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Toyota bares auto parts localization program for 40% local content

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Toyota Motor Philippines Corp.  (TMP) yesterday announced a parts localization program that would double  its local content for its best selling model Vios to 40 percent in 2014 with over 300 locally-sourced parts and substantially improve the capacity utilization of its highly underutilized press plant.


TMP President Michinobu Sugata revealed this at yesterday’s ceremonial roll-off of the all-new Vios at its plant in Santa Rosa, Laguna. The Philippines is the second ASEAN country to introduce the full model change of Vios, the first being Thailand in March this year.

Sugata, who noted the local workers’ dedication in close collaboration with the Motomachi plant engineers in Japan to come up with the left-hand drive Vios model for the Philippine market, said that Toyota will further enhance the localization ratio of this third generation Vios by utilizing TMP’s press plant to localize the stamping of 15 auto parts by July 2014. As of this month, Vios has 265 local auto parts from only 230 when it started completely knocked down assembly in 2007.

“This will bring improved press technology into the country and allow us to realize our vision of invigorating Philippine manufacturing, which is very important in terms of its great potential for investments, employment and technology,” Sugata said.

The parts local program is a welcomed news as the country’s automotive leader is now selling more completely built up models than completely-knocked down (CKD) models. CBU sales account for 60 percent of its total sales while CKD sales contribution has gone down to 40 percent given the fact that it has only two CKD models Vios and Innova out of its 18auto model line up being sold locally.

The parts localization program was also made possible with TMP’s P1.757 billion investments for the full model change of  Vios that was approved by the Board of Investments with income tax incentives in July 2012.

TMP vice-president Rommel Gutierrez told reporters at the sidelines of the event that they are looking at localizing “bulky parts” to boost local value added to 40 percent from the current 20 percent. The localization of the “bulky” auto parts is aimed at reducing its logistics cost since these parts are being imported from Thailand and Indonesia.

This will also improve the capacity utilization of its press plant, which is now at a low of 30 percent. Gutierrez, however, refused to say how much the localization program would improve the press plant’s capacity utilization and what are these “bulky parts”.

In his speech, Sugata said that these improvements would result in a faster production line as the company expects to increase capacity from 30,500 units to 33,300 vehicles per year.

Sugata, however, said they expect to sell more than that so they actually plan to build 36,300 units of Vios and Innova by the end of this year, which is 18 percent more than year last year, by rendering overtime work and holiday work. Under this higher production target, Sugata said Vios will account for 14,594 units to be built from July to December.  “We will take the market by storm with this model. We have already jump started the motorization of the Philippines. With the all-new Vios which is proudly made by Filipinos for Filipinos, we will make the auto industry fire on all cylinders. You can bet on it,” Sugata said.

Gutierrez added that the company may have to expand its facility once they hit the 40,000 unit production capacity.      

Meantime, the all-new Vios will be sold at a price higher than the second-generation model. It is already available at P23,000 higher than the previous model.

 TMP expects sales of the all-new Vios to hit 2,000 units a month from the current level of 1,400 units. Vios accounts for 60 percent of the company’s total CKD model sales, the remaining 40 percent is accounted for by its other CKD model Innova, an Asian utility vehicle.

                The two CKD models of TMP account for 40 percent of its total sales as the country’s leading car player has given into more importation of completely built-up models to account for the bulk of 60 percent of total sales. The company expects overall sales to reach at least 70,000 units this year from over 50,000 units last year.

For his part, TMP vice-chairman Alfred Ty expressed optimism they will be able to set new sales record with the new Vios, which only started with less than 500 units in monthly sales in 2003 to 1,000 units in 2007, this has expanded to 1,700 in March this year.

“With the all-new Vios, we are optimistic that this new model will break new sales record,” Ty said.

He further noted that through the past 25 years, the company has sold 816,396 vehicles and infused P35 billion in investments and in the process, remitted P136 billion pesos in taxes and customs duties since it began operations in 1988. Through TMP’s active existence, we are able to generate over 40,000 jobs in the upstream and downstream value-chain linkages. (Manila Bulletin) (BCM)

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