Southeast Asia is considered a potential new market if car ownership is still below 20%. Several countries here also have very ambitious plans to capture a significant share of the electric vehicle market.
The automotive industry has undergone fundamental transformations as countries around the world push for emission reduction targets. At the COP26 summit (November 2021), many countries and leading automakers pledged to phase out fossil fuel vehicles by 2040.
Southeast Asian countries are preparing for the electric vehicle revolution. Southeast Asia has the advantages of being a low-cost manufacturing hub and has a promising market. At the same time, governments in the region are planning to get a head start on capturing some of the market soon. The aim is to create different opportunities for the automotive industry to both export and serve the domestic market.
Thailand is the country with the most developed auto industry in the region. The country produces about 2 million vehicles a year and is aggressively switching to electric vehicles. Last year, Thailand announced a roadmap to bring 30% of car production to electric vehicles by 2029, with many policies to promote and attract investment for this industry.
Indonesia, the world’s largest producer of nickel – a key ingredient in lithium batteries – aims to become a hub for the production and export of electric vehicles.
To its advantage, Indonesia has made battery production a core part of its own electric vehicle strategy, based on its vast source of nickel ore.
The country banned nickel exports in 2020 to protect its industry by attracting major battery manufacturers to invest. Battery manufacturer CATL (China) has pledged to invest USD 5 billion; LG Chem has entered into an alliance with Indonesia Battery Corporation (IBC) and Foxconn has also announced that it will manufacture electric vehicles and batteries in Central Java, Indonesia.
Meanwhile, Vietnam is developing with VinFast, a new car company eager to conquer the American and European markets. Vietnam also has a policy to ‘take on’ the wave of electric cars. Importantly, there are incentives to waive registration fees for electric car buyers or to lower excise taxes on electric cars to encourage investment and production.
Business Time noted that the shift to electric vehicle travel is necessary to protect vehicle production in the region. However, consumers in the Southeast Asian market as well as existing automakers do not seem ready to adapt and take advantage of the market opening. This can provide opportunities for domestic companies to participate.
Currently, Japanese OEM manufacturers still have a leading position in the region. But car manufacturers such as VinFast are also finding a foothold. Major global automakers have set ambitious emissions targets for themselves and plan to launch hundreds of new battery-electric vehicle models by 2025. So they are very interested in getting it. Assisting Southeast Asian countries in their transition from internal combustion engines.
These major international players will continue to dominate the manufacturing sector in the region for at least the next five years before domestic players can take control. As electric vehicle sales and marketing evolves, the focus must be on the value chain and network. This gives local businesses an advantage over foreign competitors.
Southeast Asia is considered a potential new market if car ownership is still below 20%. According to experts, products that are affordable, equipped with many technologies and attractive designs will be more accessible. This is the strength of Chinese automakers, or new companies like VinFast can enter the market.