Safeguard duties seen to hinder auto sector recovery

MANILA, Philippines — Local automakers yesterday warned that the government’s decision to impose provisional safeguard duties on vehicle imports would hinder the industry’s recovery from the impact of the COVID-19 pandemic and lead to further decline in sales as the measure exposes the country to various risks.

Chamber of Automotive Manufacturers of the Philippines Inc. (CAMPI) president Rommel Gutierrez said the temporary safeguard against imported vehicles is another blow to the automotive sector and seen to further derail the recovery efforts of industry players and stakeholders.

While CAMPI supports the development of local vehicle manufacturing, he said the group has been vocal in opposing the imposition of safeguard duties on completely built-up units or imported vehicles.

“We project further reduction in sales volume which in turn poses risk of employment downsizing, not to mention government revenue loss. This will also encourage revival of grey market or used vehicles,” he said.

Association of Vehicle Importers and Distributors Inc. (AVID) president Ma. Fe Perez-Agudo said the move is like pulling the rug from under the auto sector still struggling to get back on its feet with an expected 40 percent drop in sales last year.

“This further dampens the recovery outlook of the industry at a time when all players and stakeholders are appealing for government support. The measure will aggravate the already anemic demand and make it harder for Filipinos to afford personal mobility with the projected price hikes,” she said.

As demand for vehicles has been weak with consumers putting off purchases of big-ticket items due to the pandemic, combined vehicle sales of CAMPI and Truck Manufacturers Association Inc. went down 41.6 percent to 196,197 units as of end-November from 336,226 units in same period in 2019.

For AVID, the group’s total vehicle sales declined 43 percent to 40,993 units as of end-October from 71,362 units in the same period in 2019.

“With much uncertainty, investments in dealer expansion and parts localization may be deferred,” Gutierrez said.

He said there are also risks both in the short and long term which would affect the performance of the automotive industry.

“The risk in the short term will be a disruption in regional production and supply. In the medium to long term, this will further slow down regional economic growth because of the chain reaction to other industrial sectors,” he said.

He added the safeguard duties could weaken trade and economic relations as affected exporting countries to the Philippines may resort to retaliation.

Agudo said penalizing imports would not trigger investments, create jobs or address the regional competitiveness of the local manufacturing sector.

“Alternatively, we call for long-term policies that will further improve the ease of doing business which would open opportunities for investments, create jobs for our workers, and provide the Filipino reliable and affordable means of transport,” she said.

Earlier this week, the Department of Trade and Industry (DTI) announced it decided to impose provisional safeguard duties in the form of a cash bond amounting to P70,000 for every imported passenger car (PC) and P110,000 for every imported light commercial vehicle (LCV) for a period of 200 days from the issuance of an order by the Customs Commissioner as it found that increased vehicle imports caused serious injury to the domestic motor vehicle manufacturing industry.

At present, vehicle imports from Southeast Asian neighbors enter the Philippines at zero duty.

The DTI’s move follows an evaluation conducted on the petition filed by the Philippine Metalworkers Alliance to take action on the serious injury caused by the increased imports of vehicles to the domestic vehicle manufacturing industry.

Republic Act 8800 or the Safeguard Measures Act allows the government to provide relief to the local industry when this is seriously injured by the surge in imports of like products.

“Safeguards are imposed to protect local manufacturers and producers and to prevent other companies from leaving the country. If we recall, the discontinuation of the production of Isuzu D-Max in July 2019 and the assembly plant closure of Honda Motors Philippines in the first quarter of 2020 affected local jobs and the Philippine economy. It may also attract vehicle manufacturers to operate in the country and create more jobs,” Trade Secretary Ramon Lopez said.