Toyota urged PEZA to encourage more investments in parts manufacturing to make participation in the new CARS program easier
MANILA, Philippines – The Toyota Group is seeking the support of the Philippine Economic Zone Authority (PEZA) ahead of its expected participation in theComprehensive Automotive Resiliency Strategy (CARS) program.
The group urged PEZA to encourage more investments in automotive partsmanufacturing to make more components locally available, strengthening the program.
Parts localization is a central feature of the CARS program which rewards automakers with tax incentives for producing cars locally.
The assembly company of the Toyota Group is expected to invest at least P1.4 billion under CARS, although it has yet to formalize its participation pending the issuance of the implementing rules and regulations (IRR) of CARS.
“The CARS program provides new investment opportunities not only for Toyota Motor Philippines (TMP ) but for the entire Toyota supplier network,” the Toyota Group said in a statement.
The Group added that TMP, together with the Toyota Group of Export Suppliers, recently convened to update PEZA about its business operations performance, as well as industry prospects and challenges.
Michinobu Sugata, TMP president, earlier indicated the company will enroll only one car model – its bestselling Vios compact sedan – as its entry in CARS.
Sugata said TMP will beef up the production of the Vios to 33,333 units annually starting 2016 to hit the CARS’ required 200,000 unit production volume in 6 years.
TMP produced a total of 26,000 units of Vios at its manufacturing plant in Sta. Rosa, Laguna.
The last time TMP introduced a new Vios model in 2012, the company spent P1.4 billion ($30.56 million) as it applied for incentives under the Board of Investments.
According to Sugata, TMP will be investing more for the new model of the Vios, saying "there is no minimum investment in the clause."
Adrian Cristobal Jr, undersecretary of the Department of Trade and Industry (DTI), said that the IRR is being finalized and is targeted for issuance this month.
CARS participants will be required to invest a minimum amount in fixed capital, including parts, he added.
The CARS Program under Executive Order 182 has specified that localization of parts must be 50% of the vehicle’s weight including stamping and instrument panel, center control, front and rear bumper.
Toyota has already localized bumpers, controls, and door trims and has invested in additional stamping facilities at its Sta Rosa plant.
Additional investment in parts manufacturing will require prior consultation with its Tokyo headquarters.
Once these new investments come in, Sugata said, its local content will be increased to over 50% from the current 40%.
"It has very strict qualifications, and the requirements are not easy but Toyota Motor Philippines will take this challenge," said Sugata.
The program has set $600 million (P27.4 billion) in tax incentives to participants for the production of 600,000 units of cars or 200,000 units of a car model over a 6-year period.
The CARS Program requires a minimum of 100,000 unit production volume to start enjoying the tax perks, with a subsidy of $1,000 ($45,800) per unit.
Sugata said that the DTI has so far completed 70% of the IRR but that TMP has to clarify some points on the program itself. ¬