Motorcycle Industry COMPETITIVENESS ROADMAP PUTTING THE NATION ON - PowerPoint PPT Presentation

Motorcycle Industry COMPETITIVENESS ROADMAP “PUTTING THE NATION ON MOTORIZED TWO - WHEELS”

Outline of Presentation 2 Development of the Philippine Automotive Industry  Global Motorcycle Industry  Philippine Motorcycle Industry Backgrounder  Domestic Motorcycle Industry  Motorcycle Manufacturing Linkages  Factors that Motivate Growth  Factors that Dampen Growth  SWOT / TOWS Analysis  Strategic Action for Growth 

Development of the Philippine Auto Industry 3 The beginnings of the auto industry can be traced back to the commercial importation of CBU cars and trucks from 1916 to 1950. 1916 CBU Importation 1950 Import Control Law/ Foreign Exchange Controls Progressive Motor 1972 Vehicle Program MVDP 1987 (MO136, MO157, MO160) Amended MVDP 1996 (MO346) 2002 New MVDP (EO156)

Development of the Philippine Auto Industry 4 • Local Content Requirement Progressive Motor • Foreign Exchange Requirement Vehicle Manufacturing • Prohibition of vehicle importation Program (1972) • Local Content Requirement MVDP (MO136 / Dec. 1, 1987) CDP • Foreign Exchange Requirement (MO 57 / Feb. 9, 1988) CVDP • Prohibition of vehicle importation (MO160 / Feb. 29, 1988 ) MDP • Termination of Local Content and FOREX Amended MVDP Requirements based on GATT-WTO TRIMS (MO346 / Feb. 26, 1996) • Import liberalization of brand new CBU • Phase-out of Local Content and FOREX New MVDP (EO156) requirements under the TRIMS Extension (Dec. 12, 2002) • Prohibition of used vehicle importation

Global Motorcycle Production 5 Philippines rank 8 th in world’s motorcycle production overtaking Japan and 4 th in ASEAN surpassing Malaysia In thousand

ASEAN 4 Production 2007 - 2012 6 TH 17% PH 8% MY 4% 9,000 ID 71% 8,000 7,000 ASEAN 4 PRODUCTION 6,000 5,000 4,000 3,000 2,000 1,000 - 2007 2008 2009 2010 2011 2012 Indonesia 4,722,521 6,264,265 5,884,021 7,395,390 8,006,293 7,079,991 Malaysia 446,415 536,567 436,430 467,941 498,076 543,088 Philippines 671,588 734,666 756,228 903,722 1,052,566 1,045,915 Thailand 1,646,873 1,907,424 1,634,113 2,024,599 2,043,039 2,606,161 Source: FAMI

Philippine Motor Vehicle Registration 7 8,000,000 58% 56% 7,000,000 56% 6,000,000 54% 53% 5,000,000 52% 53% Axis Title 51% 4,000,000 50% 51% 3,000,000 48% 48% 2,000,000 46% 1,000,000 44% - 42% 2007 2008 2009 2010 2011 2012 TOTAL MV 5,530,052 5,891,272 6,220,433 6,643,627 7,136,986 7,311,572 TOTAL MC 2,647,574 2,982,511 3,200,968 3,500,729 3,760,893 4,120,315 MC Share 48% 51% 51% 53% 53% 56% Source: LTO

Historical Domestic Industry Sales 1,200,000 90.00% 85.6% 85.00% 1,000,000 84.2% 83.3% 84.3% 82.7% 81.8% 81.0% 80.00% % Industry Growth (MDPPA and LTO) 800,000 75.0% 75.00% UNITS 600,000 70.00% 72.1% 67.0% 65.00% 400,000 60.00% 200,000 55.00% 0 50.00% 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 LTO New Registrations 343,138 495,400 585,482 605,038 671,588 734,666 756,228 903,663 1,014,1 1,048,2 MDPPA Sales 257,401 409,704 492,883 517,702 549,106 594,989 637,792 753,111 731,095 702,597 Industry % Growth 44.4% 18.2% 3.3% 11.0% 9.4% 2.9% 19.5% 12.2% 3.4% MDPPA % Share 75.0% 82.7% 84.2% 85.6% 81.8% 81.0% 84.3% 83.3% 72.1% 67.0%

Economic and Social Contributions 9 Compliant to the conditions of the MVDP   Minimum investment of US$2M. As of 2011, investments of member companies have reached PhP 3.4B in Paid Up Capital and PhP 6.8B in PPE  Conveyorized assembly line with painting, welding and testing operation for mass production Over 95% of sales are assembled CKD parts and components Parts Manufacturing   PDP for local parts. Localization rate (amount based) of member companies is approximately 15%  After sales services. Establishment of 600 3S shops and support to phased out models  Direct employment of 5,000+ personnel. In addition are employment generated by several support groups (e.g., dealers, suppliers, service providers) estimated at 30,000  Contribution to revenue generation (taxes and duties) in 2012 at PhP 2.2 billion Contribution to GDP at 0.7%   Consumer Protection  Warranty  Standards compliance on products and environment  Deference to Intellectual Property Rights

