Philippine EV law won't make electric cars cheaper

EV won't be cheaper anytime soon

Last week we got word that the finalized version of the electric vehicle bill has been sent to the Office of the President to be signed. Even if President Duterte doesn't, it will become law unless he vetoes it. 

We have all been expecting a law that will remove some of the major financial barriers to EV ownership and make these electric cars more affordable. That can only be achieved by removing the two major factors that pump up the prices of EVs: the VAT and the import duty.

Now we have a copy of the law that has been sent to the Office of the President, and what is apparent is that lawmakers removed any mention of incentives that could make EVs more affordable for us.

The yet-to-be-signed Electric Vehicle Industry Development Act was supposed to be a landmark law that will make EVs more popular expanding the network of charging stations, providing special privileges, laying the groundwork for local EV production, and lowering the prices. The Act does address most of those things (which we'll tackle later on) except for the lowering prices bit.

There will be no special changes to existing taxes, tariffs, and duties for imported EVs. That means EVs only benefit from zero excise taxes based on the last tax reform law (TRAIN Law), but will still be subject to the full import duty and VAT. EVs are very expensive to produce given the technology and the prices of batteries, but another factor is the import duty. That's why certain vehicles that don't fit free trade agreements or special rules (e.g. JPEPA) are very expensive in the Philippines.

In the pre-bicameral versions of the law in the House and in the Senate, lawmakers had written exemptions for import duty for electric vehicles. But the post-bicameral version makes no mention of any. Insiders have advised us that there was strong opposition over those specific portions of the law from the Department of Finance during the bicameral conference between the House and the Senate.

That means while malls and establishments are obligated to invest in special parking spaces with charging stations, very few will actually be able to use them because the prices of automobiles that would need that are still going to be exceedingly high vis-a-vis the vehicle size. EVs like the Chery Arrizo 5e costs PHP 1.9 million, the BYD S1 EV is at PHP 2.0 million, while the Nissan Leaf is around PHP 2.8 million.

That is also what is holding back many manufacturers that already have EV technology abroad from offering models here. Even with charging stations everywhere, will Filipinos actually buy an EV at those prices versus a similar internal combustion engine car or SUV?

What is clear is that the bicameral conference was looking towards the long term with regards to EV. The law outlines the responsibilities of each department under the executive branch to see it through, and the Department of Energy will be the lead agency. This should pave the way for investment into the local assembly and development of an EV industry. So over time (years, perhaps decades), EVs could be cheaper if it is produced here.

But given the state of manufacturing in the local auto industry, will major auto manufacturers actually invest in an EV factory or assembly line (for those already operating a factory here) in the Philippines? We certainly hope so, but that may be unrealistic given current realities. We'll tackle that issue later on.