Japanese carmaker Nissan will close its sole car assembly plant in Laguna in March, marking the latest shutdown in an industry that has been finding fewer reasons to make cars in the Philippines when it is cheaper to make them elsewhere.
Nissan Philippines Inc. (NPI) wrote to the Department of Trade and Industry (DTI) on Wednesday, informing Trade Secretary Ramon Lopez about its decision to shutter its assembly plant in the City of Santa Rosa.
A copy of the letter from NPI president Atsushi Najima was seen by the Inquirer.
The company made the decision after the expiration of its contract with its Filipino vehicle assembly partner Univation Motor Philippines Inc. (UMPI).
133 laid-off workers
The DTI on Thursday said 133 workers would be laid off, but the labor department would help them find jobs in the manufacturing sector. They would also receive “reasonable compensation packages,” it said.
Nissan’s marketing and distribution network will continue selling its vehicles produced in Thailand and Japan.
Last year, NPI was considering shutting down its plant due to weak sales and the low market share of its four-door Almera sedan, which it has been assembling in Santa Rosa since 2013, according to the DTI.
Nissan would be the third vehicle maker in Santa Rosa to cease operations, after Ford Motor Co. in June 2012 and Honda Cars Philippines Inc. in March 2020, according to Mayor Arlene Arcillas. Isuzu’s pickup truck assembly plant in nearby Biñan town closed down earlier in 2019.
Arcillas said NPI informed her of its decision two weeks earlier.
Pioneer car firms
“We are saddened … since (Nissan) was one of the pioneer car companies that made Santa Rosa their home,” she told the Inquirer in a phone interview. She said Nissan was one of the city’s top taxpayers.
UMPI will keep operating in the city for its other vehicle brands, Arcillas said.
Nissan’s operation in Santa Rosa started in October 1997. Aside from Toyota and Mitsubishi, the city hosts Columbia Motors, which manufactures trucks and buses.
More than 380 workers lost their jobs when Honda shut down its plant last year.
Nissan is one of the best-selling brands in the Philippines, behind market leaders and fellow Japanese carmakers Toyota and Mitsubishi. Data, however, suggests that this kind of success is possible even without making cars locally.
According to official industry data, Nissan sold a total of 42,694 vehicles in 2019, a 22.2-percent increase from 2018. During that time, only 4,500 of them were the locally assembled Almera, or 4 percent of the entire passenger car market, the DTI said.
It was also one of the best-selling brands in 2020, despite the challenges brought about by the pandemic and the Taal Volcano eruption. Its volume sales dropped 49 percent last year to 21,751 vehicles. It is not clear how many of these were Almera.
Transformation plan
In his letter to Lopez, Najima said the shutdown was a move “toward optimized production and efficient business operations in the Asean (Association of Southeast Asian Nations)” and part of the “Nissan NEXT transformation plan.”
He was referring to a four-year plan announced by Nissan headquarters last year to achieve profitability by fiscal year 2023 partly by cutting production capacity by 20 percent.
In a press statement in May 2020, Nissan Motor said part of this rationalization plan was to close its manufacturing plant in Indonesia and focus on Thailand “as single production base in Asean.”
Lopez said the shutdown highlighted the need for a safeguard measure, which made imported vehicles more expensive than locally produced ones. The DTI imposed the measure at the beginning of this year.
Under the Safeguard Measures Act of 2000, such a trade remedy is imposed by the government when a surge in imports seriously injures or threatens to seriously hurt a local industry.
But unlike other moves, this is not supported by local big players. For the first time in history, safeguard duties were imposed because of a petition filed by unionized workers through the Philippine Metalworkers Alliance.
“The announcement of Nissan to close their assembly operations in the country is regrettable, as these developments all the more demonstrate the critical situation of the local motor vehicle industry,” Lopez said.
“The stoppage of Almera’s assembly operations, following closely that of Honda and Isuzu, only highlights that the local auto assembly industry is critically impacted by the surge in imports and will thus benefit from the timebound safeguard duty,” he said.
Under the measure, every imported passenger car becomes P70,000 more expensive, while each imported light commercial vehicles will cost P110,000 more. These amounts were based on the DTI’s analysis of the industry’s performance from 2014 to 2018.
The temporary duties would be imposed for 200 days, or over the next six months. It could last longer—from four to 10 years—if the Tariff Commission validates the DTI’s findings after a 120-day investigation.
Even with the safeguard measure, the Philippines is still one of the most open automotive markets in the region, according to the DTI. Thailand imposes an 80-percent tariff on vehicles from outside of Asean. Indonesia, which imposed nontariff measures, effectively discouraged imports. This, the DTI said, was why imports only accounted for 7 percent of the auto market in Indonesia.
In contrast, locally assembled light commercial vehicles only accounted for 7 percent of the Philippine market.