On EV industry race: Who will dominate the Southeast Asia market?

The Southeast Asia market is revving for a promising future in its electric vehicle (EV) industry, and select countries in the region are joining the hype. It was perpetuated by the global push towards sustainable consumption that led to the advent of  eco-friendly cars.

This trend is gaining attention as the market aims to resonate with its more environmentally-conscious consumers. Such was part of the effort to mitigate climate change.

Notably, Southeast Asian countries are taking bolder steps towards their obligations under the Paris Climate Accords. They are lessening their dependence on fossil fuels and incentivizing the use of EVs. 

Said efforts lean towards the grand vision of making the region a global EV hub. Governments as well as other involved stakeholders, now usher efforts on promotion, deployment, and adoption efforts.

Ramp-up adoption of EVs

With the goal of having EVs in the transportation sector, select Southeast Asian nations have launched a range of EV-related efforts. Such renders the takeoff of the EV industry and usher people to take part in the green mobility goal.

By 2040, Singapore (SG) plans to phase out internal combustion engine-powered vehicles. Despite the potential challenges that remain in the way of the adoption of eco-friendly cars, SG remains steadfast in its deployment strategy.

SG’s Land Transportation Authority (LTA) revealed late last year its bold vision. They will roll out a network of over 12,000 EV charging stations across 2,000 Housing and Development Board (HDB) car parks by 2025. Such aligns with SG’s goal of turning every HDB town into EV-ready.

On the side, Southeast Asia’s largest economy, Indonesia, is taking strides to strengthen its domestic EV manufacturing industry. The Indonesian government has a subsidy program for electric car sales to support this effort.

The program, first announced by Indonesia’s Minister of Industry, Agus Gumiwang, in late 2022, aims to provide a $5,000 subsidy to electric car consumers.

Indonesia also seeks to utilize its nickel reserves. They aim to develop an EV manufacturing base and make itself a dominant EV player in Southeast Asia.

Jakarta, Indonesia’s capital, has secured $15 billion worth of investments from global automotive manufacturers in just three years. It was part of the government’s plan to achieve a net-zero emissions target by 2060.

Meanwhile, the Thailand government, in 2022, introduced a 40% and 20% reduction in tax for completely built-up (CBU) battery EVs bought overseas. EVs costing $61,805 has a 40% tax reduction. Also, those priced between $61,805 and $211,278 enjoy a 20% reduction in import duty.

Excise tax cuts of 2% to 8% for imported EVs were introduced. These cuts are expected to increase the number of EVs on Thai roads by as much as 7,000.

The battle for the best electric cars has intensified in Thailand. Both Japan and China are vying for dominance in the said industry.

Toyota and other Japanese car manufacturers have invested heavily in Thailand. Meanwhile, China has positioned itself as Japan’s new rival.

Chinese automakers are setting their sights on Bangkok, betting big on its market potential. In March 2023, China-based BYD and NETA inked deals to construct EV plants in Thailand. The Chinese carmakers aim to capitalize on Thailand’s established supply chain to bypass U.S. trade restrictions.

As for the Philippines (PH), Republic Act 11697, or the “Electric Vehicle Industry Development Act,” lapsed into law in April of 2022. Aside from tax exemption, EV owners are a priority during registration or renewal in the Land Transportation Office (LTO).

The LTO also gives a special type of car plate. The Metropolitan Manila Development Authority, other similar entities, and local government arms have also specifically exempted EVs from their traffic reduction efforts.

EV giants and start-ups raise the bar

With Southeast Asia capitals leading the way towards the adoption of eco-friendly cars, global automakers are pouring in investments to the region. The EV industry has a market size of about $500 million in 2021 and may be worth  $2.7 billion by 2027.

Japanese brands such as Toyota, Honda, Mitsubishi, Daihatsu, and Mazda are facing stiff competition. They are being rivaled by industry newcomers from China and South Korea as well as local Southeast Asian firms.

Non-Japanese electric car brands have aggressive strategies to expand their operations in Southeast Asia. It threatens Toyota’s position as the world’s top automaker in terms of sales volume in 2022.

While SUVs and sedans continue to be Toyota’s bread and butter in the region, Chinese and Korean manufacturers are banking on EVs to break into the Southeast Asia market and appeal to the socio-economically diverse Southeast Asia population.

Heo Junheang, Hyundai’s Vice President of Sales Group Asia Pacific Headquarters, shared their optimism about the region’s potential for EV investment. He shared this during a conversation with the Association of Southeast Asian Nations (ASEAN) Secretariat. 

“Hyundai envisions ASEAN to continue to follow the growth of vehicle technology. Electric vehicles are beginning to be produced, and we aim to be a solution to air pollution and fossil fuel shortages in the ASEAN region and worldwide,”

Heo declared.

Southeast Asia’s uphill route

Like any other industry, certain challenges face EV supply chain stakeholders in the Southeast Asia market. A major barrier to EV uptake is the lack of a public charging infrastructure network.

In the absence of the said infrastructures, there is severe limit on the driving range of EVs. Such will discourage buyers in favor of conventional vehicles.

For environmentally-conscious consumers, EVs may not also be as eco-friendly as they deem them to be. As per the ASEAN Energy Report in 2022, coal and gas comprise the most shares of power capacity in the region.

ASEAN member states made a commitment towards the use of clean energy. However, the promise of being eco-friendly in a fossil fuel-dominated energy landscape may not satisfy ethical buyers who seek other sustainable alternatives.

Nonetheless, the Southeast Asia market for eco-friendly cars is exponentially progressing. Despite challenges and consumer doubts, there is increasing optimism about the region’s potential as a global EV hub and its pivotal role in shaping a sustainable future. Whether which nation will lead the industry is a question that has yet to come to a conclusion.