THE PHILIPPINE automotive industry continues in its drive to motorization. For the first four months of 2025, the Chamber of Automotive Manufacturers of the Philippines, Inc. (CAMPI); Truck Manufacturers Association (TMA); and Association of Vehicle Importers and Distributors (AVID) jointly reported that sales are up by 2.5% (versus the same period last year) to 150,654 units.
Independent vehicle importers and distributors that are not members of the abovementioned automotive associations are estimated to add another 5,000 to 6,000 units to the market, taking growth to around six to seven percent from January to April 2025.
The sustained growth trajectory is on the back of a 20% average rise in sales from 2020 to 2023 and an 8% expansion in 2024 that led to a new sales record for the Philippine auto industry of just over 475,000 units last year. In fact, the Philippine auto market has been a bright spot in the Association of Southeast Asian Nations (ASEAN) region, exhibiting consistent growth and resiliency while other markets experienced significant swings.
From January to March 2025, perennial market leaders Thailand and Indonesia have, in fact, registered continued drops in auto sales of 7% and 5%, respectively, on the back of double-digit declines in the past two years. A report by The Nation (Thailand) quoting Nikkei Asia figures revealed that vehicle sales in the first quarter of the year for the so called ASEAN-5 — Thailand, Indonesia, Malaysia, Vietnam, and the Philippines — declined by 1.7% to 732,898 units. This was despite a strong showing by Vietnam with a 24% growth in sales.
This year, CAMPI and TMA estimate that annual vehicle sales will top the 500,000 mark — a new milestone for the industry. This will put the Philippines in the same league as Thailand, Indonesia, and Malaysia with markets in excess of half-a-million units. Interestingly, auto sales in the Philippines directly correlate to the movement in the country’s per-capita gross domestic product (GDP) that has grown by an average of 5.2% over the past four years since the pandemic. So, as the economy continues in its trajectory toward making ours an upper-middle-income country by 2027, it is expected that auto sales will continue to rise. Add to this the demographic bonus resulting from a young population that is now graduating into the workforce, and we have a reasonably sustainable growth curve for auto sales.
As more Filipinos enter the ranks of the labor force, they can establish their credit credentials. This grows access to consumer credit which is another strong driver of auto sales. Additionally, the prospects of more unbanked Filipinos moving into the banked community are high. A BusinessWorld report by Abigail Yraola quoted a study by Euromonitor International showing the Philippines as having an unbanked and underserved population of 76% compared to 67% in Indonesia, 47% in Vietnam and only 25% in Thailand. If the Banko Sentral ng Pilipinas (BSP) is successful in bringing banking and contactless payments to more Filipinos, this will significantly increase our banked population, enable higher consumption and, surely, more consumer loans as well.
Household debt as a percentage of GDP in the Philippines is still low compared to other ASEAN countries. Statistics from CEIC Data show that Thailand has the highest ratio at 88.8%. This is a significant contributor to the drop in its auto sales since credit extension has tightened quite severely because of increased loan defaults. Malaysia comes second with an 84.2% ratio, followed by Vietnam at 33.8%. Meantime, the Philippines posted only 11.7% household debt-to-GDP ratio in December 2024. This indicates an encouraging runway for auto loans, albeit with very judicious credit approvals by banks and financing institutions to avoid inordinate vehicle repossessions.
Another upside to the market is the growing demand for electrified vehicles (EVs). The share of EVs in the market has increased from 5% last year to 8% in the first trimester of 2025. The recent addition of plug-in hybrids (PHEVs) to the suite of electrified product offerings has activated a new segment of buyers, accounting for 42% of the EV market this year. Hybrid electric vehicles (HEVs), on the other hand, account for a larger 52% of the segment while battery electric vehicles (BEVs) make up the remaining 8%. Sales of EVs are expected to pick up even more with the recent announcement of government to reinstate the odd-even coding scheme during the implementation of the “Rebuild EDSA” project — recently postponed by at least a month upon the order of President Marcos.
However, encouraging as the auto industry fundamentals are for the Philippines, we should not ignore the growing turmoil in geoeconomics and their possible impact on the local auto industry. For one, China’s economic recovery is still not as robust as expected. Trading Economics reported that GDP in China grew by 5.3% in 2023 and 2024. In the first quarter of 2025, it remained fairly flat at 5.4%. This is perhaps a primary reason for them to export their excess economic capacity including for automobiles. Although China remains a top trade partner for the Philippines, we are not as heavily dependent on exports as our ASEAN neighbors. The Philippine GDP is 70% driven by domestic consumption. Therefore, China’s slow recovery has impacted us less than our neighbors. We should not underestimate the fallout, though.
Another destabilizing factor, of course, is the US Trade Diplomacy under President Trump that is undermining global economic activity. Although it can be argued that the disruptive “Liberation Day” tariff rates have not really gone into effect yet — except for the 25% increase on autos and a 10% baseline tariff rise — it is, perhaps, the very uncertainty of the on-again, off-again tariffs that is even more devastating and disruptive. Businesses are unable to plan, supply chains are in suspense, and capital expenditures are put on hold. This is quite a toxic elixir for the global economy. As an import dependent economy, we are vulnerable to a full-blown trade war that will likely result to higher prices, a potential slowdown in consumption and, consequently, a slide in economic growth. Stagflation is everyone’s worst-case scenario here.
With the national elections behind us, government spending expected to resume, inflation remaining low, the Philippine Peso holding its value and interest rates on the downtrend, there are many reasons to believe the 500,000 auto sales mark will be breached this year. Early reports for vehicle sales in May show a significant comeback from a lethargic April but still trailing the same month last year. The market seems to be burning off its recovery thrust and transitioning to a more measured pace going forward — a good sign of a more sustainable trajectory.
