By Justine Irish D. Tabile, Reporter

AUTOMOTIVE SALES may hit 500,000 units next year as lower interest rates and upcoming elections spur economic activity, according to the Federation of Automotive Industries of the Philippines, Inc.

“We can hit that (target) in 2025, and the growth factors will be the election, interest rates that are starting to go down, plus the economy is again most likely to grow by another 5-6%,” Vicente T. Mills, the federation’s president, told reporters last week.

“But the demand for vehicles is still there because the fleet is still old, so there’s fleet replacement, and then, of course, fleet growth because gross domestic product will go up,” he added.

The Bangko Sentral ng Pilipinas (BSP) started its easing cycle last August, cutting rates by 50 basis points to 6%. More cuts are expected in 2025 as inflation is expected to stay within the 2-4% target range.

Economic managers are targeting 6.5-7.5% gross domestic product growth for 2025, and 6.5-8% from 2026 to 2028.

Mr. Mills said that compared with Thailand and Indonesia, the local vehicle density is still lower per population, which explains the still huge local demand.

“So, it will really go up; it is just that our countrymen do not have enough buying power… but now that the central bank is bringing down the interest rates, it will be more affordable,” he said.

“And as business improves, they will start to buy. And naturally, as the economy improves, vehicle population improves because that’s how it is. It goes together,” he added.

Mr. Mills said sales growth next year will also be driven by commercial vehicles, which comprised 73.77% of the total industry sales as of October.

A joint report by the Chamber of Automotive Manufacturers of the Philippines, Inc. and the Truck Manufacturers Association showed that total industry sales reached 384,310 in the first 10 months, up 8.9% from 352,971 in the same period last year.

Broken down, sales of commercial vehicles reached 283,501 units as of October, up 7.8% from the 262,875 units sold in the same period last year, while the industry sold 100,809 units of passenger cars, which represented an 11.9% increase from 90,096 last year.

Regina Capital Development Corp. Head of Sales Luis A. Limlingan said the auto industry could reach its sales target if the BSP continues to cut policy rates.

“Lower inflation and interest rates could help reach the target… as this would effectively lower the cost for borrowing across the board,” said Mr. Limlingan in a Viber message.

Toby Allan C. Arce, head of sales trading at Globalinks Securities and Stocks, Inc. said that the launch of new models could drive sales growth.

“Fresh and diverse vehicle offerings, including EVs (electric vehicles), hybrids, and fuel-efficient models, could attract a broader customer base and stimulate demand,” Mr. Arce said in a Viber message.

“Favorable government policies or tax incentives for EVs and other eco-friendly vehicles may catalyze market growth, especially as environmental sustainability becomes a focus,” he added.

Despite the positive outlook for the automotive sector, Mr. Mills said road traffic remains an issue.

“That is another problem. Infrastructure and mass transit must improve. But still, in all countries, vehicles for individuals and for commercial vehicles are still going up,” he said.

According to Mr. Arce, the improvement of road networks will help to increase the demand for new vehicles.

“Ongoing infrastructure projects improving road networks could encourage consumers to invest in private vehicles for convenience,” said Mr. Arce.

“As urban areas expand, the need for personal transportation could rise, bolstering sales in the automotive sector,” he added.