People's car a premature idea
by Manny Villar
http://www.businessmirror.com.ph/oped04.php
THE term “people’s car,” the production of which has been proposed by some quarters and supported by the Board of Investments or BOI, is misleading. For it implies that the car’s price will be within reach of most Filipinos. Even the backyard-assembled jeep commonly known as “owner” is beyond the reach of most Filipinos. And yet it costs as low as P50,000 (using the cheapest second-hand engine and parts from junk shops, plus a lot of free labor from friends knowledgeable in automotive mechanics).
And that’s less than a third of the P350,000 entry price for the proposed people’s car. We have to admit, Filipino wage earners are not in the league of workers in developed countries like the United States, where a minimum-wage employee can afford to buy a new car, on installment. Here, if you’re making P10,000 a month, you may even find it difficult to buy a motorcycle on installment without a comaker.
Let me clarify this. As a businessman and a lawmaker, I am in full support of having a truly Philippine-made motor vehicle. I also sympathize with the motor vehicle parts manufacturers, which broached the idea to increase domestic car assembly amid the increasing importation of completely built units (CBUs).
The major players in the automotive industry import CBUs primarily for new models so they can sell the units in the market immediately. In contrast, CKDs, which are primarily made up of engine, power train and chassis, require a substantial amount of parts and components from local manufacturers.
Importing CBUs makes good sense in marketing, but takes away business from local parts manufacturers.
In support of the parts makers’ proposal, the government, through the BOI, has announced that it will grant pioneer incentives to the assembly of vehicles under a people’s car program.
The objective is good, but it is such a misplaced generosity, which has no place in governance, particularly when it concerns economic policy. As I mentioned above, the Filipino people, particularly the masses, are not yet on an income level that can afford to buy brand-new vehicles. The government is making a promise it cannot keep by saying it is supporting the assembly of mass-affordable motor vehicles.
Just look at the Proton, which was developed by Malaysia, some of which even found their way to the Philippine market. It’s Malaysia’s people’s car, and it failed, even though Malaysians have a higher per capita income than Filipinos.
The Philippines also produced people’s car models even earlier than the Malaysians. Remember the Sakbayan, the very ugly box on four wheels with a Volkswagen engine? It was used mostly by law enforcement and other government agencies, which apparently were required to buy the locally produced vehicle as an incentive to the industry. Are we going to require our hemorrhaging government corporations to buy the proposed people’s car? That’s nothing more than a subsidy, in another form.
I still see one or two Sakbayans on the road, but most of them are gone. It’s bigger brother, the Trakbayan, is gone, so is the Harabas of General Motors or the Cimarron of Chrysler. Darwin’s law of the survival of the fittest applies to industry, too, you know.
A recent and better-looking people’s car was the Kia Pride. We still see quite a number of them on the road, mostly being used as taxicabs. It has since been replaced by a newer, more expensive model.
And now we’re building a people’s car, again? It’s a nice topic for conversation, but right now it should go no farther than coffee-table talk. On the other hand, let’s encourage the automotive companies to develop cars that will use more locally made parts than their imported models.
But let’s not force the industry to go into the mass production of a people’s car. Even the Philippine market is not big enough to buy all the people’s car that these companies can produce. Generally speaking, all the assembly plants in the country are operating only part of their capacities.
Perhaps, when we begin to grow by 8 percent in terms of gross domestic product, and that means the economy is really sizzling hot, Filipino households will generate enough income to afford to buy brand-new cars. That is the time when we can consider producing a people’s car.
Right now, I doubt that anybody will be investing a lot of money in a people’s-car project.