Philippine auto parts makers struggle to survive

Local auto parts makers will start selling spare and replacement parts to local and foreign markets under one brand name, as part of efforts to cushion the impact of reduced production volumes amid increasingly trying market conditions, the Motor Vehicle Parts Manufacturers Association of the Philippines (MVPMAP) said in a statement Friday. It said the move will help address problems arising from reduced production volumes over the last few years due to negative market factors like unfair competition posed by unabated smuggling. Local automotive industry sales have lagged in the last 10 years, failing to breach the 100,000-unit sales mark. MVPMAP said vehicles sold in completely built-up form with no local value-added parts and labor have steadily increased against those assembled from completely knocked-down kits. "The importation of used vehicles, particularly via the Subic Freeport, has continued unabated. The Philippines still continues to import auto spare parts for the replacement market, even those parts that can be locally assembled," the group noted. "All of these have contributed to a reduced production volume for local parts makers, not even enough for them to take advantage of economies of scale," it explained. "The result is most of our members are currently operating at only 40% of their rated plant capacities. Even worse, some have closed shop." In fact, the group said, the number of local auto parts makers has been reduced by more than half only about 175 companies from 250 companies 10 years ago. Considering that there are over 50,000 workers dependent on the local auto parts making industry, "we have to do something fast to save the industry. We hope that this project will provide the impetus for a revived market that will save 50,000 jobs," John Lee, MVPMAP director, was quoted as saying. He said MVPMAP members will pool their resources to collectively market and sell their non-proprietary products under a common brand name. The products will be screened and granted a seal of approval before it gets into the program. "We will save costs by making joint collaterals and marketing materials and implement a common marketing strategy. In this way, we are able to pool together meager resources to compete globally as a bigger entity. In the process, we also create more business opportunities for our members," Mr. Lee said. He also assured end-users that they will get the same quality for the products they buy as those supplied to original equipment market or to car and truck assemblers. - B. S. Sto. Domingo/BusinessWorld