Southeast Asia beefs up credentials as regional EV powerhouse

With rising petrol prices, growing concerns about climate change, and the pressing need to follow environmental, social, and governance guidelines, more countries in Southeast Asia are getting on the electric vehicle (EV) bandwagon.

Investments related to EVs that are worth billions of dollars have been pouring into various parts of Southeast Asia over the last few months, as the region of more than 600 million consumers continues its big push to become a thriving EV hub.

The governments and private sectors in economies across ASEAN are also investing heavily, be it to manufacture cars for domestic sales and exports, or producing batteries and other parts that are in demand to assemble EVs elsewhere around the world.

Last month, Japanese manufacturer Toyota announced plans to invest 27.1 trillion rupiah (S$2.53 billion) in Indonesia over the next 5 years to produce EVs. Taiwan-based Foxconn is looking to start making EVs and batteries in Central Java later this year, while Mitsubishi Motors wants to produce hybrid EVs and battery EVs in Indonesia as part of a US$667 million investment in Indonesia between 2022 and 2025.

One of Vietnam’s largest conglomerates, VinGroup, has launched its own EV models and is already selling them in the United States and Europe. Thailand is also vying to become an EV assembly hub in the region, while Malaysia is attempting to transform its strong electronics sector into a supplier of motors and parts for EVs.

Samsung SDI Energy Malaysia recently announced a RM7 billion (S$2.16 billion) investment in its first EV battery cell manufacturing facility in Seremban, the capital of the state of Negeri Sembilan.

In Singapore, South Korea’s Hyundai Motor Group’s new innovation centre has an EV factory that aims to produce 30,000 EVs by 2025. The government is also working on expanding the number of EV charging stations across the island, with plans for some 2,000 Housing and Development Board car parks to have at least 3 EV charging points each by 2025.

Analysts whom The Business Times spoke to noted that while these national endeavours and foreign investments are both admirable and timely, the Southeast Asia region as a whole still lags far behind China, which is currently the world’s leading manufacturer of EVs.

According to Michael Dunne, chief executive officer of ZoZo Go, a US-based EV consultancy, China is set to build more than 6 million EVs in 2022, which is about 65 per cent of the world’s total.

He noted that ASEAN can be competitive in trying to attract both Chinese and non-Chinese EV production to the region. Thailand, for instance, has already attracted 2 major EV manufacturers from China - MG and Great Wall Motors - thanks to generous government subsidies that have lowered prices for buyers and caused a spike in EV sales.

Thailand, long regarded as ASEAN’s automotive powerhouse, has nearly every Japanese carmaker and major European and US brands set up in the country.

With a huge manufacturing base in China, analysts note that the main incentive for Chinese EV makers to shift their production to countries in Southeast Asia would be to enjoy these special subsidies and tax incentives, as well as to avoid intra-regional import taxes under the ASEAN Free Trade Area.

“Thailand could become a right-hand drive production hub for Chinese EVs, for the local market and export them to the ASEAN region or Australia,” said Kunat Tharasrisuthi, senior analyst of EVs at LMC Automotive. Thailand’s road system is geared to right-hand drive vehicles.

According to latest available figures provided by LMC, Thailand and Indonesia offer the largest domestic markets for vehicles in Southeast Asia- each sells close to 1 million units every year - with the 2 countries competing annually to be the top market for sales.

In the EV space, nickel-rich Indonesia has been using its huge deposits of nickel - the main raw material in lithium MNC (manganese, nickel and cobalt) batteries - as an incentive for global EV producers such as LGES and Tesla to base their battery production and car assembly on the archipelago.

While Tesla recently agreed to buy US$5 billion worth of nickel from Indonesian mines over a 5-year period, it has yet to sign on to a local assembly deal. This, said observers, may have something to do with the fast-changing technology for lithium batteries, which are at the heart of EV production.

While NMC lithium batteries currently account for the largest share of EV battery sales, they are quickly being replaced by LFPs, or lithium batteries whose main raw materials are iron and phosphorous, which are now commonly used in Chinese EV brands.

Still, there are many other reasons why EV auto makers may want to use Indonesia - the largest economy in Southeast Asia - as a production base. Hyundai has chosen Indonesia for its regional production base for internal combustion engine (ICE) and EV cars, and is on track to export 300,000 units from the country this year alone.

The most interesting EV story in all of Southeast Asia these days is VinFast, the Vietnamese-made EV model that is now attempting to penetrate the US and European markets, after launching ICE models successfully in its domestic market last year.

VinGroup’s VinFast is positioning itself to take on the larger and more established Chinese EV brands by joining forces with non-Chinese partners.

“ASEAN must develop partnerships with European and American companies to secure both technology and access to global markets,” said Dunne, noting that VinFast is building linkages with global leaders like Samsung and Italy’s Pininfarina.

“Before the end of this year, VinFast plans to have their VF-8 cars running on the streets of California, Holland, Germany and France. Now it faces this crucial test of just how many buyers in Europe and the US will embrace this little-known brand from Vietnam,” he said.

LMC’s Kunat believes VinFast is taking a big gamble by going big overseas first, before trying to penetrate the ASEAN market in a bigger way first.

“By selling their EV in the US they can gain some publicity, so maybe they are trying to make a name for themselves in the American market first, and then come back to Southeast Asia,” he said.

Source: The Business Times © SPH Media Limited. Permission required for reproduction.