NOTES THE STATE OF THE AUTOMOTIVE INDUSTRY TODAY

1. Industry leaders warn of devastating effects of excise tax scheme
    By Aris R. Ilagan

The Truck Manufacturers Association of the Philippines (TMAP) and the Chamber of Automotive Manufacturers of the Philippines (CAMPI) warned of the "devastating effects
on the automotive industry and related industries" if the government shall push with plans to expand the coverage of excise taxes.

The automotive industry leaders were reacting to news that the government was studying the imposition of excise taxes on Light Commercial Vehicles (LCVs) such as Asian Utility Veh-icles (AUVs). pickups and vans, which compose about 60 percent of the whole automotive market. Elizabeth Lee, senior vice-president of Universal Motors Corporation (UMC), and TMAP president, said the government must consider the effects of this measure not only on the automotive industry but on the whole economy. Ms. Lee, the first woman president of TMAP, said the car manufacturers have yet to recover from the sales slump due to the pre-vailing economic crisis and an increased and expanded excise tax would only slow down sales.

On the other hand, CAMPI recently met with Finance Undersecretary Antonio Bernardo to explain the possible impact of the new tax measure on the automotive industry.

CAMPI has 15 manufacturers as its members, producing 112 different vehicle models. In 2001, CAMPI said its members manufactured 70,000 units, and their exports reached   al-most US$ 1.1 billion. TMAP is composed of CAMPI members,   except for Honda Cars Philippines, which only manufactures passenger cars and a small SUV, the CR-V.

The proposed taxation scheme exempts buses, trucks, jeepneys, single cab pick ups,   off road vehicles and AUVs. But if the proposed expanded scheme is implemented, the   sales
of four-door pick ups alone is expected to drop by as much as 98.3 percent. The pickup is being eyed to carry a 72.5 percent increase in retail price. For vans, CAMPI anticipates    a drop of 94.6 percent in sales, with its sales forecast of only 310 units in 2002, due to the in-creased prices pushed by the proposed excise tax scheme. The automotive group calculated that if only 50 percent is increased in the prices of the Toyota Hi-Ace van, the price    would be P1.8-million. The van is now sold at P1.2 million. If the Nissan Frontier 4x4 pick up, pri-ced at P1.010 million in 2001, will be under the proposed expanded tax scheme, it    would carry a hundred prercent price increase!

Will people consider paying R2 million for a pickup? "These price increases will devastate the local auto industry because it will naturally cause sales volumes to drop,"        CAMPI pointed out. Lee said TMAP has formulated a five-point proposal in connection with the controversial excise tax issue and they are:

  · Industry supports the DoF's goal of a new system that is transparent, stable, predictive,     nondiscriminatory and revenue positive.

  · New legislation is required to provide policy stability

  · No changes in the current scheme should be introduced until a new legislation is approved     to avoid distortion in investment patterns and future plans.

  · Government and industry should jointly undertake the development of the new system.

  · Used vehicle auctions must ge stopped to make any new scheme effective, viable and     sustainable.