Professional Documents
Culture Documents
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.
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.
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
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.
Source: TESDA
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
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
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
1139
-144030
28936
-29541
117431
224536
313303
-16901
146157
112159
261990
59005
41337
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
1202550
1160136
42414
1675470
121341
12299
Demand
2004 Total Automotive Industry Sales
(in units)
6,000
Total Passenger Cars
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.
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.
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
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
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
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
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%
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
Eastworld
2%
SC Kymco
8%
Yamaha
13%
Honda
51%
Suzuki
10%
Kawasaki
15%
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
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
768
772
672
429
694
578
654
483
712
5,763
17
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
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
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
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
10
54
0.22%
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
E320 A/T
MB Vito L CDI
0.01%
Trucks
Trucks-Indent
Total CV
15
0.04%
Commercial Total
18
0.03%
997
100
55
84
94
104
131
111
147
171
Terrano(4x4)
Urvan Shuttle
84
81
87
104
91
125
84
109
122
887
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
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%
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
Mazda 3
Mazda 6
68
74
122
147
51
63
60
116
214
915
Ranger
51
105
91
62
82
89
76
27
61
644
180
143
174
189
142
237
264
256
180
1765
34
31
33
32
24
20
192
10
17
11
67
134
135
150
131
208
221
151
106
110
1346
33
14
15
39
48
36
26
217
Everest
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
Trooper(4x2)
Highlander AUV
11
26
19
12
17
103
419
407
679
392
441
451
487
571
348
4,195
587
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
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%
10
22
12
12
11
11
10
103
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
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%
Mazda (LCV)
Francisco Total
Total Industry
0.00%
0.00%
MAN
13-220 HOCL
18-310 HOCL
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)
No. of
Participants
Annual Output
14
21
21
221,450 units
145,950 units
462,100 units
Source: BOI
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
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
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.
1982
1983
1984
1985
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.
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
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
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:
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.
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:
27
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.
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
Actual Imports of
CKD/Components/Parts 1
781,812
335,062
Source:
1 CKD components/ parts imports - NSO raw data
2 Local Parts - Estimated at 30% of Actual Imports of CKDs/Components/Parts
28
Trade performance
The Expanded Philippine Automotive Export Program
Category
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.
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.
29
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
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
30
AUTO LOANS
Quarterly Total
(in billion Php)
50
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
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
D
ec
M
ar
-0
4
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.
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
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 Loans
Vehicle Sales
Source: IDEA, Inc., CAMPI and BSP
32
33
34
35
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%
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
36
Illustration: The effect of new taxes as RA 9224 lowers prices for passenger cars
40000
CV
35000
30000
25000
20000
15000
10000
5000
0
Jan-Jul 2003
Jan-Jul 2004
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
62%
78%
38%
22%
CVs
Jan-Jul 2003
Jan-Jul 2004
PCs
However, the sales of passenger cars cannot offset the decline in sales of CVs, given the
latters huge market.
37
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)
39
ALTMAN-Z SCORES
TOP INDUSTRY PLAYERS
WORCAP/
RE
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
40
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
30.829173
0.0102274
0.0002362
0.036559507
1.3932643
1.7621915
41