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Incentives to small car program to be restored
Manila Bulletin (21 June 2004)

The Board of Investments (BoI) is reviving the small car program by giving incentives to the assembly of passenger cars with less than 1000 c.c. engine displacement and a price range of P300,000 to P400,000 to counter the inflow of imported second hand motor vehicles.

Trade and Industry Secretary Cesar V. Purisima, who is also BoI chairman, however, said this is not the revival of the failed "People’s Car" program as this new proposal will require the assembly of a lot smaller engine cars.

The defunct "People’s Car" program has a basic engine displacement of 1000 c.c. but assemblers were allowed to produce up to 1.3 c.c. It was launched during the time of former DTI secretary Jose Concepcion Jr. in an effort to provide affordable but quality cars and was used as the entry point of other car assemblers into the Motor Vehicle Development Program, which was then limited to the top three Japanese car giants.

Purisima said these small cars shall command affordable prices to consumers as their price range of P300,000 to P400,000 fall under the minimum excise tax of only two percent.

The smallest car engine displacement models in the country are the 1.3 VIOS and Corolla XL, CITY, Nissan Sentra, and AVEO of GM with unit prices of above the P500,000 bracket.

Purisima said that aside from combating the entry of used motor vehicles, using smaller but efficient engines means lower fuel consumption and therefore less pollution.

"If you look at the new cars now in Japan, they have efficient 600 c.c. cars now," Purisima said.

"With the constant rise in fuel prices, car owners would realize the wisdom of using small cars for city driving which does not need for fast cars. Small cars are ideal for the ASEAN market given the traffic situation and the road structure here and our neighboring countries," he said.

DTI Undersecretary Elmer C. Hernandez, who is also BoI managing head, said that under the Motor Vehicle Development Program (MVDP), participants are entitled to a preferential tariff of 1 percent for their imports of completely knocked down units from ASEAN countries and 3 percent for OKD imports outside of ASEAN or the most-favored nation (MFN) rates.

Under the MVDP guidelines, a new participant or passenger car assembly is required to invest $10 million for parts and components production.

But if a new participant wants to avail of pioneer incentives, meaning six-year income tax holiday incentives, under the investment Priorities Plan of the BOI, the company should invest $100 million for a new automotive assembly project.


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