Perceived Value and Other Predictors of Electric Vehicle Adoption in the Philippines

The transport sector accounts for more than a third of global CO₂ emissions from end-use sectors [1], while cars and vans contribute almost half (48%) of the transport sector emissions [2]. Hence, the transition to more efficient and less carbon-intensive road transportation modes, such as EV, is crucial for climate change mitigation. EV allows broad participation of the people in the transport sector’s clean energy transition. With electricity as its main or lone energy source, EV has a lower or zero emissions intensity compared to a fuel-powered or internal combustion engine (ICE) vehicle. The growing share of cleaner and renewable energy sources (e.g., solar, wind, biomass, hydropower, and geothermal) in electricity generation further increases the viability of the EV clean energy transition path.

Most governments promote the adoption of EV by providing incentives to EV owners and users and by implementing stricter regulations on vehicle emissions [3]. Incentives include financial (e.g., subsidies, and tax exemptions or reduction) and non-financial measures (e.g., charging stations and other EV infrastructure development programs, and non-pecuniary preferential measures for EV). Several national policy programs have set targets for EV sales and/or specify dates for banning ICE sales. A 30% EV car sales target by 2030 has been set by Japan, South Korea, Canada, Italy, Brazil, and Mexico. Some European countries have announced to ban ICE sales by 2025 (Netherlands, Norway), 2030 (Germany), and 2040 (France, United Kingdom). In Southeast Asis, Singapore intends to phase-out ICE by 2040, while EV volume goals have been set by Indonesia (2.5 million motorcycles and 2,200 cars by 2025), Malaysia (100,000 cars, 100,000 motorcycles, 2,000 buses by 2030), Vietnam (100,000 cars by 2020), and Thailand (20% of annual car production by 2030) [4]. In the case of the Philippines, the 2023 draft of the Comprehensive Roadmap for Electric Vehicle Industry (CREVI) targets a 50% EV share by 2040 [5].

The transport sector in the Philippines dominates total energy demand. In 2019, prior to the COVID-19 pandemic, the transport sector accounted for 35% of total final energy consumption, while the shares of the household, industry, services, non-energy, and agricultural sectors were 27%, 20%, 14%, 3%, and 1%, respectively. Due to community quarantines and lockdowns imposed during the pandemic, the transport sector share fell to 30% while households’ share rose to 31%. However, with the end of the pandemic, transport energy demand recovered; and with a projected average annual increase of 7.1%, the transport sector share in energy demand is expected to reach 38-39% by 2040 (DOE 2022). Within the transport sector, the bulk (90%) of energy demand comes from land transport. Land transport accounts for about 80% of domestic traffic and 60% of freight traffic. In terms of emissions, the transport sector contributed 27% of both CO₂ emissions and total greenhouse gas emissions (GHG) emissions in the Philippines in 2019, second only to power generation which contributed 53% [6]. By 2040, the share of transport in total GHG emissions is expected to increase to 30%, while electricity generation’s share decreases to 42%, making specific transport programs, such as EV promotion, more central in the country’s green energy transition.

The Philippine government has long pursued a strategy of EV adoption promotion. As early as 2006, Executive Order (EO) 488 was passed, imposing zero tariffs on components, parts and accessories for the assembly of hybrid, electric, flexible fuel and compressed natural gas motor vehicles (Philippine Legislative Digital Resources website). Republic Act (RA) 1096310, referred to as the Tax Reform for Acceleration and Inclusion (TRAIN) Law and enforced on 1 January 2018, exempts purely EVs from the excise tax on automobiles, while hybrid vehicles are subjected to only 50% of the applicable tax rates on automobiles (Section 45). In 2018, the Electric Vehicles and Charging Stations Act was first proposed to come up with a national policy and regulatory framework for the use of EVs and the establishment of electronic charging stations in the country. The proposed bill was eventually passed into law on 15 April 2022 as RA 116971 and retitled Electric Vehicle Industry Development Act (EVIDA). EVIDA mandates the formulation of the CREVI, a national development plan to accelerate the development, commercialization, and utilization of EV in the country (Section 6 of RA 116971). CREVI covers all aspects and areas of the EV industry - manufacture, assembly, and trade of EVs, parts and components, and batteries; construction, installation, and maintenance of charging stations and equipment, and other support infrastructure; research and development; and human resource development.

