Southeast Asia is emerging as a potential market and manufacturing hub for electric vehicles (EVs). Mordor Intelligence estimates the ASEAN EV market at nearly $500 million in 2021 and forecasts it to grow to $2.7 billion by 2027.
Policy makers in the region are putting in place wide-ranging incentives to drive the adoption of EVs as part of climate commitments as well as to attract investments in vehicle assembly and parts manufacturing.
Indonesia, the region’s largest economy, wants to sell only electric cars and motorcycles by 2050. It offers fiscal and nonfiscal incentives to both EV automakers and battery manufacturers, including tax perks for importers. Brunei Darussalam has set a target of 60% of total annual vehicle sales for EVs by 2035. Thailand is making a wide range of EV models tax-exempt. Malaysia is targeting to set up 10,000 EV charging stations by 2025.
Sustainable investing
Meanwhile, major players and unicorn startups in the energy and transport sectors are investing in EV battery manufacturing, charging infrastructure, and fleets of EV vehicles (buses, cars, and motorcycles) in line with corporate sustainability goals.
For example, Indonesia’s national energy company, Pertamina, is involved not only in the production of EV batteries but also providing the infrastructure for exchanging EV batteries. More than a hundred Green Energy Stations across the country, which is run by subsidiary Patra Niaga, will offer EV battery charging and swapping (exchanging an empty with a fully charged battery) services. Pertamina partnered with Grab Indonesia, which has more than 8,500 EVs, to develop the EV ecosystem in the country.
In the meantime, a report from Nikkei Asia says a cross-border app was launched by Singapore’s City Energy and Malaysia's EV Connection to make it easy for EV drivers to find charging stations in both countries. Shell is installing super-fast EV chargers along highways in Malaysia, Singapore, and Thailand.
Several studies look at the readiness of the ASEAN market to shift from fossil fuel- to electric-powered vehicles. The transition will take time since more than 90% of the region’s transport sector depends on fossil fuels.
National incentives and regional initiatives
ASEAN member states support the transition to a sustainable transport system with cleaner fuels, vehicles, and vessels under the Kuala Lumpur ASEAN Transport Strategic Plan 2016–2025.
According to a policy review by the ASEAN Centre for Energy, Brunei, Indonesia, Singapore, and Thailand have set targets for EV deployment. Cambodia, Indonesia, Malaysia, the Philippines, and Singapore are giving different types of incentives to accelerate EV rollout and attract investments. Indonesia, the Philippines, and Thailand are promoting local manufacturing of EVs in an effort to bring down their cost. The report says Viet Nam’s EV manufacturer, VinFast, may provide “a good benchmark” for local EV manufacturing. Its first EV, the VF e34, sells for $30,000.
The ASEAN for Business June 2022 bulletin says a regionally integrated automotive supply chain, which includes the world’s largest automakers, and trade facilitation initiatives, such as the Regional Comprehensive Economic Partnership (RCEP), make Southeast Asia “a promising regional manufacturing hub for EVs.” It points out that the RCEP provides preferential tariffs for those that meet its 40% Regional Value Content Requirement. This will facilitate the flow of automotive parts within the region, promote production synergies, and strengthen the regional supply chain.
Challenges and policy options
However, countries face several challenges that stand in the way of EV adoption in Southeast Asia. The policy review and other studies cite the following concerns of consumers and businesses in the region:
- Lack of public charging infrastructure,
- High cost of ownership,
- Safety, driving range, and operation and maintenance of EVs, and
- Energy sources and reliability of power supply.
A recent survey conducted by Deloitte shows there is growing interest in EVs among consumers in the region, “driven by lower fuel costs, concerns about climate change/reduced emissions, and a better driving experience. Interest is highest among consumers in Singapore, Malaysia, and Thailand. However, the lack of public charging infrastructure and driving range remain barriers to adoption,” given the limited capacity of batteries to cover long-distance travel.
An article by Haslenda Hashim of Universiti Teknologi Malaysia and Rika Safrina the ASEAN Centre for Energy looks at technology-driven solutions and supportive policies to address this issue. These include providing fast charging and battery swapping stations, investing in public charging infrastructure, and fiscal incentives to encourage private sector investments. Building a nationwide network of battery charging stations may require the involvement of various stakeholders. The authors cited the EV charging network in Thailand, which is being financed by a green loan secured by Energy Absolut, the largest renewable energy company on the Stock Exchange of Thailand, from the Asian Development Bank (ADB).
Aside from the charging infrastructure, the policy review adds that EVs need proper operation and maintenance support, which conventional automotive service providers are not yet ready to provide. EV components (e.g., motor) should also be readily available in the local market.
There is also concern that EVs may not turn out to be an environment-friendly solution unless more renewable energy sources are used to generate electricity. According to the ASEAN Energy in 2022 report, the share of renewables in total primary energy supply reached 13.94% in 2019 while their share of installed capacity was at 28.7%. ASEAN hopes to increase renewable energy’s share in total supply and capacity to 23% and 28.7% by 2025. Countries have also made their own climate commitments to accelerate their transition to clean energy, with nine ASEAN member states setting a deadline for achieving net-zero emissions.
Consumer education and incentives will be critical to growing the EV market. Information campaigns could focus on the health and environmental benefits of shifting to EVs as well as cost savings, especially with high oil prices. Incentives could include lower or no taxes and other perks. In the Philippines, the Electric Vehicle Industry Development Act, which took effect recently, offers tax incentives for the importation of completely built EVs and gives EV owners priority registration and discounts on fees, special license plates, and exemption from traffic volume reduction schemes.
This article was first published by BIMP-EAGA on 10 August 2022.
