Overview of the Philippine Auto Industry Roadmap of the Philippine Auto Industry Roadmap Rafaelita...
Transcript of Overview of the Philippine Auto Industry Roadmap of the Philippine Auto Industry Roadmap Rafaelita...
Overview of the Philippine Auto Industry Roadmap
Rafaelita M. Aldaba PH Department of Trade and Industry
Board of Investments 29 January 2016, Acacia Hotel, Alabang, Manila
Presentation Outline
Roadmaps for upgrading industries to foster sustainable
& inclusive development, transformation, & growth
MACRO
PERFORMANCE
NEW
INDUSTRIAL POLICY
CARS
PROGRAM
PH MACROECONOMIC PERFORMANCE
PH REMARKABLE GROWTH PERFORMANCE
Macro Performance
• Robust growth due to strong macro fundamentals supporting domestic demand & shielding us from global weaknesses
• Rising trend in manufacturing after sluggish growth in 80s-90s
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
09Q
109
Q2
09Q
309
Q4
10Q
110
Q2
10Q
310
Q4
11Q
111
Q2
11Q
311
Q4
12Q
112
Q2
12Q
312
Q4
13Q
113
Q2
13Q
313
Q4
14Q
114
Q2
14Q
314
Q4
15Q
115
Q2
15Q
315
Q4
Quarterly Growth 2009-2015
GROSS DOMESTIC PRODUCT AGRI., HUNTING, FORESTRY, AND FISHING
MANUFACTURING SERVICES
PH a new growth area
• PH Industry growth: 7.3% (‘12); 9.3% (’13, highest), 7.5% (‘14 highest)
-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
in %
Year
Industry Growth: PH vs Selected East & Southeast Asian Countries
PH
TH
INO
VN
PRC
MAL
5
WHAT MAKES PH DIFFERENT
Market
• Growing market, middle class • Demographic sweet spot
Labor
• Young, English speaking, highly trainable • Moderate wage increases
Operating environment
• Strong macro fundamentals • Political stability, strong business/consumer confidence
Policy focus
• New Industrial Policy • Investment Promotion Agencies
Competitivenness
• Improved competitiveness ranking (World Economic Forum #47 from #52)
Comparison of Wage Rates
53
74
133
205.5
259.5
344
345
352.375
1143
1230
1619
1734
0 500 1000 1500 2000
Myanmar
Cambodia
Vietnam
Indonesia
Philippines
Malaysia
Thailand
China
Singapore
Taiwan
Hong Kong
Korea
Workers
source: Japan External Trade Organization (JETRO)
138
285.75
298
373
387.5
635.75
698
944
1456
2255
2263
2325
0 500 1000 1500 2000 2500
Myanmar
Vietnam
Cambodia
Indonesia
Philippines
China
Thailand
Malaysia
Singapore
Korea
Hong Kong
Taiwan
Engineers (mid-level)
• Wages for workers & engineers are relatively lower than China, Malaysia, & Thailand
THE NEW INDUSTRIAL POLICY FOR STRUCTURAL TRANSFORMATION
MANUFACTURING, AGRIBUSINESS, & SERVICES ROADMAPS
New Industrial Policy
Inclusive growth
Regional economic
integration, FTAs*
Jobs, Competitive-
ness
• Competitiveness crucial in upgrading, rising regional integration & global value chains
* Free Trade Areas
• Industrial policy best way to create jobs, reduce poverty, & achieve inclusive growth
• Upgrade industries • Remove growth obstacles
GOAL: Improve Competitiveness
• Create proper environment for private sector development
• Private sector: proximate source of growth
Government as Facilitator
• How to plug in regional production networks • Move up the value chain • Build strong regional economies
GVC-focused, Cluster-based
Strategic Industrial Policy
MANUFACTURING ROADMAP
-automotive, aerospace parts electronics, garments, food, resource-based industries, chemicals, furniture, tool & die, shipbuilding
-move to high tech transport equipment, chemicals, electrical machinery -manufacturing hubs in regional & global production networks for auto, electronics, machinery, garments, food
-high value added activities upstream industries: chemicals, iron & steel, med-tech basic & fabricated metal
Phase I 2014-2017
Phase II 2018-2021
Phase III 2022-2025
VISION: globally competitive & strongly linked with other sectors, a main growth driver
Major Strategies
Manufacturing--15% to GDP
Horizontal measures
Coordination mechanism
Vertical measures
• Close supply chain gaps • Expand domestic market
& exports • HRD & skills trainings • SME development • Innovation • Green growth
• Promotion • Power, smuggling,
logistics, infrastructure
• Improve regulation, reduce cost of doing business
• Competitive exchange rate
open trade regime, sustainable macro policies, sound tax policies & administration, efficient bureaucracy, secure property rights, institutions
Strategic Actions: Manufacturing
13
STRATEGIC ACTIONS
Close Supply/Value Chain Gaps : Copper, Furniture, Tool & die, Paper, Iron & steel, Petrochemical, Plastic
Domestic Market Base & Exports: Automotive, Shipbuilding HRD & Skills/Trainings: engineers, design, tool-making,
prototyping, molding, die casting, technical-vocational SME Development & Innovation: Finance access, compliance
with product standards, Incubation, Quality testing, R&D, Industry-academe linkages, Fablabs, SME Business Centers
