What you need to know about DTI’s safeguard duty affecting car prices

Updated Jan 06, 2021 | Same topic: Automotive Industry Updates

New tax on vehicle imports could affect the local car industry’s recovery. 

The Philippine automotive industry has been greatly affected by the COVID-19 pandemic with sales dropping to an all-time low. Last April 2020, vehicle sales went down by almost 99 percent with only 133 units sold. 

Despite the challenges brought by the pandemic, the local car industry remained resilient as it started to pick itself up in September 2020 with 24,523 units sold. Then, PH Auto Industry entered Q4 2020 on a positive note as it posted more than 25,000 unit sales in October, a 2.7 percent increase. 

However, the Philippine automotive industry is set to face yet another challenge as the Department of Trade and Industry (DTI) announced the imposition of safeguard duties on imported cars. 

Honda BR-V

Honda BR-V

The DTI is imposing a provisional safeguard duty or tariff in the form of a cash bond amounting to Php 70,000 per unit for imported passenger cars and Php 110,000 per unit for imported light commercial vehicles. 

The provisional safeguard measures will be implemented around January 20, 2021. It will be in place for 200 days from the issuance of an order by the Commissioner of Customs and while the case is under formal investigation by the Tariff Commission. 

DTI Secretary Ramon Lopez said that the imposition of the safeguard duty on imported cars was the agency’s response to the petition filed by the Philippine Metalworkers Alliance. The safeguard duties were seen as necessary to protect the local or domestic motor vehicle manufacturing industry.   

The DTI explained that the increased importation of passenger cars and light commercial vehicles is a “substantial cause of serious injury to the domestic motor vehicle manufacturing industry.” DTI Secretary Lopez added that the safeguard duties will ensure a level playing field for locally-manufactured vehicles that use Philippine metal products. 

Mitsubishi Xpander units

Mitsubishi Xpander units

“The Philippines has one of the most open markets relative to our ASEAN neighbors. While we generally do not restrict products coming into the market, we also need to ensure the level playing field for our local industry,” Lopez said.

DTI Secretary Lopez added that safeguard duties will prevent car companies from leaving the country, and it can also attract vehicle manufacturers to operate in the Philippines. 

“Safeguards are imposed to protect local manufacturers and producers and to prevent other companies from leaving the country. the discontinuation of the production of Isuzu D-Max in July 2019 and the assembly plant closure of Honda Motors Philippines in the first quarter of 2020 affected local jobs and the Philippine economy,” Lopez said.    

According to the DTI, imports of passenger cars have increased by an average of 35 percent from 2014 to 2018. While the share of imports relative to production showed that imports exceeded domestic production from 295 percent in 2014 to 349 percent in 2018.  

On the other hand, imports of light commercial vehicles that includes pickup trucks increased from 17,273 units in 2014 to 51,969 units in 2018. Its share of imports relative to domestic production also significantly increased from 645 percent in 2015 to 1,364 percent in 2018.

>>> Related: Imported vehicles expected to get price hike according to DTI’s plan

2021 Toyota Vios

The new Toyota Vios

To put things in perspective, the said safeguard duty or tariff will not affect locally manufactured cars that use materials from Philippine metal products. However, cars that are currently fully assembled in the country are not that many. As of this writing, cars fully assembled in the Philippines are the Mitsubishi Mirage G4, Mitsubishi L300, Nissan Almera, Toyota Vios, and Toyota Innova. 

With that in mind, most of the cars available in the local market will be slapped with the DTI’s safeguard duty. As such, this could lead to a price increase in imported cars sold in the Philippines such as the Nissan Navara, Isuzu D-Max, Toyota Fortuner, Ford Everest, Mitsubishi Montero Sport, Geely Okavango, Honda City, Hyundai Reina, Kia Soluto, among many others.    

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