With the goal of mainstreaming EV use in the Philippines, barriers to EV adoption are to be addressed by incentivizing the purchase and use of EV on the demand side, and by enabling the development of the Philippine EV industry on the supply side. EV adoption inducement strategies include mandatory EV share in corporate and government fleets, dedicated parking slots for EV, and installation of charging stations (Sections 16-19). EVIDA provides for both fiscal and non-fiscal incentives for EV manufacturing and use, and for the operation of charging stations and other EV support infrastructure (e.g., research, training and testing centers). Fiscal incentives include exemption from or reduction of excise and import taxes as well as exemption from motor vehicle users’ charge, and vehicle registration and inspection (Section 24). Non-fiscal incentives consist of priority registration and renewal of registration, exemption from the mandatory unified vehicular volume reduction program and number-coding scheme, expeditious processing of public utility vehicle (PUV) franchise applications, expeditious processing of importations, EV training programs, and employment of foreign experts under a technology transfer agreement (Section 25). Further, EVIDA stipulates that government financial institutions provide concessional financial packages (preferential interest rates and payment schemes), and that the Central Bank encourage private banks to prioritize, streamline, and allocate a share of their portfolio for the EV sector.

Drafted in 2023, CREVI targets a 50% penetration rate of EVs in the county by 2040. The program projects a total of 6.3 million EV, comprising about half of the total projected vehicle fleet in the country by 2040. This projected EV fleet will consist of 67% motorcycles and tricycles, 32% sedans and SUVs/UVs, and 1% buses (Table 1).

Table 1. CREVI targets, number of EV units by vehicle type

Source: Department of Energy 2023

From 2010-2019, there were only a total of 11,950 EV registered with the Philippine Land Transportation Office (LTO), the bulk (92.4%) of which were tricycles (6,783) and motorcycles (4,260), while 5.3% were utility vehicles (595) and sport utility vehicles (38), 2.2% were sedans (260), 0.09% were trucks (11), and 0.02% were buses (3) [7]. The dominance of electric tricycles was attributed to the initiatives of the local government units as well as the Department of Energy’s e-trike project, while the share of e-utility vehicles was due to electric jeepney adoption under the PUV modernization program. Registered four-wheeled EV were mostly donated units from the international community. In 2018, in particular, the increase in EV registrations was largely attributed to foreign government’s donations of plug-in hybrid electric sports utility vehicles to Philippine government agencies [5]. In 2021, the number of registered EV reached 8,593, but this was still a measly 0.07% of all registered vehicles. Thus, mainstreaming EV use in the Philippines remains a gargantuan task. Crafting implementation strategies for EVIDA and CREVI requires a thorough assessment of consumer attitudes and preferences that determine actual EV uptake.

This paper aims to contribute to evidence-based policy making and program development for the EV sector. Specifically, the study aims to:

(1) Determine people’s perception of the benefits and costs associated with the use of all types of EV, and how they contribute to EV value;

(2) Assess EV adoption potential in the Philippines, particularly among private vehicle owners;

(3) Identify the effects of PV, electricity and environment-related perspectives, and government policies (financial and non-financial inducements) on EV adoption.

