Utility vehicle program bill being readied

The Board of Investments (BoI) is drafting the framework for the proposed Philippine Utility Vehicle Program (PhUV) that will become the basis for legislation creating the program and granting perks for participants. BoI managing head and Trade Undersecretary Elmer C. Hernandez told reporters late last week that his office is studying the incentives and financing package for the program, which will be designed to spur production of low-cost multi-purpose vehicles and lure consumers from buying used cars. UNTAPPED MARKET Car makers and car parts manufacturers have blamed the smuggling of such vehicles as unfair competition, since illegal importers of secondhand cars do not pay duties and taxes. Besides consulting supportive lawmakers, BoI is also consulting leaders of the Chamber of Automotive Manufacturers of the Philippines, Inc.; Truck Manufacturers Association, Inc., and the Motor Vehicle Parts Manufacters Association of the Philippines (MVPMAP). "It’s [the planned bill] still in the drawing stage. Once we develop the framework, we can prepare the necessary bill," Mr. Hernandez said. He said the framework should be finished in time for the opening of the 14th Congress this July so that the appropriate bill can be filed. THREE SCHEMES He said the framework consists of three schemes from which participants can choose. The first scheme is to mandate owners and operators of public utility vehicles with old engines to replace them, using locally made parts. Not only will this proposal spur the local parts industry, it should also address the air pollution problem in Metro Manila, Mr. Hernandez said. The second scheme is to build an affordable passenger vehicle that will cater to the C and D classes. "Right now, the current market of the assemblers — the A and B classes — is not growing. If you want a viable auto industry, you should also market to the C and D classes. That’s a big market," Mr. Hernandez said. The price of these vehicles for the C and D classes should not exceed P400,000, he stressed, which is roughly the price of secondhand cars in good running condition. FOR ENTREPRENEURS The final proposal is to develop a multipurpose Asian utility vehicle that can carry both passengers and cargo. Designed for small businesses, these vehicles will have at least 60% local content and will be priced at P350,000 at most. "We are looking at cars for the entrepreneur types," MVPMAP executive director Ferdinand Racquelsantos said. KEY CHALLENGE Since August last year, local auto parts manufacturers have been urging the government to undertake a program similar to the People’s Car program of the ’90s, which saw the development of models like the Tamaraw FX and the Ford Fiera. Mr. Racquelsantos said the first prototype — with around 58% local parts — can be produced by the end of the first quarter. Mr. Hernandez said the key challenge the proposed program now faces is the insufficient number of companies in the country that can manufacture engines. "We don’t have economies of scale. If you have economies of scale because of demand and attain critical mass, this will justify the putting up of a manufacturing plant," Mr. Hernandez said. -KLA/BusinessWorld