June 2, 2015 / 9:21 AM / 3 years ago

Philippines sets $600 mln in incentives to boost falling car output

MANILA, June 2 (Reuters) - The Philippines has launched a long-anticipated scheme that will provide incentives worth $600 million over six years to its tiny auto industry in an attempt to lift the country’s shrinking car output and catch up with regional rivals.

The Southeast Asian nation’s automobile sector, dominated by Japanese car makers such as Toyota Motor Corp and Mitsubishi Motors, had been clamouring for the incentives saying they were needed to boost production, and have said they might shift manufacturing to cheaper neighbouring countries.

President Benigno Aquino signed the incentives into an executive order before he left on Tuesday for Japan.

Under the scheme, the government will provide an average of 4.5 billion pesos ($100.7 million) worth of incentives annually, or a total of 27 billion pesos in six years, to support the production of three vehicle models.

The plan, finalised after a three-year study, will encourage production of at least 600,000 vehicles and generate economic activity worth 300 billion pesos over its six-year life, the government said.

“We will study this carefully with our principal, Mitsubishi Motors Corp of Japan,” said Froilan Dytianquin, vice president at Mitsubishi Philippines, the country’s second-biggest car maker.

Mitsubishi said in January it wants to produce new models in the country, such as compact cars, but its decision would depend on the incentives.

As per the scheme released on Tuesday, a car firm can get incentives for one model if the model has a track record of competitiveness, plans to make new investments in assembly and targets a production volume of at least 200,000 units over six years, among other requirements.

Most car companies in the Philippines have opted to import complete vehicles instead of producing locally due to the high cost of imported raw materials and the lack of adequate testing facilities. Less than a fifth of cars sold in the country now are made locally, compared to about 90 percent in the mid-1990s, industry sources say.

There was no immediate comment on the scheme from Toyota Philippines, Honda Cars Philippines, Nissan Philippines Inc and Isuzu Philippines Corp, which also produce vehicles in the country. Other firms sell imported completely built-up cars.

Given the output volume required under the plan, only the local units of Toyota and Mitsubishi will be eligible to apply for incentives, said Ferdinand Raquelsantos, head of motor vehicle parts industry group MVPMAP. $1 = 44.67 Philippine pesos) (Editing by Muralikumar Anantharaman)

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