The Society of Honor by Joe America

My previous article mentioned Michael Jackson’s father and his frustration with the factory. The Philippines barely has factories: unlike Motown aka Detroit, it never built the industrial base that turns working people into a middle class. That is why the majority of Filipinos live in precarity, and why the poorest remain truly destitute. So I am checking out a plan, laid down by commenter Joey Nguyen, that tries to change that.

The plan argues that the Philippines still has a chance to position itself to build an automotive industry if it adopts a coordinated industrial policy: Industriepolitik as we say in Germany. It lays out a legislative and institutional framework to move the country from basic assembly toward full-scale manufacturing in the electric vehicle sector.

Present situation

The Philippines is spending between USD 4.5 and 5.5 billion a year importing vehicles it largely does not produce. Only around 20% of the roughly 475,000 cars sold annually are manufactured locally. Meanwhile, regional competitors are pulling ahead: Thailand and Indonesia are attracting over six times more automotive investment, and Vietnam has moved to a nationally branded electric vehicle industry in less than a decade.

This is not just an industrial gap—it is a narrowing window. As the global automotive sector shifts toward electric vehicles, supply chains are being reorganized across Southeast Asia. Within the next two to three years, the region’s production networks may solidify in ways that leave little room for late entrants.

The gap becomes clearer in regional comparison. Between 2021 and 2025, the Philippines attracted approximately USD 2.2 billion in automotive investment, far behind Thailand and Indonesia, which each drew close to USD 14 billion over the same period. Vietnam, starting later, has already established a nationally branded manufacturer and scaled production rapidly. The competitive landscape in ASEAN is no longer emerging: it is consolidating.

At the supply chain level, the disparity is even more pronounced. The Philippines has fewer than 80 automotive-grade parts manufacturers, compared to more than 2,500 in Thailand. This limits the country’s ability to localize production, capture value, and meet the requirements of modern automotive manufacturing, particularly in the EV segment where integration between components is critical.

Critical infrastructure is also missing. The absence of a domestic vehicle testing and certification center forces manufacturers to rely on facilities in Japan or Europe, adding cost and time to development cycles. Meanwhile, what happened to CARS and EVIS programs this year sends mixed messages in terms of policy consistency and continuity.

One further constraint is not capital, but incentives. Philippine conglomerates consistently earn returns of 15 to 20 percent in sectors such as banking, real estate, and telecommunications. Automotive manufacturing, under current conditions, yields significantly lower returns of around 8 to 10 percent. Without policy intervention to close this gap, capital will continue to flow away from manufacturing.

Proposed solution

The solution Joey proposes tries to link what is already there in the Philippines and boost what is not yet there with targeted government incentives. The result is a coordinated legislative package designed to shift the Philippines from vehicle assembly toward full-scale manufacturing in the electric vehicle (EV) sector. Rather than relying on a single incentive scheme, the plan combines five interlocking laws that address financing, demand, infrastructure, and industrial capability.

• The Automotive Resurgence Act (PAREA) would replace the CARS program with a stable, long-term funding mechanism, giving investors greater policy certainty. 
• Complementing this, the Electric Vehicle Manufacturing Investment Act (EVMIA) introduces targeted tax incentives tied to local value creation, particularly for firms achieving at least 40% domestic content.
• On the demand side, the Green Public Transport Fund (GPTEFA) aims to accelerate EV adoption in public transport through financing support, eventually transitioning toward mandated electrification. 
• This is paired with structural cost reforms under the Industrial Power Competitiveness Act (IPCA), which seeks to bring industrial electricity prices closer to regional benchmarks.
• Finally, the Automotive Center Testing Act (PATCCA) addresses a critical capability gap by establishing a domestic vehicle testing and certification facility, reducing reliance on overseas centers and lowering development costs.

Beyond legislation, the proposal attempts to solve a coordination problem that has historically limited Philippine industrial policy.

The proposal also assigns clear roles to major Philippine conglomerates at the start, effectively anchoring the ecosystem.

• GT Capital/Toyota as the manufacturing base
• Ayala/IMI in electronics and components
• San Miguel in charging infrastructure via Petron
•  and AboitizPower in energy supply. 

