Local auto parts manufacturers said the lack of local raw materials and lack of testing facilities in the country, among others, hamper the localization of parts in the Philippines.

Richard B. Valdez, senior vice president of Toyota Motor Philippines Corp.’s purchasing division, said the desire to localize supply chains is limited by common challenges faced by suppliers.

Valdez highlighted that these challenges are lack of design capacity, lack of research and development, lack of testing facilities and unavailability of local raw materials in the country.

In the case of the Toyota Vios model, however, he said: “Support from the CARS (Global Automotive Resurgence Strategy) program has helped us achieve localization levels above those required by the program. »

From the perspective of another local automotive player, Mitsubishi Motors Philippines Corporation (MMPC) Senior Vice President for Purchasing Naoyuki Okamoto highlighted that some of the challenges in localizing parts in the country are: “lack of raw material manufacturer in the Philippines, resulting in high imports. cost.”

Okamoto also noted that the country’s local auto manufacturing faces a cost competitiveness challenge from local sourcing compared to its counterparts in other countries.

The MMPC official said the local automotive sector also has “a limited number of local parts manufacturers producing functional parts and large tools.”

Okamoto revealed that Mitsubishi’s Mirage model has achieved more than 40 percent localization. These local components are: Stamping and body parts (Hood, Roof, Muffler, Rear floor), Interior parts (Plastic: Bumper, Door, Console; Others: Seat, Carpet), A1 tire and wheel, Other parts : Beam, Weather Band.

Another Mitsubishi model with local components is the L300 model. These local components are: stamping and body parts (roof, bumper, door, chassis, fuel tank, muffler), interior parts (seat, cabin carpet), steel wheel, other parts: harness, cutter cold.

MMPC said L300 has achieved more than 30 percent localization.

For Toyota’s share, Valdez said, in 2023, the Toyota Group accounted for about 30 percent of the Philippines’ total auto parts exports, equivalent to an export turnover of $665 million.

According to Valdez, the automobile brand wants to have a “significant” participation in Toyota’s regional production network through the export of spare parts.

He explained that for Toyota suppliers, there are two channels of integration into Toyota’s global supply chain: direct exports and indirect exports.

“Exports, primarily of Vios and Innova parts, provide additional sales opportunities where the domestic market for OEM parts is limited. Suppliers are able to tap into additional markets and maximize their production capacity, which helps them manage their cost competitiveness,” Valdez said.

From the government’s perspective, Board of Investments (BOI) Executive Director for Industrial Development Services (IDS) Corazon H. Dichosa said in her remarks at the Reverse Auto Show on Tuesday that the local Philippine automobile industry is “faced with many problems”. challenges that limit its growth to its full potential.

“The local supply chain remains limited for various reasons and regulatory challenges also persist that make it easier to import completely built units (CBUs) than locally assembled vehicles for the local market,” Dichosa said.

The BOI official said that given that the Philippines is a nation of more than 116 million people, 63 percent of whom are in the labor force, “this is a large enough market to support an industry Philippine automobile”.

Unfortunately, Dichosa said the local market is served by “a large portion” of imports from the Philippines’ neighboring countries, both (completely built units) CBU and (completely knocked down units) CKD.

Indeed, she highlighted that for the period 2015 to 2023, vehicle imports represent 71 percent of the country’s total sales.

“Imagine the foreign exchange savings we could have made if only we were able to produce more of what people buy locally,” Dichosa noted.

The BOI official stressed that the Auto Reverse show goes beyond the simple exhibition.

“This is part of our strategic effort to strengthen the network between our local parts manufacturers and automobile assemblers and manufacturers for a more self-sufficient automobile industry,” Dichosa emphasized.

Image credits: Noriko Hayashi/Bloomberg