Electric vehicle manufacturers in the Philippines are warning that the country’s fragile auto revival is at risk after key incentive funds were struck from the 2026 national budget. They argue that without restored support for flagship manufacturing schemes, the industry could miss a rare window to anchor EV production in the country rather than remain a pure import market.
The push to bring back funding for the Comprehensive Automotive Resurgence Strategy (CARS) and the newer RACE initiative is emerging as an early test of how serious Manila is about building a competitive, low‑emissions auto base, not just encouraging EV sales at the showroom level.
The veto that rattled CARS and RACE
The turning point came when President Ferdinand “Bongbong” Marcos Jr. approved a P6.793-trillion national budget for 2026 but vetoed a large block of unprogrammed spending that included incentives for carmakers. In explaining the move, President Ferdinand “Bongbong” Marcos Jr. said Monday that he struck out nearly P92.5 billion in unprogrammed items, a decision that swept up tax incentives tied to auto manufacturing. Industry groups quickly zeroed in on the impact on The CARS program, which had been designed to rebuild scale by tying fiscal support to high volume production of specific models.
Executives behind the CARS scheme argue that the veto undercuts long‑term investment decisions that were made on the assumption of policy stability. The Philippine Parts Makers Association has stressed that What has been missing is policy continuity and long term commitment, warning that the choice now is to either support domestic manufacturing or watch it disappear altogether. For EV players, that warning is not abstract: the same policy tools that helped justify internal combustion assembly are supposed to be repurposed to attract battery and electric drivetrain production.
EV makers warn of stranded investments
Electric vehicle advocates say the veto lands just as the sector is starting to gain traction with consumers and investors. Industry representatives have told policymakers that “Without sufficient production volume and government support, these investments become difficult to justify,” a message delivered as they pressed for the restoration of funding for CARS and the RACE initiative in Jan budget deliberations. Their concern is that multinational groups weighing where to place the next wave of EV platforms will see the Philippines as unreliable compared with neighbors that lock in incentives for a decade or more.
The RACE (Revitalising the Automotive Industry for Competitiveness Enhancement) Program was conceived as the bridge from legacy CARS incentives to a broader, technology‑neutral scheme that could support both efficient combustion engines and EVs. Policymakers have described how RACE Builds on CARS but aims to reward more models and more players, rather than just a handful of nameplates. Earlier planning documents put a proposed RACE allocation at 250-million pesos, focused on four‑wheeled internal combustion and hybrid vehicles that could share platforms and supply chains with future EVs.
Industry planners insist that the architecture of RACE was deliberately embedded inside the trade department so it would not depend on ad hoc budget insertions. One senior official has explained that RACE was designed as a department initiative with funds allotted for the program, a structure meant to reassure carmakers that incentives would not vanish with each budget cycle. The veto of unprogrammed funds has not formally dismantled that framework, but it has raised doubts about whether the promised support will arrive in time to influence product planning for the next generation of vehicles.
Climate goals, consumer demand and the risk of falling behind
The timing of the funding shock is particularly awkward because EV demand in the Philippines is finally moving beyond early adopters. Market researchers point to Several factors driving this shift, including Environmental Concerns and Increasing awareness about air quality and climate risks among urban consumers, who are now more open to battery‑electric scooters, compact crossovers and ride‑hailing fleets that cut fuel costs. These trends are documented in surveys of Environmental Concerns that also highlight the importance of making EVs accessible to the average consumer through lower upfront prices and better charging coverage.
Policy has already nudged the market in that direction. The Philippine government has actively supported EV adoption through measures such as extending zero‑tariff rates on battery electric imports, rolling out government incentives, and expanding infrastructure for charging and related services, according to The Philippine EV market analysis. Yet without a parallel push on local manufacturing, the country risks locking in a pattern where it subsidizes demand while importing almost all of the value‑added components.
That imbalance is already visible in the conventional auto sector. Reports on Government arrears note that Malaya Business Insight has flagged unpaid obligations amounting to 3.99 billion pesos under earlier incentive deals with Toyota and Mitsubishi, raising questions about how quickly the Philippine state can settle past commitments while launching new ones. Advocates for EV manufacturing argue that clearing these arrears and restoring credibility is essential if the country wants to attract the kind of large‑scale investments already flowing into neighboring Thailand and Indonesia.
What is at stake for the broader auto ecosystem
For suppliers, the debate over CARS and RACE is not just about headline investment pledges but about the survival of a dense network of small and medium‑sized firms. The CARS framework was built to rebuild scale by tying incentives to local content, which in turn sustains tool‑and‑die shops, plastics molders and electronics assemblers. Parts makers warn that if assembly volumes fall below critical thresholds, these businesses will not be able to justify new tooling for EV‑specific components such as battery housings and high‑voltage wiring, even as global platforms shift in that direction. Their concern is echoed in industry briefings that stress how Jan investment decisions are increasingly tied to whether governments can guarantee predictable demand for locally built vehicles.
Political signaling will also matter. When Autocar reported that President Ferdinand “Bongbong” Marcos Jr. had signed the Philippines’ P6.793-trillion 2026 national budget, it underscored the administration’s willingness to spend heavily on infrastructure and social programs, but the simultaneous veto of unprogrammed auto incentives sent a more cautious message to manufacturers. EV advocates now hope that follow‑up measures, such as targeted tax breaks or a revised incentive menu, can restore confidence without reopening the entire budget. For now, their lobbying for a return of funding is a reminder that industrial policy, once set in motion, is difficult to unwind without consequences for jobs, technology transfer and the country’s place in the regional auto map, a tension that Autocar coverage has brought into sharper focus.
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