Despite trailing behind developed economies and China in electric vehicle (EV) adoption, Maybank Securities’ Asean Mobility Report suggests that the Asean region is well-positioned for EV growth due to increased investment in charging infrastructure, policy and incentive support, and the development of local manufacturing systems.
Analysts Jigar Shah and Neerav Dalal note that Asean’s EV penetration is notably low compared to other emerging markets. By the end of 2022, EV car sales in Asean accounted for just 2.1% of total vehicle sales, compared to 29% in China, 21% in Europe, and a global average of 14%. The primary factors contributing to this low penetration are high upfront costs and a lack of a robust local production ecosystem.
The subsidies in the region need to be increased to significantly reduce the high upfront costs of buying EVs compared to internal combustion engine (ICE) vehicles. The only exception is Singapore, where the analysts say EV and ICE car prices are similar. Additionally, Singapore, Thailand, and Vietnam are the only Asean countries with plans to phase out ICE vehicles by 2030, 2035 and 2040, respectively.
China currently dominates the EV ecosystem, controlling two-thirds of global lithium and nickel processing, and China, Japan, and South Korea own 90% of global battery parts manufacturing. To counter this, the EU and the US provide significant incentives for automakers to establish local units and sourcing contracts in specific countries to reduce dependence on these regions.
To thrive in the EV market, Asean must retain policies that attract investment from the US and China while retaining its mineral resources for greater value addition. A positive aspect is that global auto and battery manufacturers are eager to invest in diverse supply chains to ensure a stable flow of battery minerals and EV components.
Regional potential
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Indonesia and Thailand are the two largest automotive markets within the region, with the auto sector accounting for about 10% of their GDP. Maybank believes both countries will emerge as regional and global hubs for battery development in the coming five to 10 years.
Indonesia is at an advantage because of its world-leading nickel reserves and nickel’s use in electric vehicle batteries. The country has reportedly attracted investments of around US$20 billion ($26.8 billion) for developing nickel mines and other downstream products, mainly from Chinese metal producers. The Indonesian government has also supported the shift to higher value-added goods exports, battery making and battery system development to boost the local manufacturing of EVs. Large auto and battery makers such as Tesla, BYD, LG Chem, Contemporary Amperex Technology (CATL) and Panasonic are evaluating Indonesia’s policies to make large investments in the country.
“After achieving policy clarity, Indonesia could attract much more investment, and this can not only catapult Indonesia’s vehicle transition to cleaner products but also help Asean as a region adopt EVs faster and more cheaply. No other country in Asean is witnessing more developments on the EV front than Indonesia,” the analysts add.
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The analysts emphasise Thailand’s significance as the second-largest country in automotive production in Asean, housing numerous global auto manufacturing operations for worldwide exports. According to the analysts, the potential establishment of a battery unit in Thailand by China’s CATL bodes well for the entire Asean region. “The benefit of the battery ecosystem in Indonesia and Thailand should be visible in the cost structure and shift away from ICE products to EV in another four to five years.”
Asean EV market size
Driven by the launch of new models, EV car sales in Asean surged to about 50,851 in 2022 from 15,926 in 2021. Despite the sharp increase, EV sales were just 2.1% of the region’s passenger vehicle sales, Maybank analysts note. Thailand leads within the Asean countries, contributing more than 50% of the region’s EV sales, followed by Indonesia and Vietnam.
BloombergNEF predicts that Asean’s annual electric passenger vehicle sales will reach 2.7 to 2.9 million by 2040, accounting for 62% to 64% of total annual passenger vehicle sales in the region. In the short term, analysts expect a doubling of EV sales through favourable government regulations, such as concessional taxes for imports and facility set-ups.
Meanwhile, EV two-wheeler sales growth will also remain robust. The analysts believe this is driven by the entry of start-ups and faster adoption of scooters, further supported by the ease of charging through home or battery swapping. BloombergNEF forecasts the Asean two-wheeler sales to reach 12 million units by 2040, with Vietnam, Thailand and Indonesia taking the lead.