Aggressive marketing & promotion to attract investments Horizontal issues: high cost of power & domestic shipping,
smuggling & streamline & automate government procedures
AGRIBUSINESS ROADMAP DRIVE REGIONAL ECONOMIC TRANSFORMATION
Transform & upgrade agriculture from traditional farming to a globally competitive agribusiness sector
-rubber, coconut, mangoes, coffee, cacao, banana, palm oil & other high value crops -supply chain gaps
-deepen participation in GVC -PH as agribusiness regional hub
-strengthen agro-processing & its linkages to production: R&D; strengthen supply chains, upgrade commodity clusters; access to technologies, finance; regulatory & certification system
Phase I 2014-2017
Phase II 2018-2021
Phase III 2022-2025
SERVICES ROADMAP Glue That Binds All Sectors Together
-Labor-intensive sectors: tourism, construction, ship repair, MRO -accelerate infrastructure investments -move up IT-BPM GVC
- PH as regional hub: training - upgrade services, manufacturing related services to sustain growth & job creation
- Education, design, R&D, finance, infrastructure - Services embedded in manufacturing - HRD & skills training - Innovation ecosystem linked with manufacturing
Phase I 2014-2017
Phase II 2018-2021
Phase III 2022-2025
Globally competitive services, create quality jobs, move up the value chain, enable structural transformation
Comprehensive National Industrial Strategy (CNIS)
• THREE IMPORTANT CHANNELS AFFECTING INDUSTRY GROWTH: COMPETITION, INNOVATION, PRODUCTIVITY
16
MANUFACTURING SERVICES
AGRICULTURE FISHING,
FORESTRY MINING
INTERNAL FACTORS: GOVERNMENT POLICIES &PROGRAMS, INSTITUTIONS, INFRASTRUCTURE, MACRO STABILITY, RULE OF LAW,
PEACE & ORDER, POLITICAL CLIMATE
EXTERNAL FACTORS: GLOBALIZATION, REGIONAL/BILATERAL/MULTILATERAL TRADING ARRANGEMENTS, GLOBAL & REGIONAL PRODUCTION NETWORKS
Industry Development Council (IDC) IDC Secretariat
IDC Technical Committee DTI - Chairman
• DTI, NEDA, DA, DOF, OP; Private sectors representatives
IDC Executive Committee DTI – Chairman
• 11 representatives from government • 7 representatives from private sector • 1 representative of academe • 1 representative of research institute/think tank • 1 representative of labor • 1 CSO representative
Chemicals,
plastics, petrochem
ical
Eminent Persons Group (EPG)
5 industry leaders
Philippine Industry Development Council
Electronics
Mass housing
IT-BPM
Furniture
Ceramic tiles
Biodiesel
Aerospace
Automotive
Copper
Metal casting,
Rubber
Iron & steel
Motorcycle
Natural health
Retirement
Tool & die
Paper
COMPREHENSIVE AUTO
RESURGENCE PROGRAM
Auto roadmap visions, goals, strategies, timeline
Current State and Strengths
Industry Characteristics
Rated capacity: 200K units/year 4 carmakers Parts & components: 272 Direct Employment: 68K Net exporter of parts: Exports US$4.3B (7% of total) Strong current comparative
advantage: ignition sets, radio receivers, external power, lead-acid electric accumulators, brake system, transmissions, air filters for engines, tires, etc
Highly skilled labor & technical manpower
Metro Manila
Pampanga
Laguna
Cavite
Batangas
Vehicle Parts
7 plants electro-deposition painting systems
3 stamping, 5 transmission, 6 wiring harness, 2 large injection, 3 suspension system, 2 tool & die, 50+ others
PH Auto Industry Sales & Growth
269164
321532
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
0
50000
100000
150000
200000
250000
300000
350000
1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Total Industry Growth
• PH: high population with low vehicle ownership o Motorization rate: PH: 35; VN:20; INDO:73; THA:200; MAL:
395 • Significant market potential as the share of households who
can afford to buy vehicles increased from 26% to 36%
32%
42%
2011
19.3
4% 7%
11%
31%
>25k 15-25k 10-15k 5-10k
<5k
2017
21.6
8% 9%
27%
56% 47%
2009
18.6
3% 5%
12%
16%
33%
33%
2015
20.0
6% 9%
14%
32%
20.8
2013
5% 8%
13%
39%
# of households in the income range Millions of households
Source: Ayala & Mckinsey
PH Market Potential
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• Share of HH who can afford to buy vehicles up from 26% to 36%
• Significant potential in PhP43K to1.1M income bracket
• Up from 21% to 28%
• Over PhP1.1M from 5% in 2013 to 8% in 2017
Vehicle Sales of Selected ASEAN Countries (Jan.-Jun. 2015)
-12%
-18%
-3%
21%
72%
-16%
67%
0 100,000 200,000 300,000 400,000 500,000 600,000 700,000
Brunei
Indonesia
Malaysia
Philippines
Singapore
Thailand
Vietnam
Jan-Jun 2015Jan-Jun 2014
source: ASEAN Automotive Federation
Vehicle Production of Selected ASEAN Countries (Jan.-Jun. 2015)
-14%
3%
9%
-2%
45%
0 200,000 400,000 600,000 800,000 1,000,000
Indonesia
Malaysia
Philippines
Thailand
