With car sales expected to top 500K units this year, local auto manufacturing should be pursued with vigor
THE PHILIPPINE government is intent on expanding the contribution of the industry to economic development. In fact, this is an expressed goal of the National Economic and Development Authority (NEDA) in its national development plans. The government agency noted, “The Philippine economy over the past years has been characterized by a reduced share of the manufacturing sector in the country’s gross domestic product (GDP).”
The Philippines, with its dynamic economy and youthful workforce, has made significant strides in recent years. Despite these gains though, the nation still has lots of opportunities to improve in the areas of employment, income distribution, and economic well-being. One of the most effective ways to address these issues is through job creation, and I am hugely encouraged that this is among the government’s central concerns.
In this regard, I believe in the primacy of the manufacturing sector as a robust engine for economic growth and employment generation, particularly in countries with abundant labor resources like the Philippines. A report by Asia Fund Managers cited the manufacturing sector as contributing only 28% to the country’s GDP in 2024. This compares with the service sector that accounts for over 62% and the agriculture sector with 9%. Clearly, there is a case to be made for a rebalancing of the economy.
The automotive industry is a significant contributor to the manufacturing sector. In a speech to members of the media earlier this year, Toyota Motor Philippines (TMP) Chairman Alfred V. Ty mentioned that “the auto industry is truly transforming into a major pillar of economic development.” According to reports of the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI), the Truck Manufacturers Association (TMA), Association of Vehicle Importers and Distributors (AVID), and some members of the Electric Vehicle Association of the Philippines (EVAP), total vehicle sales in 2024 reached 475,000 units, representing approximately 40 different brands and more than 400 models on the road. This is a new record for the auto market, exceeding the previous high of 473,000 units in 2017 when sales soared in anticipation of changes in the excise taxes on automobiles.
Mr. Ty stated that, by his estimate, sales in 2024 should have generated up to P70 billion in taxes and duties and 138,000 direct and indirect jobs supplying parts or business services to the auto sector. He explained that the rapid and significant influx of automakers and brands was a very welcome indicator. “I have always said that the one thing that attracts automakers the most to any market is increasing sales volumes. And as motorization progresses, this opens new opportunities for local manufacturing,” Mr. Ty stressed.
In 2025, industry prospects are quite encouraging. The macro outlook is reasonably optimistic with GDP expected to exceed 6%. Personal consumption is seen to grow with the relaxation of interest rates. In addition, the upcoming elections is expected to trigger incremental economic demand. As a result, the auto industry is projected to sell 512,000 units by the time 2025 is done and dusted, representing a sustained rate of expansion of 8%, comparable to the growth in 2024. This will be another record-high for the industry and a very important milestone — breaking through the half-million mark.
In addition to the macro growth drivers, other factors that are expected to enable a rise in car sales is the continuing strength of and growing access to credit. A report by the Banko Sentral ng Pilipinas (BSP) showed that consumer loans increased by 25% to P1.59 trillion at the end of December 2024. The growth was largely due to a rise in credit card loans by 29.4% to P934.55 billion from P722.46 billion. However, motor vehicles were also a significant contributor, with loans for car purchases reportedly soaring by 19.5% from P380.14 billion to P454.37 billion by yearend.
The growth in demand for electrified vehicles (xEVs) will also be another growth driver. In 2024, CAMPI reported sales of xEVs to have grown by around 60% to 18,690 units, accounting for about 4% of total sales. If sales of non-CAMPI members are included, xEV sales last year are estimated at almost 25,000 units, representing 5% of total vehicle sales, compared to 2.6% in 2023. These include sales of hybrid electric vehicles (HEVs), plug-in hybrid electric vehicles (PHEVs), and battery electric vehicles (BEVs).
This year, more automakers will be introducing EV models, likely to spur further demand. In January 2025 alone, CAMPI reported that 1,600 xEVs were sold, making up 5.36% of total car sales. If we apply this percent of sales against the annual sales projection of up to 512,000 units this year, total xEV sales should hit 27,500 units, excluding sales of non-CAMPI members.
Other new model introductions — excluding xEV — will also stimulate market expansion. The most significant contributor is expected to be the Toyota Tamaraw, whose sales began in January this year. Toyota projects sales to top 20,000 units in 2025, serving a growing and previously untapped demand for mobility from the micro, small, and medium enterprise (MSME) sector. Meantime, increased demand from specific mobility sectors such as the logistics industry and the transport network vehicle service (TNVS) will also stimulate growth.
Indeed, the drive to motorization continues to gain momentum. With the rise in economic activity, a growing demand for a broader range of mobility solutions will emerge in tandem. This is a very compelling opportunity for the government to put in place programs that will allow us to capture local manufacturing investments and generate more jobs across various regions of the country.
Indeed, it was very encouraging to hear that the government is set to allocate P9 billion as fiscal support for participating car makers under the proposed Revitalizing the Automotive Industry for Competitiveness Enhancement (RACE) program. RACE targets to cover three specific models of four-wheeled internal combustion engine (ICE) vehicles. Each participant will pledge to locally manufacture 100,000 units. In fact, Board of Investments (BoI) Executive Director Ma. Corazon Halili-Dichosa shared, “Both Toyota and Mitsubishi signified their intention to enroll under RACE.”
The Philippines offers a fertile ground for investments in auto manufacturing. Not only will this create thousands of jobs, but it can also upskill a generation of workers, promote economic and social well-being, and enhance the quality of life of Filipinos. I hope that more auto manufacturers will consider to invest in local production or decide to make the Philippines a vital part of their global supply chain for automotive parts and components. With the support of the government, this is an opportunity we should take full advantage of.