Quantitative analyses of the determinants of EV adoption, particularly in the developing countries of Southeast Asia, are still scarce. Further, findings on the most relevant factors driving EV adoption vary across study areas. Hence, there is a need to investigate what factors matter for specific countries and contexts. To the author’s knowledge, this is the first economic analysis on consumers’ preferences for EV with reference to both climate change mitigation and electricity supply and price issues. The Philippines, like other Southeast Asian countries, still faces challenges in increasing the share of environment-friendly renewable energy in electricity generation [8]. Moreover, the Philippine electricity market has long been overwhelmed by high electricity generation costs, making the electricity price in the country the highest among Southeast Asian countries. These issues, which are particular to the Philippines and the Southeast Asian context, are incorporated as additional explanatory variables of EV adoption in the model. Findings from this study can aid concerned government agencies in the formulation and implementation of effective EV adoption promotion policies and programs, and guide EV industry players in understanding and satisfying the specific needs and demands of potential consumers in the Philippines.

The conceptual framework for this paper follows the value-based adoption model developed by Kim et al. [15] based on the theory of consumption value. An individual’s acceptance or adoption of a particular technological innovation depends on his/her perception of the net value of the innovation - the individual’s overall assessment of the innovation's utility [12, 16]. PV results from a comprehensive consideration of all the benefits and costs/risks from the technological innovation [15, 17]. Kim et al. [12] posit that higher PV of EV increases the likelihood of a positive EV adoption decision, as found in the case of information technology innovations [18-20].

Drawing from past papers [9-12, 14, 21], this research hypothesized that the individual’s perception of the value of EV (PV), stems from seven benefits and costs items that the individual may associate with EV adoption: (1) purchase costs and resale value (PCRV), (2) operational cost savings (OCS), (3) driving convenience (DC), (4) technological risks and limitations (TRL), (5) battery charging concerns (BCC), (6) EB, and (7) EC. Benefits that can be derived from EV use - OCS (electricity cost is lower compared to gasoline cost, lower maintenance and repair costs), DC (less noise and vibration) and EB (less emissions leading to improved air quality and contributing to climate change mitigation) - will raise the PV of EV. On the other, risks and costs associated with EV - higher purchase price and lower resale value, technological constraints (limitations on speed, vehicle power, number of models and availability of services), BCC (few public charging stations, limited battery driving range, long charging time), and EC (pollution from battery production and disposal) - lowers EV’s PV.

In line with Kim et al. [12], the study also looked at the effects of the individual’s environmental consciousness and innovativeness, and the government’s EV support programs - both FI and NFI - on the intention to adopt (AI). This paper adds a fifth factor in the framework, namely, concerns about electricity supply and price. In the Philippines, the supply and price of electricity have long been a challenging and contentious issue. Electricity remains to be mainly generated from imported coal and fossil fuel, and hence subject to global market fluctuations. Electricity price in the Philippines is the highest among Southeast Asian countries due to a pricing policy that transfers fuel price and foreign exchange risks to consumers [22]. These electricity-related concerns may diminish EV adoption intention. A schematic diagram of the conceptual framework on the factors influencing PV of EV and EV adoption intention is presented in Figure 1.

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Figure 1. Conceptual framework

For this research, individual awareness of the benefits and costs of EV and preferences for EV were elicited in a survey. Each respondent was asked to agree or disagree with statements on various EV benefit and cost attributes, perception of EV value, and adoption intention using a scale of 1 (strongly disagree) to 5 (strongly agree). Table 2 lists the variables and the corresponding questionnaire items used to arrive at measures for the variables. The measure for each variable is derived by getting the average of the responses to the questionnaire items.

The survey was administered to individuals in March-May 2024. To capture consumer perceptions that are based on both understanding and actual experience of driving vehicles, the sampling frame was limited to individuals who are at least 18 years old (the minimum age for driving in the Philippines) and possessing a driver's license. Due to these requirements, survey respondents were generated through convenience sampling procedures by five trained and experienced enumerators. Enumerators were given assignments as to the target number of respondents by age group and household social class to ensure a fairly even distribution of respondents. A total sample of 403 respondents was generated for the study, 314 of whom have no EV. Thus, a total of 314 observations were used for this paper on EV adoption intention. The data were analyzed using the GSEM procedure in STATA.

