The green race is heating up, with a proposal to grant generous incentives to the manufacturers of electric cars, hybrids, and other types of vehicles powered by alternative fuel gaining momentum in Congress.
Last October, two House committees — ways and Means, and Trade— approved an unnumbered bill which was actually a consolidation of different bills authored by a number of congressmen aiming to spur production of “green” vehicles.
The proposed incentives range from exemption from excise tax to duty-free importation of raw materials and equipment for nine years to priority in license listing to exemption from the much-loathed ‘color coding” scheme.
The bill also provides for a zero VAT rate for nine years on the sale of raw materials, spare parts, components and capital equipment used in the manufacture or assembly of electric, hybrid and other alternative fuel vehicles, including the conversion into such vehicles.
The non-fiscal incentives under the bill are:
1. Priority in registration and issuance of a special plate number by the Land Transportation Office;
2. Priority in franchise application by the Land Transportation Franchising and Regulatory Board;
3. Exemption from the Unified Vehicle Volume Reduction Program, otherwise known as the Number-Coding Scheme implemented by the Metropolitan Manila Development Authority and local government units; and
4. Mandatory provision for parking spaces in new establishments for all electric, hybrid and other alternative-fuel vehicles.
Climate change
The congressmen believe that the proposal, if passed into law, would address the problem of climate change. Incentives are believed to spur manufacturers and assemblers of alternative fuel vehicles to be more active in the manufacture of cleaner vehicles.
The lawmakers said with the proliferation of “green” vehicles, the demand for the importation of fossil fuels like gasoline and petroleum would be reduced, “paving the way for the realization of a healthier environment.”
“With the advent of these environment friendly cars, there will be less demand for the importation of traditional or conventional fossil fuels [gasoline and petroleum] and more for the production of alternative fuels like electric, solar, wind, hydrogen fuel cell, compressed natural gas [NCG], liquefied natural gas [LNG] and liquefied petroleum gas [LPG],” said one of the proponents, Rep. Hermilando Mandanas of Batangas.
Mandanas said because the Philippines is considered a climate change hot spot, it is prone to sea level rise, flash floods, extreme and longer hot and rainy seasons, cyclones, storm surges, droughts and a host of other serious consequences.
“It is thus imperative for the country, in line with the solutions to global warming being undertaken by the world, to step up its own efforts in dealing with this global concern. This can very well be done by legislating measures to lessen, if not eradicate, the emission to the atmosphere of the so-called harmful gases which cause the earth to warm up way beyond the normal levels,” he said.
Under the bill, hybrid vehicle is defined as any vehicle that combines the technologies of using internal combustion engine with a battery-powered electric motor to gain advantages of both propulsion systems.
It defines electric vehicle as any vehicle that uses electric motors solely for propulsion while it refers to alternative fuel vehicle “as any vehicle using alternative sources of energy such as but not limited to solar, wind, hydrogen fuel cell, compressed natural gas or liquefied natural gas and liquefied petroleum gas, other than conventional sources of energy like petroleum and gasoline for propulsion.
Senate version
Senator Ralph Recto has taken the spears for the Senate version of the bill granting incentives to alternative fuel.
SB 2856, a consolidated bill filed by Senators Recto, Miriam Defensor-Santiago, Antonio Trillanes IV, and former senator Juan Miguel Zubiri, gives hybrid vehicle firms a nine-year VAT holiday. The bill also proposes exemption from paying excise taxes and duties on raw materials, spare parts, and equipment for the manufacture of green vehicles.
Incentives will also be extended to owners of hybrid vehicles. They will be exempted from paying the motor vehicle users’ charge that the Land Transportation Office collects whenever vehicles are registered. The LTO collects from P300 to P12,000 as MVUC depending on the type and age of the vehicle being registered.
The bill also directs the Land Transportation Franchising and Regulatory Board to give commuter fleets that use only hybrid vehicles priority in licensing.
Recto said that supporting the hybrid vehicle industry is just like shielding the motorists and car owners from the volatility of oil prices in the world market.
Carmakers upbeat
A number of local car assemblers welcomed this latest development and they have already expressed their desire that there should be this kind of incentives program for the alternative fuel vehicles in the country.
For one, Toyota Motor Philippines, which had been selling its hybrid vehicles Prius and Lexus in the local market, believes that the passage of the bill would increase the distribution of these two models in the Philippines.
Data from TMPC showed that approximately 100 hybrid vehicles were sold since it started to distribute the Prius and Lexus in the local market.
Toyota believes that giving incentives to hybrid vehicles would make them more affordable to consumers. Toyota had been selling the Prius in the Philippines for P2.3 million.
Honda Cars Philippines, on the other hand, said it is ready to produce its own hybrid vehicle anytime once the government provides the right incentives.
Meanwhile, Isuzu Philippines said there should be incentives for alternative fuel vehicles because the cost of production would be double compared to the manufacture of gas-fed vehicles.
‘It would be more expensive to manufacture hybrids compared to gas-fed ones so it would be just right that there should be incentives for these kinds of vehicles,’’ Arthur Balmadrid, senior vice president for sales division, told Manila Standard in an interview.
A study showed that producing a hybrid car would cost $5,000 more than a conventional vehicle.
Balmadrid also said that one of the problems to be encountered would be in the area of infrastructure, particularly the establishment of charging stations, for the electric vehicles.
Meanwhile, the Chamber of Automotive Manufacturers of the Philippines, said it supports the thrust of the bill.
If this will be passed, it will have positive effects on the industry since this emerging market can be developed. The economy will also benefit considering the economic contributions of local vehicle assembly, Homer Maranan, Campi secretary general, told Manila Standard.
Maranan said it might be true that the cost of production could be more expensive than the manufacture of gas-fed vehicles.
That may be true for the initial cost of production but once you have the volume spurred by the incentives, the cost could eventually go down, Maranan explained.
Alternative fuel
The Board of Investments favors the formation of a special incentives program for alternative fuel vehicles to lure foreign firms to invest in manufacturing and assembly operations in the country.
But the agency said only the manufacturers should only be given incentives contrary to what the bills in Congress espouse, which include the grant of perks to imported electric and hybrid vehicles.
Earlier, one of China’s biggest e-vehicle manufacturers had expressed its intention to build assembly plant in the Philippines.
The Chinese firm is also the mainland’s biggest manufacturer of batteries for vehicles and cellular phones.
In an interview with Manila Standard, BoI executive director Efren Leano said it would be better if batteries for e-vehicles would be manufactured in the Philippines to lower their cost of production.
The cost of battery is almost half of the total production cost of one vehicle, so it would be better if there would be manufacturing facilities for battery for e-vehicles, Leano said.
The BoI is also more inclined to give incentives to electric vehicles than the hybrid or those using alternative fuels.
The BoI said hybrid will still use fuel, which will still contribute——-although in lesser amount——-to gas emissions.
The BoI said to encourage motorists to shift to cleaner vehicles, they should be given non-tax perks including special lanes in Edsa, toll plazas and preferred parking spaces.
The BoI bucked the Senate’s proposal to give importers incentives for nine years. It said it should be lowered to four years to allow local manufacturers to plan, re-tool and invest in the same activities which would lead to the local assembly of these vehicles.
But Leano said it would still be up to Congress to decide what incentives should be extended to these kinds of vehicles, whether locally assembled or imported.
