Manufacturing

Philippines challenges Thailand in auto production

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Philippines challenges Thailand in auto production
A worker at Japan's auto giant Toyota Motor assembles a LEXUS car at the company's plant in Miyata City, Fukuoka Prefecture, on October 2, 2006. Post-crisis global demand has driven up profits at Japan's top companies, but the yen is also rising owing to fears for the recovery's durability -- casting a shadow over future earnings, analysts say. AFP PHOTO / Ken SHIMIZU

Philippines has long trailed the vehicle manufacturing hubs of Thailand and Indonesia in auto production. Only 300,000 cars at most will be produced in the Philippines this year, compared to an estimated 2 million in Thailand. Toyotadominates the Philippine automobile market with a 43% market share in 2014 and ispoised to become the first producer in the country to reach the one millioncumulative sales mark this year, with the Revo and Innova being the hottest sellingmodels.

There are both pluses and minuses for foreign companies choosing the Philippines as aproduction base. Workers are one of the Philippines' most competitive assets with English-speaking and highly trainable manpower. Toyota has set up a Toyota school to train mechanics that are then exported to other factories as far away as Australia. The unemployment rate in the Philippines is high for Southeast Asia at 6.6%, so there are plenty of workers available. Philippines is also a well-established hub for electronic components, fuelled mostly by Japanese investment as well. Toshiba and Panasonic both have factories in the country. On the negative side, the country suffersfrom the highest electricity costs in the region and other serious infrastructureshortcomings, from congested bridges and roadways to clogged ports and airportterminals. Also many investors see the country as an unfavourable legal environmentwith a 60:40 local-to-foreign ownership rule, which prevents majority foreignownership of investment in land and business -- and bars ownership altogether in certain industries, including mining and the media.

Under the administration of President Benigno Aquino Jr, the Comprehensive Automotive Resurgence Strategy (CARS) offers automakers tax incentives if they register to produce at least 200,000 units of one vehicle model over the next six years with a maximum benefits per manufacturer of US$554 million.Toyota is thinking of producin the Vios sedan under this scheme After shuttering its factory in Detroit, Mitsubishi Motors is planning to start production in the Philippines later this year in a factory purchased from Ford Motor Co. The new base would be a Southeast Asianproduction hub for Mitsubishi, with factories in Thailand, Indonesia and, soon, the Philippines.

Consumer activity in the Philippines rose by 6% in 2014, while Thailand's consumption contracted. In the automotive sector alone, sales rose 21% in the first half of 2015. Manufacturing has been booming, growing 8% in 2014. Exports rose 12% last year, with Thailand falling for a second straight year in a row.

Source: bangkokpost.com

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