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Southeast Asia: The Emerging Frontier for Electric Vehicles

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Southeast Asia: The Emerging Frontier for Electric Vehicles

Once a luxury segment of the automotive industry, EVs have become popular among consumers and companies alike in recent years, with solid growth trends attracting public and private investment. The spotlight is on Southeast Asia.


A report by Oxford Business Group revealed the electric vehicles (EVs) set to proliferate and become more accessible to drivers around the world, several emerging markets are looking to expand their EV manufacturing. EVs today have become instrumental in the global drive towards climate goals. The only thing lacking is the infrastructure which some countries have yet to establish due to lack of resources.

Its uptake is essential to the global energy transition, as transport remains the sector with the highest reliance on fossil fuels, producing an estimated 37 percent of CO2 emissions from end-use sectors in 2021. The number of passenger EVs on the road is expected to triple globally in the next decade to over 77 million, according to BloombergNEF.

The Draw Of Southeast Asia

Last November, South China Morning Post observed Chinese electric vehicle makers were making a foray into Southeast Asia, an untapped market with few established players, as competition heats up at home in China. BYD, Great Wall Motor, Hozon and Aiways have all been delivering EVs in countries such as Thailand, with the aim of gaining a foothold in these markets where three million cars are sold on average each year.

Member countries of the Association of Southeast Asian Nations (ASEAN) are target markets for Chinese EV companies whose cars range from RMB 100,000 (US$14,204) to RMB 200,000. 

“EV markets in ASEAN countries have yet to take off, but the potential is huge amid customers’ rising interest in battery-powered vehicles,” said Peter Chen, an engineer with car-parts maker ZF TRW in Shanghai. “Local production will help them win a big market share in the coming decade.”

In February, the Philippines, Vietnam and Indonesia are reportedly competing to house an electric-vehicle assembly plant for BYD Co., the world’s second-largest maker of EVs, according to a top Philippine trade and investment official. The Chinese auto giant is in an “advanced stage of discussions” with the Philippines, the Southeast Asian nation’s Trade Undersecretary Ceferino Rodolfo said in an interview. BYD representatives scoured the Philippines for possible factory sites during a visit late last year and the company may decide on the site during the second quarter, said Rodolfo, who also heads the Board of Investments.

BYD is already set to build its first EV production facility in Thailand, Southeast Asia. The company is still exploring if the new factory will be a full-blown assembly plant or a final-assembly facility with car parts shipped in from overseas, said Lanie Dormiendo, director for the Philippines’ International Investments Promotion Service. 

Powered By Government Subsidies

Subsidies or tax exemptions have adopted as useful tools for encouraging the adoption of EVs. The Thai government has set aside a budget of THB 24 billion (US$714 million) to subsidise domestic manufacturing of EV battery cells for electric vehicles (EVs).

Energy Minister Supattanapong Punmeechaow said the EV battery subsidy is one of the measures agreed upon by the National Electric Vehicle Policy Committee at its first meeting of the year. The subsidy is expected to help manufacturers cut EV battery production costs, which in turn would make EVs more affordable in the domestic market.

However, the Energy Minister warned that these subsidies will be distributed on a “first-come, first-served” basis due to the limited budget — a whilst stocks last model. The ministry added that owing to a number of positive factors, Thailand has drawn the attention of many leading battery manufacturers to set up their factories in the country. It remains to be seen if manufacturers will make use of the subsidy to support their EV business. After all, it is also a competition to get a slice of the pie. 

Back in 2009, the Chinese government implemented subsidies for EV purchases given these novelty vehicles were more expensive. It reportedly blew over RMB 200 billion (from central government) and RMB 100 billion (from local governments). The exponential success of this plan was reflected by 2016’s figures of combined EVs and plug-in hybrid electric vehicles (PHEVs) sales increasing 62 percent to 336,000 units, making it by far the biggest market for hybrid vehicles worldwide, with a share of 44 percent of global sales.

Chinese’s market share was only six percent in as at 2013. These results prompted the Chinese government to extend the subsidy originally slated to expire in 2015, followed by 2022, and now 2023.

Not letting China, Thailand and Vietnam have all the fun, Indonesia too declared its EV entry. President Joko Widodo (Jokowi) said that Indonesia has all components required to produce EVs. Hence, it has a huge opportunity to build an ecosystem for the EV industry in future. 

“We have nickel, copper, and also tin. All the components needed for electric cars are in Indonesia,” he said at the opening of the 2023 XVIII PP Muhammadiyah Youth Conference in Balikpapan, East Kalimantan.

Hence, Indonesia is keen on building a large EV ecosystem, Jokowi stressed.

He added, “We must have good products that could make other countries depend on us. The raw materials are all in Indonesia, including that for EV batteries. The future of this ecosystem will become big in Indonesia.” Jokowi noted that a developed country can make other nations depend on the products it manufactures.

Indonesia’s potential in the EV market commands attention given the accumulated investment volumes, due to its rich nickel reserves. The country reportedly signed more than a dozen deals worth more than US$15 billion for battery materials and electric vehicle production with global manufacturers including Hyundai, LG and Foxconn. It may not be long when the market welcomes an Indonesia EV. Lastly, Oxford Business Group added the world’s two-largest EV battery producers are preparing to invest in projects in the country. The country released its EV Roadmap in September 2020, which includes plans to produce 600,000 four-wheeled EVs and 2.45m two-wheeled EVs annually by 2030, along with complementary metals-refining and battery-production targets.

Southeast Asia’s Rapid Rise in EV Adoption

Southeast Asian nations are competing to woo investments in EVs as global carmakers distance from internal combustion engine, a transition that China is dominating. Great Wall Motor Company has started a production line in Thailand, while nickel-rich Indonesia attracted interest from both BYD and Tesla. The Philippines is also pursuing top-tier producers of EVs and batteries like BYD through tax breaks and other incentives under a law passed last year as rising oil prices help accelerate the global shift away from gas-fueled cars. 

Statista.com’s findings revealed Thailand’s revenue in the EV market is projected to reach US$178.80 million in 2023. The annual revenue growth rate is projected to be (CAGR 2023-2027) of 22.31 percent, resulting in a projected market volume of US$400.10 million by 2027. That translates to projected unit sales reaching 9,196.5 vehicles in 2027. The volume weighted average price of EV market in 2023 is expected to amount to US$44.76 k.

Vietnam’s EV market is dominated by its own VinFast. However, it will face competition on home ground when Chinese competitor BYD Auto Co builds a plant in Vietnam to produce car parts, Reuters learnt — in a move that would reduce the company’s reliance on China and deepen its supply chain in Southeast Asia as part of a global expansion. It would worth keeping our eyes open on the Southeast Asian EV market when regional big guns navigate the tricky mission of business expansion – especially when an Indonesia EV enters the market.

 

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