Many readers likely expected me to comment on the recent viral incident of a transport influencer versus a government department. Admittedly, it’s still a hot topic even close to two week after it happened. However, as much as I am tempted, that issue has pushed a more serious development out of the limelight: the President’s veto of funding for Philippine auto manufacturing programs.

Don’t get me wrong, we should be discussing how the LTO deals with traffic apprehensions, as well as whether going to social media is the right way to deal with such a problem. However, the veto of funding for Philippine auto manufacturing programs has more far-reaching effects, like stability of employment in the sector, our prospects for attracting foreign investment, and the future of auto manufacturing in the country.

Last week, President Ferdinand Marcos, Jr. vetoed the ₱4.32-billion budget for the Comprehensive Automotive Resurgence Strategy (CARS) allocation under this year's national budget. The amount is meant to pay for incentives earned by participants of the CARS program for investing in the country, generating jobs, and supporting our country’s auto manufacturing efforts. An additional ₱250 million for CARS’ successor program, the Revitalizing the Automotive Industry for Competitiveness Enhancement (RACE) program was also cut.

The President did give a valid reason for doing such, citing the decision’s role as “safeguarding fiscal discipline and promoting responsible governance.” It’s certainly a timely move, given the abuses that were unraveled with many flood control projects.

However, doing so only reinforces what many global automakers had already suspected of the Philippines: that it cannot keep its promises across administrations, and that investing in the country is no different from gambling. Why will global brands invest in facilities to assemble cars in the country when the incentives promised to those who already did will not be delivered? We have to hand it to companies like Toyota, Mitsubishi, and Foton for continuing to assemble cars locally anyway. However, how much longer will they be able to keep it up?

Some 20 years ago, the Philippines was in an enviable position, particularly when it came to the auto manufacturing landscape. Brands like Toyota, Mitsubishi, Nissan, Ford, Isuzu, and Honda were proudly building cars in the country. In fact, some Ford vehicles were even built for export. Today only a small fraction remains. Major players like Nissan, Ford, Isuzu, and Honda, have cited low market demand, high costs, poor parts supply, and other unfavorable conditions as reasons for pulling out. The country continues to struggle to attract automakers because countries like Thailand, Indonesia, Vietnam, and Malaysia now offer more compelling deals and environments to encourage manufacturing in their countries. These days, it seems like local assembly is only chosen as an option for niche vehicles that aren’t too complicated to build, that only seem to sell well in our country. We aren’t even considered when it comes to hybrids or EVs.

The CARS program and its incentives were meant to change that perception, providing interested brands with rewards for producing a certain number of vehicles within a certain time period. In fact, the quotas and deadlines were even adjusted as the Covid pandemic happened during one of the intervening years. The RACE program was conceived as a follow up, based on the lessons learned from the CARS program.

With these budgets cut, there is no incentive for foreign automakers to even consider assembling vehicles in the Philippines. Our country is essentially telling them subtly, “Invest at your own risk. There is no support here.”

This decision not only affects the local subsidiaries of these global car brands, but several smaller companies that serve as their suppliers. It may surprise some to know that not everything from a locally made car is made at the factory. Components like wheels, tires, seatbelts, wiring harnesses, airbags, instrument clusters, brakes, and many other critical components are actually sourced from local companies. As such, cutting funding for these programs not only affects those directly employed by the car brand itself, but also those that work for the auto parts companies that supply the needed components.

This will not just affect the automotive industry, but also sow doubts among investors in our other critical industries and sectors. Our semiconductor industry is growing and currently serves as an appealing alternative especially now, in light of the turmoil over Taiwan. Yet, how can we take advantage of such an opportunity if word gets out that the government refuses to meet its obligations to another sector? Indeed, safeguarding fiscal discipline may seem like a valid reason, but in implementing this stop gap measure, we just might put our country’s manufacturing future at risk.