Philippine Auto Sales Poised for First Decline Since 2020 Amid Economic Headwinds

MANILA, Philippines — War-driven pressures, higher interest rates, and sluggish economic growth have all but eliminated any chance of growth in the Philippine automotive market in 2026, with BMI projecting an 8.7 percent drop in vehicle sales. In a recent report, Fitch Solutions said vehicle sales in the Philippines may end the year at 423,750 units, down from 464,216 units in 2025. If realized, this would mark the market’s first annual contraction since the Covid-19 pandemic broke out in 2020, when sales plunged by 39.5 percent, based on data from the Chamber of Automotive Manufacturers of the Philippines, Inc. and Truck Manufacturers Association. It would also snap three consecutive years of record-high vehicle sales since 2023. “This partly reflects the fallout from the US-Iran conflict, which has increased energy prices, added to inflationary pressures and weakened consumer sentiment,” BMI said. “We believe these conditions are reducing household purchasing power and raising vehicle ownership costs, weakening demand.” According to BMI, these war-driven pressures are being amplified by a softer domestic economy. BMI expects the Philippine economy to grow by 3.3 percent this year, a decline from the 4.4 percent growth in 2025, while it projects that average inflation will rise to 5.7 percent, up from 1.7 percent. Higher interest rates drag down the market, especially since around 70 percent of vehicle purchases involve financing through auto loans. With the policy rate at 5 percent, BMI expects higher monthly payments to prompt some consumers to delay purchases or shift to cheaper models. While the growing presence of competitively priced Chinese brands could make new vehicles more affordable, BMI said: “Difficult financing conditions will limit the strength of this support.” Even weaker construction activity may weigh on the automotive market. BMI expects the construction sector to contract by 0.6 percent in 2026, potentially reducing demand for pickups, trucks and other vehicle types that construction companies use. Still, the downturn may be temporary, as BMI expects vehicle sales to rebound 6.6 percent to 451,717 units in 2027 as economic conditions improve. The projections indicate that growth will reach 6 percent in 2028, 5.5 percent in 2029, and 4.9 percent in 2030. By the end of the decade, these figures will result in annual vehicle sales totaling 529,836 units. /pai