTIVE PHILIPPINES INCORPORATED
Manufacture and assembly of motorcycles
MASUDA PHILIPPINES INCORPORATED
SUZUKI PHILIPPINES INCORPORATED
NORKIS TRADING COMPANY INC
KAWASAKI MOTORS PHILIPPINES CORPORATION
Manufacture of motorcycle engines and parts thereof
JIANSHE PHILIPPINES INCORPORATED
PORTA COELI INDUSTRIAL COMPANY INCORPORATED
HONDA PHILIPPINES INC

0.4190135
2.7237686
-0.210049
-0.70577
5382.7143
0
0.7972422
-0.447615
2.1588763
1.2226903
0.5173267
-6.275487
1.2761414
1.908389
0.651189
0
33.544581
-0.288942
1.0611618
0.8243112
2.351614
1.4095539
0.2740126
1.7279369
-245.8344
-1.564923
-0.344741

-0.274089
0.2398346
0.1577684
-0.282892
2.725E-05
0
0.1356593
-0.245186
0.2084157
0.3756542
0.2071648
-0.04063
0.2987997
0.2153293
0.3469166
0
0.0239706
0.048894
-0.018281
0.3672448
0.2136241
0.3431712
0.1349324
0.3350446
0.001062
-0.078545
0.1340533

6.304E-06
0.0233404
0.0004846
0.020945
0.0063807
0.0063128
0
0
0.0021138
0
0.0048938
0
0.0147461
0.0015416
0.002508
0.0007781
0.2776813
0
0.0002673
0.0016215
0
0.0169546
0
0.0267466
0
0.0168395
0

0.538793463
8.816969667
2.363582094
1.255223584
0.156542098
0.389720796
0.356432432
0.433343644
7.513455117
12.65343323
3.127072969
0.607050551
3.036932193
1.843886326
2.240002574
0.164417742
4.486461909
0.64735752
0.060138263
2.116781478
1.659010547
5.784882172
0.573431075
5.3343709
0.256939256
0.139790908
1.067597039

0.4146131
0.8564791
0.6863777
1.8953412
1.4137028
3.1531693
2.2242955
4.626523
1.0682372
1.0900589
0.4659431
1.7225544
1.6096082
1.6251094
1.5345407
1.5631264
0.5608416
1.7028182
0.9052125
1.5142991
1.5029679
1.3003001
2.1024555
1.3671666
1.5752881
2.4657514
3.9856564

0.4186224
0.9453376
0.6995769
1.8892386
66.006011
3.1525628
2.2356759
4.6156926
1.1411438
1.1848209
0.4935093
1.6485995
1.6462037
1.6605138
1.5592
1.5625755
0.9992336
1.7022167
0.917155
1.5405721
1.5426291
1.3559877
2.1089709
1.4241142
-1.374744
2.4448014
3.9858162

-1.111152
1.1181665
0.6647575
3.7895959

0.0649845
0.5646011
0.1531922
0.042757

0.0008919
0.012887
0.005435
0.0012507

0.572427186
6.321773785
0.96061112
0.270385676

1.1906144
1.5225012
1.3227669
1.4286622

1.1804638
1.5806571
1.3375089
1.4749708

0
10.580195
1.3896011

0
0.0673717
0.23986

0
0.004463
0.0052789

0.066922503
0.626932866
1.11551389

1.7224243
1.3409797
0.6090112

1.7211034
1.4714532
0.6353028

NORKIS INDUSTRIAL AND ENGINEERING INCORPORATED

30.829173

0.0102274

0.0002362

0.036559507

1.3932643

1.7621915

Source: IDEA, Inc. and CIBI, Inc.

IDEA Institute for Development and Econometric Analysis, Inc.

41