Toyota Motor Philippines, a joint venture with local conglomerate GT Capital Holdings, is looking at increasing production capacity by 10% to 20% from the current 40,000 a year.

According to Reuters, vice chairman Alfred Ty, wants to take advantage of new government incentives worth $600 million over six years to the tiny local auto industry in a bid to raise shrinking output and catch up with regional rivals.

"We need to improve efficiency and we have to expand. Our capacity is quite stretched," Ty told Reuters, adding that plant utilisation rate was already over 90%.

The Philippines unit, dominant in the local auto sector, assembles Vios and Innova models in a factory south of the capital Manila.

Under the government scheme, a car firm can get incentives for that model if it has a track record of competitiveness, there are plans to invest in assembly and a targeted production volume of at least 200,000 over six years, among other requirements.

Ty told the news agaency Toyota Philippines would take advantage of the incentives through the Vios as the monthly production of 2,000 was expected to increase to 2,500 while construction of a larger assembly plant could start as soon as late 2015.

Given the output volume required under the plan, only the local units of Toyota and Mitsubishi Motors Corp would be eligible to apply for incentives, Ferdinand Raquelsantos, head of motor vehicle parts industry group MVPMAP, told Reuters.