Outline of Presentation 10 Development of the Philippine Automotive Industry  Global Motorcycle Industry  Philippine Motorcycle Industry Backgrounder   Domestic Motorcycle Industry Motorcycle Manufacturing Linkages  Factors that Motivate Growth  Factors that Dampen Growth  SWOT / TOWS Analysis  Strategic Action for Growth 

Motorcycle Supply/Value Chain Universities/Training Industry Institutions/Research Associations/ Centers Chambers Logistics/ Shipping Foreign/ Firms Domestic Suppliers Raw 2 nd 1 st OEM Material Tier Tier Dealers Supplier Logistics/ Shipping Firms Marketing Supporting industries Core activities Arms Technology/ Equipment Professional/ Suppliers Manufacturing/ Financial Services ASEAN Domestic After Other Market Market market Markets 11 Tiers : MNCs, Large firms  11  Tier 2 : SMEs

Motorcycle Manufacturing Industry Linkages a fully-integrated Iron & Steel automotive Industry industry that will impact allied industries Foundry Petrochem Rubber Industry Sector Forging Injection/Molding Injection Metal casting Electrical Others Vacuum Forming Industry Molding Tool & Die Automotive Electrical Autmomotive Metal Autoparts Producers Automotive Rubber chemical and Allied Autmotive Plastic Parts Producers Parts Producers Parts Producers Producers Manufacturers Consumers Dealers/ Distributors 12 12

Parts Utilization vs Sales 13 Value of Parts vs Sales 7,000,000.00 800.00 123 128 128 123 700.00 6,000,000.00 600.00 Value in ThousandS PhP 5,000,000.00 118 118 Units in Thousands 500.00 4,000,000.00 84 84 No. of Suppliers 71 400.00 No. of Suppliers 70 71 3,000,000.00 300.00 2,000,000.00 200.00 1,000,000.00 100.00 - - 2006 2007 2008 2009 2010 2011 Value of Parts Purchased 2,969,774,839. 3,355,845,629. 3,684,798,610. 4,519,629,628. 5,931,076,826. 5,945,328,345. Sales 517,705.00 553,143.00 594,989.00 637,792.00 753,111.00 731,130.00 13

Summary of ASEAN Fiscal Incentives 14 The Philippines Indonesia Malaysia Thailand CIT Rate 30 percent 30 percent 28 percent 30 percent Up to 8 year income tax 3 to 8 year income tax holidays for newly holiday for new pioneer Corporate income tax Tax Holidays and registered pioneer enterprises in 22 specific holidays up to 8 years 5 year tax holiday on 70 to Reductions projects meeting certain sectors. followed by a further 5 year 100 percent statutory income conditions. Halving of income tax holiday on 50 percent of (or 10 year holiday for 3-6 year income tax withholding on dividends to corporate income tax (for companies of national and holidays for non-pioneer non residents for priority activities and strategic importance). projects, expansion companies in economic companies in certain projects, and for locating development zones or in geographical areas. in less developed regions. priority sectors. Investment allowances for Tax allowances and 60 to 100 percent of Various tax credits on Doubling of depreciation qualifying capital domestic breeding stocks rates for companies in Investment allowance of 25 credits expenditure. and genetic materials, as economic development percent for expenditures on Accelerated depreciation of well as for incremental zones or investing in priority infrastructure. computer, technology, and export revenue sectors environmental protection investments.

Summary of ASEAN Fiscal Incentives 15 The Philippines Indonesia Malaysia Thailand Import Duty and VAT Exemptions Duty-free import of raw Capital goods are duty and material and spare parts for Exemptions from taxes and VAT exempt. re-export. duties on imported supplies Reduction of import duty on Import duty and sales tax and spare parts. machinery, spare parts, and exemption on machinery and Various import duty reductions raw materials. equipment that cannot be for projects located in certain Zero duty on importation of Special duty drawback and produced locally. regions. capital equipment (EO 70 s VAT exemption for Sales tax and excise 2012) companies with export ratio exemption on locally over 65 percent. purchased machinery and equipment Double deduction of various expenses (such as R&D and Additional 50 percent Loss carry-forward extended to training). Double deduction for utility deduction for labor expenses 10 years for companies in Reduced tax rate 0f 3 percent and transportation costs in Others for 5 years for new projects companies in economic for offshore companies in certain regions. above certain ration of capital development zones or in Labuan. Dividend distributions during equipment to workers. priority sectors. Dividend distributions during holidays are tax exempt. holidays are from income tax exempt.

2012 Motorcycle Density 16 Motorcycle taxis – also known in Mindanao as “ skylab ” and “ habal-habal ” Untapped domestic market presents a healthy picture for the industry. Even after saturation, Filipinos will continue to use motorcycles in various travel needs and livelihood. Philippines (2012) – 24:1 Indonesia – 4:1 Malaysia – 4:1 Thailand – 4:1 Vietnam – 8:1