Last week, a Nasdaq-listed company, Envirotech Vehicles Inc. (EVT), announced its plans to invest an initial $80 million in an electric vehicle (EV) manufacturing plant at the Clark Freeport Zone in Angeles City, Pampanga. The US-based EVT is a transportation industry provider, specializing in all-electric vehicles for commercial and industrial use. This announcement capped the signing of the EVT lease agreement with Berthaphil Inc. – a commercial, industrial, and residential real estate developer in the Clark Freeport Zone.
The key economic advisers of President Ferdinand Marcos Jr. (PBBM), led by Finance Secretary Benjamin Diokno, Department of Trade and Industry (DTI) Secretary Alfredo Pascual, and Department of Energy (DOE) Secretary Raphael Lotilla, were among the witnesses to the signing of the lease agreement by top executives of the EVT and Berthaphil Inc.
As announced, the EVT is targeting to start construction of the manufacturing plant in October this year and to have that entire facility completely finished and functioning by December of 2025. The plant is targeted to have a maximum of five assembly lines, each with a capacity of 360 vehicles per year.
Days earlier last week, the Ayala-led Integrated Micro-Electronics, Inc. (IMI) forged a “strategic manufacturing partnership” with California-based Zero Motorcycles. Its joint venture partner is purportedly regarded as a world leader in the manufacture of electric motorcycles and power trains. Mass production of electricity-run motorcycles under the partnership is projected to start as early as the second quarter of 2023, the IMI reported in an official disclosure to the Philippine Stock Exchange (PSE) on March 28.
The EVT’s entry and IMI joint venture came at the heels of the newly issued implementing rules and regulations (IRR) of the Congress-approved Public Services Act that lifted ownership limits of foreign investors to key economic sectors like public transportations.
However, Executive Order (EO) No. 12 that was signed by PBBM last Jan. 13 this year was obviously issued out of synch.
EO12 temporarily modified the rates of import duty on EVs, EV parts and components as provided for in Section 1611 of Republic Act (RA) No. 10863, or “The Customs Modernization Tariff Act.” The importation of completely built units of EVs shall be exempt from the payment of duties for eight (8) years from the effectivity of the RA 11697, or the “Electric Vehicle Industry Development Act,” or EVIDA for short.
EO 12 was issued while the 19th Congress was not in session. Under the country’s 1987 Constitution, the President could exercise his powers of imposing tax and tariff measures only when Congress is not in session.
EO12 was based on the EVIDA which was one of the laws approved by the defunct 18th Congress but which former President Rodrigo Duterte allowed to lapse into law on April 15, 2022.
The EVIDA declared as a policy of the State to ensure the country’s energy security and independence by reducing the country’s heavy reliance on imported fossil fuel for the transportation sector. The law also mandates the State to provide an enabling environment that permits the development of EVs as the transportation sector is one of the identified largest contributors to air pollution and resulting to huge amounts of the carbon footprints and suspended particles in the atmosphere where we breathe from.
This is in addition to other energy-related greenhouse gas emissions, contributing 34 percent of total air pollution. Of this total, transportation vehicles running on the roads use fossil fuels that contribute 80 percent of the air pollutants. According to Statista, an online platform specializing in market data, there are about 7.8 million registered motorcycles and only 1.3 million registered cars all over the Philippines.
Considering that 80 percent of air pollution come from the transport sector, the large number of motorcycles are likely the big significant contributor to total air pollution.
By temporarily reducing the rates of import duty of EVs from 30 percent to zero percent from 2023 to 2028, EO12 hopes to boost the demand for EVs in the Philippine market. Likewise, it seeks to support the transition to emerging technologies and encourages consumers to consider EVs as a cleaner and greener transportation option.
Pursuant to Section 24 of the EVIDA, the importation of completely built units of EVs shall be entitled to the incentives under RA No. 10963, otherwise known as the Tax Reform for Acceleration and Inclusion Act. Provided, that in the case of imported electric jeepneys and electric tricycles, the DOF, upon recommendation of the DTI, may suspend the exemption in order to protect local manufacturers.
While EO12 is providing tax breaks for electric cars (sedans, sports utility vehicles, limousines), golf carts, go-carts, all-terrain vehicles, ambulances, hearses, motor homes, kick scooters, bicycles, trucks, and buses, it does not include tax breaks for electric motorcycles, or electric scooters which are more affordable for the lower income sector of our society.
EO 12 unjustly excluded two-wheeled vehicles mostly used by lower income individuals from tax relief from EVIDA. Other Asian countries are supporting the growth of the EV sector by providing tax incentives and even monetary subsidies for electric motorcycles/ scooters.
Pursuant to EVIDA, the DOE, together with the Department of Transportation (DOTr), in coordination with the DTI, and in consultation with the concerned government agencies, private and public and stakeholders, adopted and promulgated the IRR for the EVIDA that took effect on Sept. 2, 2022.
When this issue was raised to DOTr Secretary Jaime Bautista and Lotilla, both concurred on the need “to re-examine” EO 12 and to recommend to the DTI – as the head of the presidential task force on tariff – to take the proper action.
Is this a case of the President’s right hand does not know what his left hand is doing?