GT Capital prefers status quo on proposed auto tariff

As government evaluates a petition to impose a safeguard duty on vehicle imports and considers imposing a tariff on auto imports from Thailand, GT Capital Holdings Inc., parent firm of Toyota Motor Philippines Corp. (TMPC), said it prefers keeping the status quo of being allowed to import cars from Southeast Asian neighbors at zero tariff.

“We are working on ASEAN (Association of Southeast Asian Nations) economic community rules and this actually allows us free movement of goods on zero tariff. We are very much working in accordance with stipulated trade rules. So the move to protect local industry for us is something we have to be watchful about. We are really in favor of free trade within the region,” said GT Capital Auto Dealership Holdings Inc. chairman Vicente Jose Socco.

The government is evaluating a petition to put in place safeguard duty on all vehicle imports and to consider imposition of tariff on automobiles from Thailand to get compensation for non-compliance to a World Trade Organization (WTO) decision favoring the Philippines on a cigarette tax case.

The Department of Trade and Industry (DTI) is evaluating a petition filed by the Philippine Metalworkers Association to impose safeguard duty on vehicle imports which have increased to 207,000 units last year from over 153,000 units in 2014, and are threatening local car assembly, auto parts manufacturers, as well as employment in the sector.

At the same time, the DTI is considering to impose duty on vehicle imports from Thailand as a retaliatory measure as the latter has yet to comply with WTO’s decision on a cigarette tax case the Philippines won.

Socco said TMPC would be affected if the government decides to proceed with imposing safeguard measure on vehicle imports and with the retaliatory measure against Thailand as it imports some of the vehicles sold in the country.

“It will have an impact not only on us, but on Mitsubishi, other manufacturers importing from Thailand, being that Thailand is the biggest production base in ASEAN,” he said.

Around 15 percent of TMPC’s vehicle imports as of end-October were from Thailand.

Of the vehicles sold by TMPC, only the Vios passenger car and Innova multipurpose vehicle are assembled at its plant in Santa Rosa, Laguna.

“What’s paramount is that we also understand that we’re trying to bring in the most competitively priced vehicles to the market and I think the government is also very much cognizant of that. The safeguard is very much contrary to the spirit of the ASEAN economic zone which promotes the free movement of goods,” Socco said.

He said any decision of the government should take into account that the country is a signatory of the ASEAN Economic Community which committed to create a region for free movement of goods and services.

“Whatever the final decision, I think we have to be very respectful of that (ASEAN Economic Community),” he said.

Asked if the imposition of the safeguard measure and proceeding with retaliatory measure against Thailand would prompt TMPC to expand assembly operations, he said “Toyota has a supply chain that’s spread out and it includes local production. So the economics of that will play itself out.”

Still, he said the group would abide by the government’s decision should it proceed with the imposition of tariffs on vehicle imports.

“If the government believes there’s some need to impose safeguard duties or use this as a retaliatory measure with Thailand, the government of course has that prerogative and we will comply as the government decides,” he said.

As imposition of safeguard duty on vehicle imports as well as tariffs on automobile imports from Thailand are being studied, Trade Secretary Ramon Lopez said the government would want automotive firms to consider the Philippines as a production hub.

“We’re not here just to buy their products, to import their products. We really want them to establish operations here in the same way they have identified certain production models in Thailand, in Indonesia. Assign a product in the Philippines so it’s a win-win arrangement,” he said.

The government wants to encourage more local manufacturing to revive the sector which can create jobs.

In line with the push for manufacturing, Lopez said the government is reviewing how to improve the Motor Vehicle Development Program to encourage other brands to come in and invest in manufacturing assembly.

TMPC is the country’s top selling automotive firm in the country, accounting for more than 43 percent of the market as it sold 130,520 units as of end-October, up five percent from 124,329 units last year, based on the latest data from the Chamber of Automotive Manufacturers of the Philippines Inc.

For this year, the automotive firm expects to assemble 53,669 units out of its facility in Santa Rosa, 22 percent higher than the 44,000 units produced last year.

TMPC has enrolled the Vios in the government’s Comprehensive Automotive Resurgence Strategy program which provides participating firms with fiscal and non-fiscal support to encourage investments in vehicle manufacturing.

For that program, TMPC has invested P5.38 billion to enhance local production capabilities and increase local content of the Vios.