The US/Israel-Iran war is causing more unintended consequences. One of the ambitions of our government has been to develop the competitiveness of the automotive industry, which has remained small relative to our ASEAN peers.

Vehicle manufacturing is arguably one of the key signs of industrialization in an emerging market, but this is one of the areas where the Philippines has repeatedly faltered in its development.

The fuel price shock generated by the war has put a reality check on these ambitions and dreams.

It makes us realize that the development of an automotive industry that is focused on the internal combustion engine (ICE) would make us entirely reliant on fossil fuels from the Middle East and therefore vulnerable to the geopolitical shocks that are becoming more the norm.

It does not make sense to give incentives and lose tax revenues to support a strategic direction fraught with increased economic risk.

It is reasonable therefore that the Department of Trade and Industry (DTI) scrapped the Revitalizing the Automotive Industry for Competitive Enhancement (RACE) and has opted for the Electric Vehicle Incentive Strategy (EVIS).

The RACE program was the proposed successor to the Comprehensive Automotive Resurgence Strategy (CARS) that was launched in 2015.

Structural changes such as new laws that moved the excise tax between gasoline and diesel closer to parity as well as climate action that favored cleaner fuels (and subsequently reduced refinery capacity and supply) have negatively affected the preference for and advantage of diesel engines — globally. Owning diesel is going to be an expensive asset.

This is a lesson that is now being learned painfully by everyone, particularly those who opposed the public vehicle modernization program that was aimed at phasing out jeepneys and buses.

The story of the jeepney driver who had to walk in the heat to get diesel when his vehicle stalled after running out of fuel should make diesel vehicle owners think about the future costs of their technology.

Public vehicle operators who embraced modernization, particularly those who shifted to electric vehicles (EVs), are now reaping the benefits of their decision and maybe are appreciating the wisdom of the government.

To be fair, while I am supportive of the shift away from ICE, I also have a concern about EVs, specifically whether a viable secondary market for them will exist.

I had written about this last year that for secondary markets to work for EVs in the Philippines, reasonably priced and genuine replacement or recycling facilities for batteries need to be created. Without a secondary market, it is possible we will see EVs eventually dumped on the road.

According to reports, the DTI is already talking to Mitsubishi and another carmaker. It is my hope that incentives that will eventually be rolled out under EVIS will include those for battery recycling or manufacturing.

If we really want to develop an automotive industry, this is a chance to do so but we must create scale as well.

Theoretically with fewer moving parts than ICE vehicles, we can encourage a smaller number of manufacturers to locate to the Philippines to create scale. If this is possible and successful, we can start exporting EVs.

However, we also need to consider current ICE vehicles. Much of the country is still running on diesel and gasoline vehicles and their maintenance.

We must also consider economic friction and losses created from their eventual shift and transformation as well as the infrastructure for this “greener” future.

It is unfortunate that it takes a war for us to realize that our fear of change can be costly.

Let us embrace change and learn to adapt quickly. Diesel and gasoline will still be critical in the immediate future, but we are headed into a new world where the engine of growth is the electric motor.