As Southeast Asia gradually expands its EV vision, the region is ready to define the future of cars
By Xiao Xin
The explosive growth of China’s electric vehicle (EV) exports has attracted attention as the country races towards the top of the global car export list, but it may be overshadowing some even more promising developments as the electrified Southeast Asian auto industry is emerging as the potential future.
In the first seven months of the year, China’s car exports grew 52.3 percent year-on-year to 1.51 million, lifting the country to second only to Japan in the global auto export rankings, industry data showed. Exports of locally made all-electric passenger vehicles posted a surge of 146.1 percent year-on-year to 219,000 during the period.
Such numbers correlate convincingly with the country’s rise as an EV trendsetter, with almost every EV move by major Chinese carmakers keenly watched. China is already the world’s largest automobile market.
By comparison, Southeast Asia remains climbing the manufacturing and technological ladder and is still nowhere close to China in the EV sector.
Nonetheless, the region is growing into a land of opportunities for EV makers from around the world as an increasingly crucial link of global EV supply chains as well as an ambitious newcomer to the EV sector. No one can afford to ignore what could be a rapidly rising star in the EV sky.
Rising Star
Pledges for carbon emission cuts have driven a transition toward EV adoption in Southeast Asia, epitomizing a trend worldwide.
At the UN Climate Change Conference of the Parties (COP26) in Glasgow in November 2021, Southeast Asian nations, along with many countries, vowed to gradually phase out fossil fuel-powered vehicles by 2040.
According to estimates from the International Renewable Energy Agency, the region will see EVs account for 20 percent of all vehicles on the road by 2025.
Factoring in the region’s brisk economic expansion, an EV-oriented future seems even more enticing.
The ASEAN grouping comprising 10 Southeast Asian nations tallied a combined GDP of US$3.3 trillion last year, or 3.4 percent of global GDP, according to an article published in mid-August by S&P Global Market Intelligence.
Over the next two decades, ASEAN’s entire GDP in nominal U.S. dollar terms is projected to more than quadruple to US$13.3 by 2040, or 5.4 percent of world GDP by then, the article said. If that happens, ASEAN’s combined GDP would surpass that of Japan or Germany by 2040, solidifying the region as one of the world’s top consumer markets.
Presently, ASEAN is the world’s fifth-largest economy after the U.S., China, the EU, and Japan.
All these predictions have made the case for major ASEAN members to bet heavily on EV-induced growth.
With a population of close to 280 million, Indonesia, the largest economy in Southeast Asia, has plans to become a regional hub for EV manufacturing by 2025. It aims to export 200,000 EVs by 2025, a colossal march from a mere 24 in 2019.
But Thailand has been the most enthusiastic EV advocate in the region. The government took the wraps off new incentives earlier this year including a cut in excise tax for imported EVs from 8 percent to 2 percent. Eligible manufacturers will be entitled to subsidies of up to 150,000 baht (US$3,947.52) for each electric car as part of a government push to convert half of the country’s auto production to EVs by 2030.
In Malaysia, the pro-EV policy package includes a tie-up with the private sector to fulfill the country’s target of setting up 10,000 charging stations for electric cars and 1,000 DC fast Fbucharging stations around the country by 2025.
The city-state of Singapore, the wealthiest economy in Southeast Asia, laid out an action plan to deploy 60,000 EV charging points by 2030 from the current 1,700. As a regional financial and R&D hub, Singapore is also known for its EV funding and research friendliness.
Industry Reshuffle
The nascent stage of the EV market seems to have ignited a fight for an early foothold in the populous region, where local governments have rolled out ambitious initiatives to drive the electrification transition, for there to be cleaner yet more thriving growth.
Policy temptations are further amplified by a strategic void left by the region’s automobile heavyweights.
With a car ownership rate of less than 20 percent, the region—home to nearly 700 million people—has long embraced Japan-curated automobile choices.
Japanese carmakers have dominated the regional market over the past few decades, securing over 80 percent of the market in the vast majority of Southeast Asian nations.
The competitive landscape in Indonesia is so formidable that non-Japanese firms can hardly survive, Caixin Weekly said in a June article, citing Han Dehong, deputy manager of the Indonesian unit of SAIC-GM-Wuling (SGMW), a joint venture between General Motors and two Chinese carmakers.