Vietnam
Jan-Jun 2015Jan-Jun 2014
source: ASEAN Automotive Federation
Market Opportunities
• Motorization starts at GDP/capita level US$2,500 • Mitsubishi to stop US operations, expand Asia
1.7 MILLION VEHICLES
2.5 MILLION VEHICLES
3 -6 MILLION VEHICLES
ASEAN Market Size
Production : 764K units
Thailand’s Snapshot
GDP per capita : US$2,603 Population : 62 Million
Domestic Sales : 626K units Production : 923K units
ASEAN Market Share 37%
Indonesia’s Snapshot
GDP per capita : US$2,980 Population : 238 Million
Domestic Sales : 764K units
ASEAN Market Share 31% Production : 702K units
2004 2010 2015-2022
Indicator 2010 2011 2012 2013 2014 2015 2016 2020
GDP/capita (US$) 2155 2378 2611 2790 2934 3279 3601 4757
Population (M) 92 94 96 98 99 101 103 109
Source: Sugata, M. (2014). TMPC
Manufacturing Cost Gap (per unit)
$-
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
Philippines Thailand
Assembly Cost Assembly Cost
Cost of Local Components
Cost of Imported Parts from ASEAN
Cost of Parts Imported from Japan
12%
49%
23%
16%
13%
7%
67%
13%
$1,500-$1,800
Cost of Local Components
Cost of Imported Parts from ASEAN
Cost of Parts Imported from Japan
25
PH Auto Industry Roadmap
Auto Program Formulation and Approval
Local Market Expansion
Integration of PH Auto Industry into ASEAN Production/ Sales Network
STAGE 1 (2013-2015) Government support critical
STAGE 2 (2016-2020) Investment & capacity building
STAGE 3 (2021-2025) Full integration to take advantage of AEC
The CARS Program Goals o Revive auto manufacturing, generate employment, attract
investments, build domestic scale, develop PH into a regional auto manufacturing hub
Coverage o Vehicle Production o Parts Manufacturing: body shell assembly, large plastic assemblies,
common parts, strategic parts not currently produced in PH, shared testing facilities
Fiscal Incentives o Time-bound; Output/performance-based o Fiscal support not exceeding PhP27B spread over 6 years o 3 models; 200,000 units per model o Fixed Investment Support (40%): Invest in parts &/or shared testing
facility o Production Volume Incentive (60%): Exceed 100,000 units in
production volume per model
Fiscal support: Allocation
Production Volume Incentive (PVI)
60% of MLB
Fixed Investment Support (FIS)
40% of MLB
Model Life Budget (MLB) PHP9B
Body shell assembly Common parts & shared facility
Strategic parts
Standard Production Support Actual Annual Production Logistics Efficiency Index
Who are eligible to enroll in the program
Participants Qualifications Car Maker • Internationally-recognized carmaker
• Proven track record • Multinational operations including R&D,
manufacturing, marketing & after sales services in Asia, Europe, N.America
Parts Maker • Endorsed by the PCM to manufacture parts of its enrolled model
• OEM auto parts maker • proven track record • member of good standing of the PH Parts Makers
Association Shared Testing Facility Provider
• Collectively endorsed by the PCMs • proven track record
Criteria for evaluating applications • Track record & model competitiveness including global &
domestic sales • New investments in body shell assembly & large plastic
parts assemblies • Planned volume no lower than 200K units over model life
up to maximum of 6 years • Economic impact of the investment plan: parts
manufacturing, linkages, strategic & common parts, employment, consumer welfare
• Impact on overall competitive environment & long term industry development
• Safety, fuel efficiency, emission level standards (no lower than standards under the Clean Air Act)
o Adoption of national standards for auto parts & certification of international quality systems (TS 16949) & environmental management system (ISO 14001)
o Alignment of PH standards with other countries: labor incentives, customs procedures & systems, technical, environment & safety standards
o Strict implementation of vehicle registration regulations– Motor Vehicle Inspection System
o Full implementation of the automated import & export documentation system
o Streamline regulatory procedures to reduce cost o Allocation of road user’s tax to improve infrastructure o Demand stimulating measures: easy consumer financing
& others
Non- Fiscal Measures
Envisioning the Future
0
50
100
150
200
250
300
350
CARS Program to sustain the growth & development of the industry from 2016 and beyond
Actual Imports Actual Production Projected Imports Projected Production
THANK YOU! With the industry roadmap’s clear vision to transform the economy & a more pro-active government bent on creating an environment conducive to private sector growth, PH is now seen as a good place to invest & one of Asia’s brightest spots.
For more information, visit our website at industry.gov.ph