Auto smuggling still rampant, threatens vehicle industry

By Daxim Lucas - Inquirer

The Philippine automotive industry continues to suffer the effects of rampant vehicle smuggling, which is hampering its development despite a recent increase in legitimate sales.

In a recent interview, Ford Group Philippines president Henry Co said smuggling of vehicles continued to pose a serious threat to the viability of the automobile industry, which in turn, threatens the livelihood of the thousands of workers employed by it.

“Vehicles are highly regulated products, but smuggling continues,” he said, describing the smuggling activities in the Subic Bay Freeport in recent months as “still significant.”

“Motor vehicle smuggling is an indication of how bad governance could be,” Co added.

The Philippine industry remains hard-pressed to surpass the 100,000-mark in annual sales since falling to the 80,000-level in the wake of the 1997 East Asian financial crisis. The Ford Philippines chief said that the inability of the industry to recover from the post-crisis sales slump was due, to a large degree, to the sharp increase in smuggling activities in Subic and other ports in recent years.

In particular, he said smuggling of used vehicles “has grown substantially over the last 10 years” and continues despite last year’s Supreme Court decision affirming the illegality of the practice.

Co said the local automobile industry had an annual capacity of 200,000 vehicles, but estimated that the utilization rate stood at only 25 percent of this, due to the prevalence of cheaper, smuggled vehicles.

The Chamber of Automotive Manufacturers of the Philippines Inc. sees auto sales to top 100,000 this year, partly due to rising affluence, brought about by the strong economy.

Co believes, however, that this level would be even higher if not for the availability of smuggled vehicles, which drain the industry of legitimate sales.

More importantly, the Ford Philippines chief believes that vehicle smuggling has the potential to bring down the local automobile industry, given that legitimate sales remained relatively weak even as vehicle registrations had been increasing yearly—the difference being made up of smuggled vehicles.

Already, he said several automotive parts makers have closed shop or moved to other countries because of weak sales.

“Over the long term, something has to be done,” Co said. “Can a country like the Philippines with over 80 million people afford to be without an auto industry?”

He said the government only has to have the resolve to implement last year’s Supreme Court decision.

“It’s illegal,” he said. “It should be easy and simple enough.”