The Outlook for Electric Vehicle Manufacture and Adoption in South‑east Asia

Driven by global efforts to diversify supply chains and to adopt green technology, South‑east Asia is focused on the opportunity for Electric Vehicle (EV) production. The International Renewable Energy Agency forecasts that 20 percent of all vehicles in the region will be electric by 2025, while the region’s total population of more than 680 million and its burgeoning middle class provide potential for strong future growth. Countries across the region are striving to convert their domestic mining and manufacturing bases to become an essential part of the EV ecosystem, developing materials that support supply chain resilience and implementing economic policies to facilitate EV adoption.

Asia Pacific’s EV battery market is forecast to surpass $90 billion by 2028, and Indonesia, with the world’s largest deposits of nickel, tin, and copper, is well-positioned to become a center for EV battery production.

In June 2022, Indonesia’s first EV battery production facility opened in Central Java, while South Korea’s LG Energy Solution and Hyundai Motors also recently broke ground on an EV battery plant with mass production to begin in 2024. CATL of China and Taiwan’s Foxconn are also exploring investment in Indonesian battery production. Howver, grabbing the headlines, Indonesian Investment Minister Bahlil Lahadalia confirmed a deal with Tesla to build a battery and EV plant in Central Java, and the recent IPO of Merdeka Battery, at $591.82 million Indonesia’s and the region’s largest public placement of the year, is further evidence of strong investor interest in the prospects for the EV space in South‑east Asia.

In June last year, Hong Seng Consolidated Bhd. of Malaysia and EoCell agreed to develop a hub in Malaysia to manufacture EV batteries. Vinfast, Vietnam’s largest private group, is leveraging the country’s significant nickel reserves to enter the battery space, starting construction in December 2021 of a facility to produce 100,000 EV batteries per year, both for sale and use in its own vehicle produciton, heightening the attractiveness of Vietnam as an EV investment destination.

Regional export production is also on the rise. Indonesia plans to export 200,000 EVs by 2025, almost 20 percent of its total vehicle exports. However, leading the pack is Vinfast. Not only does the group operate an EV factory in Vietnam with capacity to produce 950,000 unites annually, but the company has also announced plans to invest $2 billion in North Carolina for EV manufacture in the world’s largest automotive market, together with $200 million for a US headquarters in Los Angeles.

Several countries in the region have placed greater EV adoption and manufacturing at the heart of their economic and sustainable development goals.

To enhance Thailand’s future competitive advantage, the Thai government has identified “Next Generation Automotive” as one of its 10 S-Curve Industries, announcing in February a cut from 8 percent to 2 percent in excise taxes on imported EVs, a 20 percent reduction in import duties on completely built EVs to 40 percent, and a reduction in income tax from 35 percent to 17 percent for skilled foreign professionals in targeted industries.

To encourage domestic adoption, Singapore has followed a similar path. EV registrations rose from 0.2 percent in 2020 to 4.4 percent in 2021 after the Transport Ministry paid out around $31 million in rebates for EV purchase. To satisfy demand, the Land Transport Authority has targeted installation of 60,000 charging points across Singapore by 2030, while Cambodia’s Long-Term Strategy for Carbon Neutrality commits to 40 percent of cars and 70 percent of motorbikes to be EVs by 2050, as well as reducing import duty on EVs to 50 percent below those on traditional vehicles. Both Malaysia and the Philippines have adopted similar incentive policies: Malaysia now exempts EVs from road tax, and the Philippines’ Electric Vehicle Industry Development Act exempts EV manufacturers from income taxes for four to seven years.

With increased demand for transport, 2020’s Sixth ASEAN Energy Outlook forecast total enduser energy consumption to jump 146 percent by 2040. However, the promotion of EV’s in member states would decrease this growth by 18 percent. Electrical grid reliability and the relative lack of charging points remain challenging for the region’s EV development, but as high fossil fuel costs and inflation further incentivise the region to take steps toward improving energy security, several nations are already hard at work to expand their EV charging infrastructure.