The Philippines’s fast-growing electric vehicle (EV) market may not immediately translate into a production boom, with additional manufacturing incentives unlikely to significantly change the industry’s output in the next two years, according to BMI, a unit of Fitch Solutions.
BMI senior analyst for autos Santiago Arieu told BusinessMirror that while incentives for EV and hybrid electric vehicle (HEV) manufacturing could encourage more local assembly and investment, the effect on production is likely to be ‘limited’ in 2026 and 2027.
‘While such measures would probably not meaningfully transform the industry’s position in the near term (2026-2027), they could strengthen medium-term production growth by making the Philippines a more attractive destination for electrified vehicle manufacturing and related supply-chain investment,’ Arieu said in an email response.
BMI expects EV penetration to increase to 17.3 percent in 2030 from 7.7 percent of vehicle sales in 2026. Its forecast covers battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs), excluding non-plug-in hybrids.
The shift is expected to create room for new vehicle technologies even as sales of conventional internal combustion engine vehicles come under greater pressure.
Chinese brands are also gaining ground in the market, with BMI citing BYD, VinFast, GAC Aion, Chery and MG as examples of manufacturers expanding through competitive pricing, improving products and wider electrified-vehicle offerings.
Higher fuel costs are likewise encouraging consumers to consider vehicles with lower running costs, while tax incentives and a growing charging network are helping raise awareness of EVs.
But the growing market does not yet mean the country has the industrial base to support a major increase in local production.
‘We believe the biggest constraint is the relatively underdeveloped automotive and EV supplier ecosystem compared with regional competitors,’ Arieu said.
The Philippines will need more component manufacturers, suppliers and supporting industries before it can secure larger EV and HEV production commitments, he added.
The gap is particularly important as the country competes with established automotive centers in the region for new electrified-vehicle investments.
Data from the Chamber of Automotive Manufacturers of the Philippines Inc. (Campi) and the Truck Manufacturers Association (TMA) showed that sales of BEVs, HEVs and PHEVs reached 38,286 units from January to July, up 136.4 percent from 16,195 units in the same period last year.
Despite the surge, BMI expects the overall vehicle market to shrink 8.7 percent year-on-year to 423,750 units in 2026 as high fuel prices, inflation, weaker economic growth and elevated borrowing costs weigh on demand.
Holiday sales
The final months of 2026 could provide some relief, but BMI does not expect a late-year pickup to fully reverse the local industry’s perceived weakness.
Arieu told this newspaper that stronger-than-expected demand during the ‘ber months’ could support vehicle production in the second half and result in a smaller decline than currently forecast.
The main risks remain higher fuel prices linked to the US-Iran conflict, persistent inflation and financing costs.
‘If inflation remains elevated for longer than expected, the central bank may be forced to keep interest rates higher for longer,’ BMI said in its latest report, noting that vehicle purchases in the Philippines are heavily dependent on financing.
‘This would further reduce vehicle affordability and could delay the sales recovery we expect from 2027.’
Slower implementation of infrastructure projects could also weigh on commercial vehicle demand by reducing activity in construction, logistics and related sectors.
BMI, however, expects the market to return to growth in 2027, with total vehicle sales forecast to rise 6.6 percent to 451,717 units. Growth is projected at 6 percent in 2028, 5.5 percent in 2029 and 4.9 percent in 2030, bringing annual sales to 529,836 units.
For the commercial vehicle market, which includes crossovers, sport utility vehicles and pickup trucks, BMI expects volumes to increase from 336,105 units in 2026 to 414,739 units in 2030, equivalent to average annual growth of 5.4 percent.
A faster easing cycle, stronger economic growth or a larger-than-expected expansion of affordable Chinese vehicle offerings could improve affordability and speed up the recovery.