This alignment is intended to bridge domestic capital with foreign investment while creating a nucleus for supplier development, but stay open for further players, especially other foreign auto manufacturers and domestic suppliers.

Keeping the conglomerates themselves in check will be a challenge though, something Japan or Korea managed to handle, but not yet the Philippines.

Taken together, the strategy attempts to do what previous efforts did not: link incentives, infrastructure, and industrial actors into a single system. It also explicitly targets upstream opportunities such as battery materials, rubber, and steel; aiming to use the EV transition as a catalyst for broader industrialization.

On employment and returns, the programme is projected to generate 85,000 direct manufacturing jobs and up to 481,000 total jobs by 2030, growing to 710,000 by 2035. Automotive manufacturing pays 1.7 to 5.8 times the national average across all skill levels. That significantly raises the standard of living and financial stability of the equivalent of an entire medium-sized Philippine city.

The cost of doing nothing is estimated at USD 30 to 50 billion in lost cumulative GDP.

Joey’s analysis predicts a fiscal multiplier over ten years of 4.2 to 6.8 times, meaning every peso of government incentive expenditure returns PHP 4.20 to 6.80 in incremental tax revenues, with “break-even” within 5-6 years.

Let us not forget though that this proposal has to work in the Philippines.

Its success depends on multiple reforms moving in parallel: legislation, infrastructure, private sector alignment, and capability-building; any one of which could stall the entire effort.

The most immediate constraint is political execution. Passing five interdependent laws, sustaining funding across electoral cycles, and coordinating agencies would require an unusual degree of policy continuity. The Philippines has historically struggled to maintain such alignment, particularly for long-term industrial programs that extend beyond a single administration.

A second risk lies in investor response. While the proposed incentives aim to attract both foreign manufacturers and domestic capital, competition within ASEAN is already intense. Thailand and Indonesia offer not only incentives but mature ecosystems, established supplier networks, and clearer execution track records. Even with reforms, the Philippines may find it difficult to shift investor perceptions quickly enough.

There are also capability constraints. Building a domestic supplier base, training a skilled workforce, and establishing technical standards are processes that typically take years, if not decades. The timeline implied by the proposal – capturing a meaningful share of the EV value chain within a narrow regional window – may prove optimistic.

Finally, the strategy assumes effective coordination among major conglomerates with differing priorities and return expectations. While the alignment outlined in the proposal is plausible on paper, sustaining it in practice would require strong institutional mechanisms and clear incentives to prevent fragmentation.

None of these risks invalidate the proposal. But they do suggest that its success will depend less on the design of the policy package than on the state’s ability to execute it consistently and at scale – over time.

Conclusion

The proposal is ambitious, and in many ways it is exactly the kind of coordinated, long-term thinking that has been missing from Philippine industrial policy. It ties together investment incentives, infrastructure, domestic conglomerates, and workforce development into a single framework: something that competing ASEAN economies have executed with notable success. This is the first plan I have ever seen that tries to address the issue of making growth reach ordinary people in the Philippines.

Dear readers, if you have access to politicians, industrialists or technocrats, please feel free to send them this article for consideration.

It is at the very least a template for future Filipino Industriepolitik.

AI use: Bing Image Creator was utilized for all images, Claude, ChatGPT, Gemini and Copilot were used for research.

This article is dedicated to H.Sch., automotive master craftsman, born in Breslau, settled in Stuttgart and retired in Munich; and to F.A.S., a man from the early years of the German automobile industry.

Appendix

The original study is composed of 8 documents which can be downloaded here.

Disclaimer: TSOH and Irineo Salazar are not the originators of these documents. While every effort has been made to ensure their accuracy, no responsibility or liability is accepted for any errors or omissions. Thanks a lot to Joey!

Click to access 1.-asean6_automotive_investment_report_2021_2025.pdf

Click to access 2.-ph_automotive_industrial_policy_analysis.pdf

Click to access 3.-ph_conglomerates_automotive_sector.pdf

Click to access 4.-ph_automotive_5yr_10yr_blueprint.pdf

Click to access 5.-neda_memo_2026_auto_001.pdf

Click to access 6.-ph_auto_legislation_impact_analysis.pdf

Click to access 7.-paselp_draft_bills.pdf

Click to access 8.-ph_auto_public_communications.pdf