PH faces bumpy road to becoming auto hub–BMI

MANILA, Philippines — Even with incentives in place, the Philippines still faces an uphill battle in its bid to become a regional automotive manufacturing hub, particularly as neighboring countries already have a head start in attracting investments, according to BMI.

In a recent study, the Fitch Solutions unit said that apart from war-driven pressures weighing on the automotive industry, the Philippines also has to contend with stiff competition from established manufacturing centers in Southeast Asia, particularly Thailand and Indonesia in the electric vehicle (EV) segment.

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Thus, if the Philippines is keen on realizing its ambition of becoming a regional automotive hub, BMI said it would have to complement its large domestic market and cost-competitive labor base with consistent long-term policy support and more reliable infrastructure.

“For the Philippines to establish itself as a more significant automotive manufacturing hub, these advantages will need to be complemented by stronger local supplier networks, more reliable transport and energy infrastructure and a stable long-term incentive framework,” BMI said.

“Without these improvements, the country may struggle to attract larger manufacturing commitments from global OEMs (original equipment manufacturers),” it added.

Another challenge flagged by BMI was uncertainty surrounding government automotive incentives.

It cited the government’s decision in January to veto funding for the Comprehensive Automotive Resurgence Strategy (Cars) program and its intended successor, the Revitalizing the Automotive Industry for Competitiveness Enhancement program (Race).

Policy uncertainty

While funding for Cars was subsequently restored, and the government is now working to revive Race, BMI said the episode might have forced global automakers to shift production to other Southeast Asian markets.

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“Manufacturers require long-term visibility because decisions on new models, tooling and assembly capacity involve high upfront costs and extended planning periods,” it said. “Hence, uncertainty over incentives could encourage OEMs to allocate production to other Asean markets where policy support, supplier networks and export infrastructure are more established.”

And while it sees potential in the Electric Vehicle Incentive Strategy, BMI said the Philippines had already fallen behind regional peers in attracting investments across the EV supply chain. INQ