The Philippine auto industry expressed alarm and outrage over recent developments in government policy regarding used vehicle importation.  During a press conference held on 14 September 2005 at Makati Shangri-La, the auto industry’s main associations: Chamber of Automotive Manufacturers of the Philippines (CAMPI), Motor Vehicles Parts Makers Association of the Philippines (MVPMAP), Philippine Automotive Association (PAA), Automotive Industry Workers Alliance (AIWA) and Motorcycle Parts Producers and Exporters Association (MCPPEA)—revealed that the stated government policy prohibiting importation of used vehicles may once again be overturned.

The alert was prompted chiefly by recent revelations of Senator Richard Gordon that the issue of used motor vehicle importation was the subject of a political tradeoff, particularly in the Subic Freeport.

Senator Gordon provided to the auto groups a photocopy of  memorandum addressed to President Gloria Macapagal-Arroyo from the Chief Presidential Legal Counsel and the Senior Deputy Executive Secretary for Legal Affairs stating that “the DOF, DTI, BOC, SBMA, LTO have all been directed by Executive Secretary Eduardo Ermita to comply with the Regional Trial Court Decision…allowing the importation and entry of used motor vehicles with the Subic Special Economic Zone, subject only to the payment of the required customs duties, until final disposition of the matter by the Supreme Court.”

Opening the floodgates to used car imports pending yet another court decision is the last thing the struggling auto industry needs.  Our Supreme Court has not exactly been a bastion of protection for investors either.  Either way the Court decides, the future is growing dimmer.  Despite the introduction of more than a dozen new models this year, and the 11% growth in auto sales this year, the industry is still reeling from the unabated inflow of used vehicles.  Legitimate vehicle registrations totaled only 88,000 vehicles, versus informal sales of 116,000.  Industry sales are far below the 1996 peak of 162,000, and the 230,000 vehicles needed to sustain local factories.  Capacity utilization stands at below 25%.

“We are the smallest market in the region, dwarfed by our ASEAN neighbors.  Thailand with over 550,000 units sales, Malaysia with over 490,000, Indonesia with over 480,000 units.  Their auto industries flourished due to a large extent, to the banning of used vehicle importation,” said Elizabeth Lee, CAMPI President.

The auto groups also revealed the extent of the deception in tax declarations.  A 1998 Mitsubishi Pajero that sells for PHP380,000, for instance, is declared at $450 acquisition cost, or PHP25,200.  Taxes paid amount to a mere PHP55,459, for a total cost of PHP80,659.  That means a profit of PHP299,341, or 371%.  Even 1997 to 2004 BMWs and Mercedes-Benzes were declared at ridiculously low acquisition costs of $350 to $500.

Mr. George Blaylock, President of PAA, was close to tears of outrage as he expressed dismay at the situation.  “Don’t you see something very wrong here?”

Compounding the industry’s problems are indications that used vehicle importers have reportedly set up shop in Visayas and Mindanao, bypassing the Subic route when necessary.

Ms. Lee added, “The charges made by Senator Gordon with reference to how the used motor importers brazenly continue to run over laws and authorities of the land, contravene government policy, and subvert an important domestic industry, and the economy in general, should not be taken lightly.  They continue to demonstrate that with the huge profits they can make out of their trade, combined with political clout, anything is possible in this country.  They are as Senator Gordon has said, purveyors of a culture of corruption.”

Some members of the local press went on record wondering why an industry that           has invested so much and contributes billions to the economy has been allowed to suffer for the benefit of a few individuals.  The used vehicle importers don’t benefit the public in any way, as their vehicles, most of which are already considered junk from other countries, are not certified as safe to run on the roads.  This government must realize that the auto industry, zealously protected in almost every other country, must be allowed to flourish and not be killed off by illegal imports.

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