Last year, Japanese automobile brands made up 95 percent of the Indonesian market, the report said. SGMW’s local unit sold 25,600 units, accounting for merely 2.9 percent of the Indonesian market. This was possibly the best result non-Japanese carmakers could ever achieve in the local market, Han said.
An increasingly EV-centric mentality is widely expected to make a difference in the region, as continued focus on fossil fuel cars and hybrid models by Japanese companies could stall them in the global race toward all-electric cars.
That suggests enormous untapped opportunities for automakers from other countries, notably China and South Korea.
In the case of SGMW, the JV’s first EV model to be sold abroad, the Wuling Air made its global debut in Jakarta in June. The Wuling Air has been selected as the official vehicle for the 2022 G20 Summit to be held in Bali in November.
In Malaysia, its national carmaker Proton, partly owned by Chinese auto giant Geely following a 2017 deal that resulted in Geely’s acquisition of a 49.9 percent stake in Proton, is purportedly planning a 2027 launch of an EV.
Prior to that, Geely’s JV with Mercedes-Benz, Smart Automobile Co., Ltd., disclosed plans in January to sell China-built and Smart-badged EVs in Southeast Asia, with Proton Edar, the Malaysian carmaker’s distribution arm, appointed as importer, distributor and dealer of Smart EVs.
Numbers aside, Southeast Asia is already an important destination for China’s EV exports in volume terms, albeit mostly entry-level models from more traditional Chinese carmakers.
Great Wall Motors is one example. The Chinese sport utility vehicle maker launched its GWM brand for the Thai market in February 2021 and introduced a pure electric model Ora Good Cat eight months later. Within 48 days of its pre-sale in mid-October 2021, GWM received 6,000-plus orders for Ora Good Cat, according to the company.
The China-imported EV model, initially priced at least 989,000 baht, is now available for 828,500 baht thanks to the Thai government’s tax incentives.
Put in perspective: 1,954 EVs were sold in Thailand in 2021, a figure the Federation of Thai Industries forecast to more than quadruple to some 10,000 cars this year, media reports said. Government subsidies that have lowered EV prices were cited as the main reason behind the surge.
GWM, now the best-known EV brand in Thailand, also began production at its Thailand plant in June 2021. This September, the plant celebrated the 10,000th new-energy vehicle rolling off the line.
In another major move, Chinese EV maker BYD, which has unseated Tesla as the world’s largest EV producer in sales terms, unveiled plans in early September to establish a facility in Thailand to start manufacturing 150,000 passenger vehicles annually from 2024.
As for the Chinese automaking new force, an EV startup trio composed of Nio, XPeng and Li Auto, ongoing rivalry with Tesla across equally premium-priced models prompted them to look to the European market for overseas expansion.
Even so, the new force remains keen on building its local presence.
A typical example was Nio which went public in Singapore in May, the third stock exchange to trade its shares after New York and Hong Kong.
Nio has also revealed plans to set up an R&D center in Singapore to improve artificial intelligence and autonomous driving.
Alongside Chinese brands, South Korean carmakers are aiming high in the region. The faltering clout of South Korean carmakers globally may have fueled their ventures into Southeast Asia.
As a pillar industry of the South Korean economy, the auto sector, highly reliant on supply chains outside of South Korea, has taken a hit from the pandemic-inflicted disruptions to global supply chains. Consequently, South Korea produced 3.46 million vehicles in 2021, a decline of 1.3 percent from the year before, per the Korea Automobile Manufacturers Association.
Although the country is still holding onto its fifth spot on the global car production rankings, its annual car production has continued a downward trend since 2018.
Understandably, a head start in Southeast Asia’s promising EV market would be huge for South Korean automakers.
Hyundai launched a new plant in Indonesia in mid-March tasked with manufacturing the country’s first locally assembled EVs. The new plant, with a production capacity of up to 250,000 units per year, is Hyundai’s first factory in Southeast Asia.
