Assembled cars vs. imported cars in the Philippines

Which is cheaper- a locally assembled car or an imported car? The answer is obviously a locally assembled unit such as the Toyota Vios or Toyota Innova, which are also two of the top ten best selling car units today. To learn more about how cars are sold in the Philippines, we have delved deeper into the topic of assembled cars vs. imported cars in the country. In June 2013, data collected by the Philippine Automotive Competitiveness Council Inc. (PACCI) showed that 66 percent of the total vehicles sold in the first half of the said year were completely built-up (CBU) units. This means that the cars were already assembled when they were shipped to our shores. The remaining 34 percent are completely knock down (CKD) units or those which need to be assembled locally. The trend of imported cars outnumbering locally produced units in the Philippines has been going on for the past few years. In 2012, just a decade ago, CBUs were only 8 percent of the total vehicles sold in the country.

Locally assembled cars

By definition, a locally assembled car has its parts shipped to the country before it is put together and marketed for local or international consumption. When car manufacturers decide to locally assemble a car model, they often look at the profitability of that model in the local market plus the cost of labor and overall construction. So, what is the advantage of buying a locally assembled car? Certainly it's not the price. Most of our neighboring ASEAN co-members are already exempt from import duties because of the free-trade agreement. This setting, however, gives car manufacturers a lot of traction to react to the local market. Therefore, assembling locally allows brands such as Toyota and Mitsubishi to react to sudden demands by simply assembling CKD parts instead of shipping them from their other plants in the region. Another appealing concept of buying a locally assembled vehicle is the fact that Filipinos were involved in creating the car, which makes it a sort of “Filipino-made” vehicle. Some of the popular models assembled in the Philippines are Asian Utility Vehicles (AUVs) such as the Isuzu Crosswind and Mitsubishi Adventure, which are also local best sellers. By assembling a car locally, manufacturers are also able to provide jobs in the automotive industry for our countrymen.

Imported cars in the Philippines

Most cars that are imported into the Philippines are completely built and ready to be sold. According to the data from the Department of Finance and the Bureau of Customs (BOC), the current largest importer of cars in the country is Hyundai Asia Resources Inc. (HARI), which pays close to P2 billion in customs duties. BOC defined customs duties as taxes “levied on goods entering the country and are derived by multiplying the dutiable value with duty rate and converted to peso value.” However, several companies are exempt from customs duties as defined by the Tariff and Customs Codes of the Philippines. Interestingly, the list of the top car importers also reflects the top brands in the country. Examples of car models that are imported into the Philippines are the Audi A8 and BMW 6 Series. In most cases, imported cars account for a large portion of the second hand cars in the Philippines and are sold in the import gray market. Only one port, Port Irene, was a permitted shipping point for gray market passenger vehicle importations. However, Executive Order 418, signed at the beginning of 2014, banned the importation of used passenger vehicles at this port. In some cases, such as with mini trucks and multicabs, imported parts or vehicles are re-assembled by welding chassis parts together. This practice allows some local vehicle retailers to sell their automotive products at a cheaper price.

PH car industry vs. ASEAN neighbors

The Philippines may have the potential to be the “Detroit of  Southeast Asia” given its numerous car assembly plants, particularly the ones in Binan and Sta. Rosa, Laguna. In 2012, for example, more than 75,000 vehicles were locally produced in the country compared to 64,000 units in 2011. However, the figures above are dwarfed by neighboring nations such as Thailand, Indonesia and Malaysia. The Thais, the largest producer of vehicles in the region, produce more than one million units each year. Indonesia also creates around one million and Malaysia is able to supply close to 500,000. The Philippines, on the other hand has the potential to manufacture 350,000 units, but only 20 percent of this is utilized by local firms.

Which car to buy?

So which is better, an imported car or a locally assembled one? That discussion would take more than just one post and would probably vary from one car model to another. But it's good to note that if you are buying a locally assembled car, it supports the country’s automotive market and provides jobs. Buying imported cars on the other hand contributes in the nation’s economy in terms of taxes and customs duties.