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Auto industry facing global cost pressures, weak demand — DTI

THE Department of Trade and Industry (DTI) said the auto industry is facing cost pressures and weak consumer demand in major global markets.

At the opening ceremony of the Auto Parts and Vehicles (APV) Expo on Wednesday, Bianca Pearl R. Sykimte, director of the Export Marketing Bureau (EMB), said these pressures are weighing on the growth of the industry.

Citing Euromonitor International’s Automotive Global Industry Report, she said growth of the automotive industry will be weak until 2027, even though it has recovered from the supply shocks experienced during the pandemic.

“Significant cost pressure is expected to remain due to rising labor costs and the higher investment and research and development costs associated with the production of electric vehicles,” Ms. Sykimte said.

“Supply chain optimization efforts are expected to continue because of geopolitical tensions. Car manufacturers are anticipated to create smaller networks of semi-independent suppliers to reduce risk,” she added.

She said that manufacturers are also expected to become more vertically integrated by collaborating more with mining, chemical, and technology companies.

“Rising operating costs and the need for large-scale investment are expected to continue to drive consolidation in the automotive industry … Companies are expected to form alliances and intensify acquisitions of smaller components,” she added.

The three-day APV Expo is the inaugural edition and was organized by EMB and the Philippine Exporters Confederation, Inc. (Philexport).

According to Ms. Sykimte, the event will give the industry a chance to connect with potential partners.

“Platforms like this provide the opportunity to learn from and benchmark with other industry players and experts as we continuously develop and position the Philippines as a regional hub for sustainability, connectivity, and innovation-driven manufacturing and services,” she said.

Philexport President Sergio R. Ortiz-Luis, Jr. said the expo will also be a venue “for domestic manufacturers and exporters of auto parts and accessories to learn from their counterparts abroad, while also showcasing their own capacities.”

The event is expected to attract over 4,000 potential buyers and sellers, as well as more than 120 regional and international exhibitors.

Meanwhile, Transportation Undersecretary for Road Transport and Infrastructure Jesus Ferdinand D. Ortega said that the auto parts and vehicle industry is key component of the government’s Public Utility Vehicle Modernization Program.

“Together with quality vehicles, what we need are quality parts. These are vehicles and parts not for private use but for livelihood. So I think these kinds of venues will help us look for the quality that is needed,” Mr. Ortega said.

He added that more manufacturers will be accredited to drive growth in local production.

“What’s good news here is that we will be amending our department order (calling for more) after-sales service to ensure that quality parts needed for these vehicles will be available for years to come,” he said. — Justine Irish D. Tabile