Asean governments are responding to the growing demand for electric buses by aiming to replace fossil-fuel buses with electric ones by 2030. BloombergNEF expects Asean’s electric bus sales will hit 44,500 units by 2040. For instance, Singapore’s Land Transport Agency plans to replace 400 diesel buses with electric buses by 2025, half of all buses by 2030, and achieve 100% electric or hybrid buses by 2040.
Although the decarbonisation of trucks will be slower than cars, buses and two-wheelers, analysts expect fuel-cell-powered trucks for long-distance trips to make a meaningful contribution. This is as hydrogen technology is starting to show results in heavy-duty long-distance trucks.
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The Singapore market
Compared to other markets in Asean, Singapore is a “peculiar” one wherein automotive sales depend on a vehicle quota system approved by the government, the Maybank analysts say.
The city-state has had no manufacturing for years, with all vehicles imported. However, Hyundai has set up a new smart plant in Jurong, with plans to assemble up to 30,000 EVs annually by 2025. The plant, built on a 44,000 sq m plot, will also serve as an innovation lab for research and development into mobility concepts, the analysts note.
The tax scheme provided by the Singapore government is favourable for EV adoption, as it is based on the vehicle’s carbon emissions. The country has also set an ambitious goal to sell only EVs after 2030, phasing out all ICE vehicles by 2040. Additionally, Singapore is targeting to set up 40,000 public and 20,000 private electric charging stations by 2030.
Within Maybank’s Asean coverage, ComfortDelGro (CDG) is one of their top picks for mobility transition-themed companies. As part of its environmental, social and corporate governance (ESG) roadmap, CDG seeks to transit 90% of its total car fleet across all its operations globally to cleaner energy vehicles by 2030 and 100% by 2040, says analyst Eric Ong. He adds that CDG has budgeted up to $6 billion to replace the bulk of its fleet from internal combustion buses and taxis with EVs over this period.
CDG also plans to import a new Chinese EV van brand for sale or lease by the 4QFY2023. Its engineering arm will be the exclusive distributor of the commercial EV manufactured by ChangAn KuaYue.
“CDG has been in the environmental sustainability business since 2021 via joint ventures with ENGIE South East Asia to provide EV charging solutions and renewable solar energy. To date, it has installed 500 charging points, which is expected to double to 1,000 by year-end,” says Ong.
Another top pick for Maybank is Nasdaq-listed Grab. Analyst Kelvin Tan says Grab has strategically supported driver-partners to transition to low-emission vehicles. Tan adds that the company has regionally introduced 13,000 low-emission vehicles to its rental fleet.
Grab has also adopted a three-pronged approach to encourage and make EV adoption easier: First, it has established an ongoing partnership with Hyundai to trial EVs and understand the gaps and barriers to adoption. The company has partnered with KLeasing and automotive maker MG Thailand to launch EV loans for driver-partners to lower cost barriers. Finally, Grab Singapore launched the eco-friendly rides toggle in March last year for JustGrab rides, allowing passengers to select EVs.
“Owning private vehicles has become more expensive due to additional taxes and levies. This structural trend is likely to accelerate as many countries in the region adopt green transportation policies. We believe this will provide long-term growth in demand for Grab’s mobility and delivery services,” says Tan.
Nanofilm Technologies International is one stock unrated by Maybank, which closely reflects the mobility transition theme. Its subsidiary has established a joint venture company, ApexTech, with two Chinese companies to provide coating solutions for advanced battery components and systems in EVs and energy-storage applications in China. Nanofilm owns 60% of the joint venture company.
The joint venture is on track with the initial commissioning targeted for 2H2023, while full coating equipment is set to come on-stream by 2024. The pilot lines are designed and built inhouse by Nanofilm. Industrial-scale mass production is expected to be reached by 2025.
