Big trouble in the industry

One of the hottest issues that are presently confronting the local automotive industry is the tremendous response that the local market has afforded Honda’s All New CR-V.

I am almost certain that my opening statement has raised a lot of eyebrows, especially among those who have knowledge of the controversy. It’s simply because many believe that the issue is the tax exemption that Honda has been given for its new CR-V by the Department of Trade and Industry (DTI) through the Board of Investments (BOI) through the recommendation of the Bureau of Internal Revenue (BIR). I still say that it’s because the new CR-V is selling like "hot cakes" or else there won’t be any issue at all, tax exemption or no tax exemption.

Allow me to give you what my little research has uncovered in my effort to get into the core of the issue.

The new Honda CR-V’s classification under Category 1 of the Commercial Vehicle Development program (CVDP) is currently being questioned. Being classified as such, the CR-V is exempt from paying excise tax, a privilege enjoyed by all the Asian Utility Vehicles (AUVs) presently in the market. The exemption has also allowed Honda Cars Philippines, Inc. (HCPI) to come up with a very popular price, only slightly higher than the AUVs, that has made the market gobble up the model.

We sought officials of HCPI to find out their position regarding the controversy and one of the first things they emphasized was, "The CR-V’s seat and seatbelt specifications passed the requirements as stated in Republic Act 4136 and Revenue Regulation 14-99".

RA 4136 states in part, "for each adult passenger, a horizontal rectangular area, including seat and feet space, not less than 35cm wide and 60cm long, except in the front seat which will allow an area of 50cm wide for the operator" while RR 14-99 states in part, "The requirements of the Seatbelt Use Act of 1999 must be compiled with for a seat to be counted as such for purposes of these regulations".

We were shown a schematic illustration that graphically showed that the new CR-V meets all the above-mentioned specs.

I was also shown a letter signed by a Mr. Elmer Hernandez, executive director, Industry Development Group of the BOI that confirms the claim that the new CR-V’s registration under Category 1 of the CVDP was approved by the Board of Investments. Quoting the letter in part it says, "We are glad to inform you that the Board ratified the action made by the management committee approving your application to participate in Category 1 of the Commercial Development Program."

HCPI was also emphatic that "based on the BIR’s actual inspection of the new CR-V, the bureau confirms that the vehicle passed the 10-seater requirements."

A letter signed by BIR assistant commissioner Mr. Edwin Abella attests, "for confirmation of the exemption from the imposition of excise tax of your company’s new Honda CR-V, an Asian Utility vehicle (AUV) falling under Category 1 of the CVDP of the Board of Investments" "it was reported that per inspection report submitted by Revenue Officers (L. Abalahin, F. Laxamana & D. Mangaoang) it was reported that your new Honda CR-V has met the requirements of a ten-(10) seater utility van, the prescribed number of seatbelts, and the seat and space measurements."

As a clincher to prove their claims, HCPI officials came up with a letter signed by Ms. Leticia V. Ibay, technical director of the DTI’s Technical Services Group which says in part, "the prototype design of the new CR-V model, showing 10-seating capacity is in accordance with the provision of RA 4136 known as the Land Transportation and Traffic Code of the Phils – the CKD importations of the new CR-V model will fall under Tariff Heading 8702.90 10, subject to model registration under Category 1 of the CVDP."

HCPI officials also belied claims by their detractors that the government stands to lose revenues with the CR-V’s tax exemption. We were shown a graph that proved the contrary, wherein the new CR-V, in having the tax exemption, will actually give the government higher earnings, with a projected sales volume of 6,000 units, both in terms of revenue collections and additional investments. The higher earnings come in terms of total local value added by way of additional labor costs, local parts purchases, total tax revenue by way of VAT and import duty on CKD parts and new investment (transmission pant) and revenues due from the new investment.

But there’s more to the consequences of this issue that meet the eye.

If Honda would lose the tax exemption for the new CR-V, each unit would have to be taxed more than 200 thousand pesos, which has to be added on to its present price. Now, what happens to the almost 3,000 reserved units currently in the pipeline? Who’s going to absorb the additional cost? Honda would not. It’s like having a death wish. They are not about ready to close shop and sacrifice their thousands of workers. The buyers? Now, that’s going to be big, big trouble. Many have paid reservations and are assured of price.

If Honda loses the tax exemption, the projected sales volume would definitely be affected, and so would the need for the new investment, which is justified by this projected sales volume.

If there’s no reason for the putting up of the new transmission manufacturing plant, then they won’t. But President Arroyo has proudly announced the "billion peso" investment right after her trip to Japan. That’s going to be very embarrassing if it doesn’t push through. Remember, she said she might have erred politically but not economically.

Boy, big problem here!

All-new Camry here

The Grand Ballroom of the Dusit Hotel Nikko in Makati was bursting in the seams with motoring journalists eager to see for themselves what the all-new Toyota Camry is all about.

The atmosphere was more of jubilant as TMPC, Toyota Motor Philippines Corporation announced their outstanding performance during the first five months of the year, when they not only maintained their undisputed overall leadership in the local market, they once again hold claim to the title of "Triple Crown Leader" in the Philippine automotive industry — leader in Passenger Cars, Commercial Vehicles and Total Vehicle Sales.

No wonder the once boyish smile of Toyota top marketing honcho Danny Isla has turned into a wide confident grin. Considering that he’s one of the hardest guys in Toyota to find in the office, he must have worked so hard for this and he has all the right to his wide confident smile.

And now here’s the All-New Toyota Camry that’s projected to mark high in the sales charts, to further strengthen market dominance. Toyota’s very friendly president, Mr. Nobuharu Tabata, was beaming with confidence when he described the Toyota flagship model as, "The biggest, most spacious, best looking and most powerful Camry ever." He added that, "America’s favorite car just got better as it evolved into a sleeker and more luxurious driving machine. Its stronger and bolder styling, larger interior space that offers new levels of comfort and luxury, will fascinate even those with exceptional taste. The dignified-looking new top Japanese executive at TMPC assertively declared that the Camry’s new VVT-i engine that provides excellent performance, and the multitude of high-technology safety features will surely make the new Camry a benchmark for world-class sedans.