The Philippine automotive industry has been a bright spot for the Philippine economy, accounting for 19% of the country’s gross domestic product (GDP). This significant contribution includes motor vehicle assembly, importation and distribution, rebuilding, and the manufacturing of parts and components.
As a vital driver of economic activity, growth in the industry correlates with an increase in GDP. In 2024, vehicle sales reached 475,094 units, marking a 7.64% increase from the previous year. Meanwhile, the economy expanded at a similar pace of 5.6% last year. However, this growth is not without underlying economic influences that also affect the automotive industry.
Rising inflation had a noticeable impact on car buyers’ purchasing decisions when it was volatile a few years ago. With higher prices for fuel, food, and basic goods, consumers became more cautious with big purchases such as properties, gadgets, and even vehicles. As a result, many buyers begin to lean toward more fuel-efficient, practical, and cost-effective models. This can be observed in 2023 when headline inflation in the country was at 6% for the year and the best-selling cars for the year were sedans, subcompact SUVs, and crossovers.
Economic conditions have also influenced a shift in consumer automobile preferences. The Philippine middle class has seen significant growth, particularly from 1991 to 2018, with its share of the population increasing from 28.5% to 43.5%. The still-rising segment, with its increasing income and purchasing power, has led to a higher demand for passenger cars, according to online data firm Statista. Additionally, consumers from the middle-income segment, who prioritize both affordability and utility, have driven strong demand, particularly for compact vehicles, sedans, and budget-friendly SUVs that offer a practical mix of price and functionality.
Another economic factor contributing to industry growth is the accessibility of auto financing. Banks and financing companies have been offering competitive loan packages, low down payments, and extended payment terms, making car ownership more attainable even for first-time buyers in the Philippines.
Latest numbers from the Philippine Savings Bank (PSBank) show high demand for car loans, as the institution earned P2.56 billion in the policy alone. The figure represents an 18% jump from last year’s P2.17 billion.
Furthermore, car manufacturers and banks have started partnering up to encourage more purchases through exclusive promos, discounted interest rates, and bundled insurance packages, which can be seen in the ventures of Mitsubishi Motors Philippines Corp. and Security Bank Corp., as well as Tesla Philippines and Rizal Commercial Banking Corp.
Government initiatives have also played a key role in shaping the sector. In May 2024, the Philippine government extended its zero-tariff policy on electric vehicles (EVs), hybrid vehicles, and e-motorcycles until 2028 to accelerate the country’s transition to sustainable mobility and reduce dependency on fossil fuels.
The Comprehensive Automotive Resurgence Strategy (CARS), which aims to upgrade and create globally competitive manufacturing industries, and the Motor Vehicle Development Program, designed to provide the automotive sector with comprehensive industrial policy and development direction, have further laid the groundwork for long-term growth in the sector, and potentially, cheaper cars for Filipinos.
The Philippine automotive sector stands at a dynamic intersection of consumer evolution, government policy, and economic momentum. While inflation, global supply chain issues, and fluctuating fuel prices remain potential headwinds, the market’s long-term outlook remains positive.
Automakers that adapt to economic shifts — by offering affordable and fuel-efficient models, exploring electrification, and embracing digital retail — are poised to thrive. As the country’s economy continues to expand and diversify, the auto industry’s ability to respond to these forces will determine its role not only as a contributor to GDP, but also as a catalyst for inclusive growth and innovation in the years ahead. — Jomarc Angelo M. Corpuz