Table 2. Variables and questionnaire items

The transport sector dominates total energy demand in the Philippines. Projected to grow at an average annual rate of 7.1%, its share in energy demand is expected to reach 38-39% by 2040. In terms of GHG emissions, the transport sector’s share is expected to reach 30% in 2040. With land transport accounting for the substantial 80% of domestic traffic and 60% of freight traffic in the Philippines (PEP 2020-2040), mainstreaming the use of EV can be a crucial component of the country’s climate change mitigation strategy. Drafted in 2023, the Philippine government’s Comprehensive Roadmap for the Electric Vehicle Industry targets a 50% EV penetration rate in 2040 when the EV share in total land transportation fleet in 2021 was even short of 1%. Formulating effective measures and implementation strategies to achieve this highly optimistic goal requires a thorough understanding of the end-users’ concerns and aspirations about EV as a mainstream road transport mode.

This paper presents the results of a survey on Filipinos’ awareness and preferences for EV and identifies the factors that influence the individual’s intention to purchase and use EV using SEM. First, the individual’s perception of the over-all value of EV is specified as a function of all benefits and costs factors associated with EV. The regression results reveal that higher PV arises from a higher awareness and appreciation of EV’s OCS, DC, and EB. On the other hand, BCC, technological risks, and purchase cost lower EV’s PV. Only EC does not significantly affect PV. Second, the study finds that EV adoption intention is positively correlated with PV, FI and NFI for EV use, and the individual’s EI. PV has the strongest positive influence on EV adoption. NFI appear to be more important than FI. On the other hand, concerns about electricity supply and prices significantly lower EV adoption potential.

These findings reveal the importance of continuing and intensifying direct interventions in the EV sector most particularly in the following three areas: (1) battery charging (legislation and programs to ensure an expansive network of easily accessible public charging stations, availability of charging hardware and space in residential buildings and carparks, and collection and dissemination of data on charging stations); (2) preferential measures for EV (free parking schemes; exemption from toll fees; access to bus lanes, priority registration); and (3) information campaign. These three areas proved to be crucial in the success of EV adoption policies in countries such as Norway which achieved almost 90% EV adoption rate in 2024. In addition to the purchase and import tax exemptions to make EV price more comparable to ICE’s, the Norwegian government established fast-charging stations on all main roads as well as promoted level-1 charging - lower-power charging stations at home, businesses and schools (e.g., a “charging right” for people living in apartment building was legislated); exempted EV from toll, road, ferry, and municipal parking charges; gave EV access to bus lanes; and fostered public acceptance and awareness of EV [25].

Moreover, the relative importance of non-financial and soft measures over the financial (tax) incentives, together with the relatively smaller impact of EV purchase price on PV found in this study for the Philippines augur well for the viability of removing the financial (tax) measures in the medium and long-term. EV tax exemptions will have to be lifted eventually as they impose a heavy burden on the Philippine government budget. Moving away from tax measures can be helped further by the continuing decline in battery production cost, the main item contributing to the high EV price.

For information campaigns, survey results reveal the need to highlight some specific aspects of EV. For example, since operating costs savings has the strongest positive effect on PV and only fuel cost savings are currently well-known, information campaign can focus on the other two much less known components of OCS, namely, routine maintenance and repair costs. Also, it is crucial to disseminate accurate information and raise familiarity with EV attributes such as its driving convenience and technical limitations. Krause et al. [26] emphasized the importance of the accuracy of perception on actual EV uptake. Familiarization may also be achieved through the promotion of an EV procurement program in government as well as corporate entities [27].

Finally, with concerns about the high price of electricity in the Philippines and uncertainties about its supply significantly discouraging EV adoption, reforms to stabilize the price and supply of electricity in the country become even more imperative. The energy sector transition from imported fuel sources, which are affected by volatile world market price and exchange rates, to renewable energy sources (e.g., solar, hydropower, wind, biomass, geothermal) which are abundant in the Philippines [28] must be pursued in tandem with the EV promotion programs.