From EVs to hydrogen, Asia's green tech sector perseveres amid financing hurdles

Bringing green mobility to public transit, along with a focused push for renewable energy, can pave the way for viable solutions to climate change, even as green technology grapples with overcoming funding constraints to deliver long-term answers for Asia in transitioning to a low-carbon future.

This was highlighted on Thursday (Mar 7) by participants in the Asia Green Tech Summit, hosted by Nikkei and the Financial Times, in which investors and green tech players called for urgent action to spur the region along in the green transition.

Electrifying public transit and making it more accessible will be a key to greener cities, VinFast Chairwoman Le Thi Thu Thuy said on Thursday at the summit as the Vietnamese company pushes its electric vehicles beyond personal rides and ownership.

The event brings together regional investors and business leaders to discuss how technology can be deployed at scale to support Asia's transition to a net-zero carbon world.

Besides making EVs for individuals, VinFast builds and operates hundreds of electric buses for public transit in Vietnam as a member of the country's largest conglomerate Vingroup. The company has already sold tens of thousands of electric scooters and EVs for local ride-hailing services.

"We've made public transportation accessible to people that have never taken it," she said, noting how the majority of commuters use two-wheelers in the busy streets of Vietnam. "Our mission is to make EVs accessible to everyone and drive electrification for a greener future."

VinFast started manufacturing EVs in 2021 and wants to expand its global footprint. It most recently entered Indonesia, where it plans to set up a manufacturing plant by 2026. Other markets in the pipeline include the Philippines, Malaysia, Thailand and India.

"This is the year of global expansion for us," Thuy said of the company's push for more EVs. VinFast is targeting entry into 50 different overseas markets by the end of the year, according to the chairwoman.

"EV is the future for the automotive industry," Thuy said.

Southeast Asia's EV market is still developing, with less than 2% of global total sales. But regional EV sales are growing rapidly and competition is intensifying as smaller players take on giants like China's BYD and Elon Musk's Tesla.

EV sales across Indonesia, Malaysia, Thailand, Vietnam, the Philippines and Singapore are rising sharply, with sales opportunities in 2035 expected to fall between $80 billion and $100 billion, up from $2 billion in 2021, according to global consultancy EY.

Isao Sekiguchi, president of Nissan Motor ASEAN, said the EV landscape has seen a "significant change" over the past few years in emerging Asian markets like Thailand, the Philippines and Indonesia. Governments there are pushing for electrification with incentives to make them more affordable.

Despite these efforts, Sekiguchi said the industry must address different maturity levels across markets, taking into account electricity costs and charging infrastructure. "We see the speed of a distribution and the competitive landscape differ market by market," he said.

A key to decarbonization would be to offer the best selection of energy-efficient vehicles, Sekiguchi said, including hybrid and plug-in hybrid cars, both of which combine a battery with an internal combustion engine.

Even as the auto sector invests in decarbonization, younger green tech players have been grappling with a tough fundraising environment to achieve growth, as the current high interest rate environment prompts investors to be cautious with their money, participants said.

SuetChee Chiong, director at Decarbonization Partners, which invests in late-stage venture capital and early-stage growth equity companies, noted that green technology backers have been selective in their investments, to the extent that some companies in the sector have turned to existing shareholders for funding to reach business targets amid tight capital conditions.

"For every dollar of capital supply, there's like three dollars of demand there," said Chiong. "Capital is in scarcity, but there's still a lot of interest in climate tech, and it's just that investors are generally more cautious. Investors are looking for businesses with strong fundamentals."

Amid the caution, traditional financial institutions appear to be saving the day, said Alexandra Tracy, president at green finance consultancy Hoi Ping Ventures.

"In most of the markets that we're looking at, the bulk of the financing is coming from the domestic commercial banks; it's not coming from capital markets," she said. "It's coming from quite traditional, old fashioned, arguably, institutions, who are risk averse, who don't necessarily look at leaping into the next new sectors."

Funding constraints aside, summit participants identified promising areas where new green tech could prove valuable in the fight against climate change, one of which is hydrogen produced through renewable resources.

As part of the energy transition, countries and businesses have been seeking to tap into hydrogen as a potential alternative form of energy. Japan was among the first to draw up a national strategy for hydrogen, while Singapore is also betting on it as one of its main future energy sources to achieve its net-zero goals by 2050.

Akira Yabumoto, executive senior advisor with Japan's Electric Power Development, known as J-Power, said hydrogen has a "critical role" for his company to transition from use of fossil fuel. As part of its green push, the company is developing project in Australia for coal-to-hydrogen with carbon capture and storage, linking it to Japan in order to build a hydrogen supply chain.

J-Power, a big Japanese power generator with many coal-fired power plants and hydroelectric facilities, aims to cut its carbon emissions by 46% by 2030 from 2013 levels. "The biggest challenge is how we can transform our existing business [and shift] from fossil fuel," Yabumoto said.

Summit participants were optimistic about green tech's potential to help Asia decarbonize, although high adoption costs are a barrier. Despite this, Trishna Nagrani, a business development executive at Climeworks, which offers solutions to remove carbon dioxide from the air, believes economies of scale can eventually be reached to lower costs for such innovations.

"We do need technological breakthroughs," she said. "Once you start achieving more economies of scale, we can start seeing that cost coming down."

A version of this article was first published by Nikkei Asia on Mar 7 2024.
©️ 2023 Nikkei Inc. All rights reserved.