The new facility is expected to cement Hyundai’s rising profile in the Indonesian market. In the first half of the year, Hyundai and its affiliate Kia Corp tallied combined sales of 12,013 units, nearly a four-fold surge compared with a year ago, Yonhap reported, citing the Association of Indonesia Automotive Industries. Accordingly, the combined market share of Hyundai and Kia in Indonesia rose to 2.6 percent, up 1.8 percentage points from the prior year.
More strikingly, Hyundai Thanh Cong Manufacturing Vietnam and THACO Kia, two South Korean automakers’ local JVs in Vietnam, another important part of the region’s EV ecosystem, sold 71,882 vehicles in the first half, per data from the Vietnam Automobile Manufacturers’ Association. The combined sales, a jump of 29.3 percent year-on-year, easily eclipsed the 43,085 tally of Toyota Motor Corp in the growing Vietnamese market.
Last but not least, Tesla, an EV pioneer and pacesetter, has also set sights on the region’s market. The U.S. carmaker has registered to begin selling cars, solar panels, and energy storage systems in Thailand. It’s reportedly ramping up hiring in Thailand amid growing EV competition, with around 20 Bangkok-based job openings.
Supply Chain
As such, the EV roadmap signals a gradual shift away from Japan’s monopoly in the region’s auto market. It’s even more noteworthy that the transition is dovetailing with the region’s strategic vision to turn Southeast Asia into a crucial part of global EV supply chains.
More importantly, the region’s domestic brands could over time take on their foreign counterparts.
The founding of local manufacturing facilities has been attractive to regional governments keen on facilitating an EV-powered makeover.
To ride the EV wave, Indonesian President Joko Widodo has publicly lobbied top EV makers, notably Tesla, to invest in his country on an entire supply chain basis.
“We had a lot of discussions, particularly on how Tesla could build their industry from upstream to downstream, end-to-end starting from smelter then build the cathode and precursor industry, build EV batteries, build lithium batteries [and] then the vehicle factory, everything in Indonesia, because that’s very efficient,” said Widodo in a June interview with CNBC. “That’s what I offered.”
Widodo met with Tesla CEO Elon Musk in May after attending a summit for ASEAN leaders in Washington DC. He traveled to Texas from Washington to meet Musk.
Musk said he would dispatch a team to Indonesia “to check the potential of nickel and environmental aspects,” but they never came, according to Widodo. He remains hopeful a Tesla visit could still happen. The Indonesian president also invited Musk to the Bali G20 Summit in November.
The success of Tesla’s Shanghai Gigafactory could have motivated Indonesia to trust its EV ambitions to the U.S. EV giant. Tesla makes plenty of vehicles in China to meet local consumer needs and represents the lion’s share of China’s EV exports.
Home to abundant deposits of nickel, tin, copper, among other key materials for EV batteries, Indonesia is evidently well-placed to translate its reservoir of natural resources into future prominence in the EV sphere.
In addition to a hotly pursued EV consumer market, Indonesia has increasingly been seen as a heavily invested market for EV battery projects.
Tesla supplier Contemporary Amperex Technology (CATL), the world’s largest EV battery maker headquartered in East China’s Fujian Province, revealed in April plans for a US$6 billion EV battery project in Indonesia.
CATL’s subsidiary Ningbo Contemporary Brunp Lygend will team up with two Indonesian firms to build a project that includes nickel mining, processing, production, and recycling of EV batteries. Construction is expected to begin this year and be completed by 2026, according to CATL.
Also joining the competition are Hyundai and South Korean battery maker LG Energy Solution Ltd, which have secured financing for a battery cell facility in Indonesia. Construction of the new facility near Jakarta will be finished in the first half of 2023, and commercial production is scheduled to commence by 2024.
Factoring in the increasing EV plants, battery projects, and R&D facilities in the region, the Southeast Asian market is booming, strengthened by the emergence of hot local brands.
A compelling standout is VinFast, the automaking unit of Vietnamese conglomerate Vingroup. VinFast, which started selling locally made electric cars last December, has targeted the U.S. for the production and sales of its branded vehicles.
As Southeast Asia gradually ratchets up its EV vision, the region may define the future of cars, like what Japan, the U.S., and China have done and are still doing.
(Chen Yan, Chang Xiang, and Tian Yuan contributed to the story.)
China Report ASEAN 