After an increasing trend in the car sales in the past seven years, the Philippine automotive industry experienced a slowdown in 2018. New vehicle sales based on the combined data of the Chamber of Automotive Manufacturers of the Philippines (CAMPI) and the Association of Vehicle Importers and Distributors (AVID) showed an overall 16% decrease in sales from 531,959 units in 2017 to 446,110 units sold in 2018. The industry attributes this to the government’s implementation of Republic Act 10963–known as the Tax Reform for Acceleration and Inclusion (TRAIN) Law which took effect in January 1, 2018. The TRAIN Law increased the excise tax for vehicles and fuels, thereby increasing the selling prices of vehicles. In addition, the demand for vehicles in 2018 was also affected by the high inflation rates, rise in interest loan rates, and increasing oil prices. Nonetheless, industry experts anticipate better sales in 2019 as the economy is expected to recover based on the country’s improving economic performance in the 4th quarter of 2018.
Summary
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U.S. automotive aftermarket companies need to work with local agents or distributors to help them enter the Philippine market. The distributor or agent must be familiar with local regulations, have access to key customers, and have the capability to provide after-sales support. It is important to note that automotive lubricants and fuel additives must secure the necessary permits from the Philippine Department of Environment and Natural Resources (DENR) and the Department of Energy (DOE). Duties and tariff apply to vehicle and aftermarket product imports. Detailed information on specific tariff information is available from CS Philippines (contact information listed below).
CBU’s from the U.S. are imposed with a 20%-30% import tariff as compared to 0% import tariff for CBU’s from the ASEAN because of the ASEAN Free Trade Agreement (FTA). Other existing FTA that are beneficial to the Philippines and other economic regions are the Philippines-Japan Economic Partnership Agreement, ASEAN - China, ASEAN - Korea, ASEAN-Australia-New Zealand, and ASEAN-Japan. Import duties of CBUs from these regional blocs are zero or lower than the MFN rate that is applicable to the U.S.
On automotive standards, ASEAN countries developed a Mutual Recognition Arrangement (MRA) on Type Approval for automotive products. Under the MRA, ASEAN nations which include the Philippines is working towards full harmonization of technical standards in automotive parts and systems based on the United Nations Economic Commission for Europe (UN-ECE) standards. Once approved the Philippines will adopt UN-ECE (European) auto standards. This will place U.S.-made vehicles at a disadvantage since the U.S. adopts the U.S. Federal Motor Vehicle Safety Standards (FMVSS). Nonetheless, the Philippine government has committed to exercise openness and flexibility to follow other standards such as the FMVSS.
Market Entry & Barriers
Philippines