The trend of electrification of the mobility sector is driven by global commitments by countries and corporations to act on reducing harmful carbon emissions.
The maturity of electric vehicle (EV) technology and its acceptance by consumers have contributed to the significance of this trend.
Many countries have either mandated or announced timelines to phase out the sales of pure internal combustion engine (ICE) vehicles.
Norway leads the trend with a target of achieving zero ICE vehicle sales by 2025. China, the world's largest automotive market, will sell only xEV (different forms of hybrids and zero-emission vehicles) by 2035.
Among Southeast Asia nations, Singapore aims to have all vehicles run on clean energy by 2040.
Other countries such as Indonesia, Malaysia and the Philippines have also announced commitments to accelerate conversion to xEV by 2030.
Thailand is particularly resolute in accelerating zero-emission vehicle transformation, with the goal to produce 50 per cent of electric vehicles locally by 2030, and 100 per cent by 2035.
International management consultancy Roland Berger projects that the share of global ICE sales will reduce to 40 per cent by 2030.
Need for a new approach
EV development has created a new industry value chain and opportunities.
"Taking Thai EV development goals as an example, we estimate a revenue pool of more than US$100 billion, however, there are many challenges associated with the new market that remain to be resolved," says Roland Berger principal and automotive practice lead (Southeast Asia) Timothy Wong.
Roland Berger's Automotive Disruptive Radar (ADR), a biannual tracker of disruptive trends in the automotive sector, indicates desirability among consumers to switch to EVs.
Accessibility, convenience and price, however, remain key concerns. The existence of charging infrastructure, access to maintenance and repair, and price gaps between ICE and EV are hurdles to be resolved.
On the supply side, industry players are grappling with the challenges of the nascent market with an underdeveloped EV ecosystem.
The struggles include needing to build stronger EV-related know-how and attracting investments to scale up.
"Should we wait for the EV to be more ready before we invest, or should we act now? How soon can we reap the rewards?" said Wong in reflecting sentiment on the ground towards EV potential and risks.
He added that to address the conundrum of the nascent EV market in Southeast Asia, both the public and private sector have roles to play with different strategic imperatives and considerations.
Overall, the development of EV will create unprecedented opportunities for various stakeholders in the public and private sectors.
Roland Berger believes that a "playbook" approach could provide high level guidance for policymakers and business decision-makers to better define their objectives, strategy and approach to capture the EV growth potential.
PLAYBOOK FOR PUBLIC STAKEHOLDERS AND POLICYMAKERS
1) Enable and stimulate EV deployment
Governments play a key role to enable and stimulate electric vehicle (EV) growth. Three broad policy categories essential to stimulate EV growth in Southeast Asia are:
• Enabling infrastructure development policies: Availability and accessibility to charging infrastructure is a major concern. Funding to develop charging infrastructure with partnership of private sector stakeholders is critical to enable EV growth.
• Demand side policies: Incentives to close or narrow the price gaps between ICE and EV are necessary. Singapore's rebates under the Electric Vehicle Early Adoption Incentives give buyers of EV batteries a rebate of up to 45 per cent on their additional registration fees, capped at S$20,000 to narrow the ICE vs EV price gap. In Thailand, subsidies in the range of 70,000 baht to 150,000 baht are provided for completely knocked down (CKD) and completely built-up (CBU) units of battery capacity of 10-30kWh and more than 30kWh, respectively.
"The recent slew of policies on EV will help to encourage the growth of EV in Thailand," said Roland Berger Thailand country head and partner Udomkiat Bunworasate.
• Supply side policies: Objectives differ by each country's auto industry capacity.
"For automotive producing nations such as Malaysia, Thailand, Indonesia and Vietnam, incentive packages to encourage and accelerate the industry transformation from ICE to EV would be key," said Udomkiat.
For automotive consumption nations, lowering of import duties and taxes to reduce upfront cost of ownership is more effective.
2) Leverage EV to drive economic transformation agendas
EV development not only creates environmental and socio-economic benefits, but also new EV value chains, ecosystems and investment needs. EV presents unprecedented opportunities for SEA governments to attract new investments to transform its economies.
In Southeast Asia, resource-rich countries such as Indonesia and the Philippines have the world's largest and sixth nickel reserves, respectively, a critical raw material for lithium ion batteries.
Both countries are well positioned to attract global investments and partnerships along the EV battery value chain, build capabilities and upgrade the local economy.
Indonesia for example, has set up Indonesia Battery Corporation to spearhead this development. A partnership with LG/ Hyundai for co-investing in a battery plant in Indonesia was also announced.
PLAYBOOK FOR PRIVATE SECTOR STAKEHOLDERS
1) Define strategic roles of EV
A diverse group of private sector stakeholders is in play in the EV ecosystem, such as EV producing OEMs, parts and component suppliers, fleet operators, large corporations or new players venturing into EV, investors and more.
All players have different agendas and objectives, hence a "one-size fits-all" approach will not work.
Three strategic roles that EV could play for the private sector are:
• An enabler to achieve environmental, social and governance goals: In Southeast Asia, large corporations such as Ayala Corporation in the Philippines have announced net zero greenhouse gas emissions by 2050. EV will be a key lever to achieve climate action targets.
• EV as opportunistic investment: Tens of billions of funds went or is going into EV sectors. EV players and OEMs such as Tesla and Nio have attracted capital market attention and enjoy higher valuation than traditional companies.
Investment along the EV value chain presents opportunities for investors to diversify investment portfolios and optimise returns/ risks.
• EV as a new growth engine: An example is PTT in Thailand, which has invested aggressively and formed partnerships with global and local players in battery, EV car production and mobility services.
2) Adopt "ecosystem" mindset and approach
Three building blocks are essential for EV to work in the nascent market environment. These are: demand creator, supply securer and enabling infrastructure.
• Demand creator: Sources of generating necessary uptake volume and demand to justify business feasibility. These could be in the form of internal captive demands (e.g. government eBus programme, own corporate fleet), domestic and regional Southeast Asia demands and potential exports.
• Supply securer: Sufficient demands created to attract and secure supply or investment in production, sales & distribution, and aftersales services. This supply could be in the form of parts and components (e.g. battery), EVs and other service providers.
• Enabling infrastructure: Charging facilities and other financing means essential to alleviate EV adoption concerns.
3) Leverage collaboration and partnership to boost EV market
Partnership or strategic alliance has become a common and important go-to-market approach to grow the market for mutual benefits.
In the battery sector, LG chemical formed a strategic partnership with Hyundai to build an EV battery cell plant in Indonesia with an annual capacity of 10GWh, to meet the demands of 150,000 electric vehicles.
In the EV production segment, Toyota partnered with Chinese EV OEM, BYD, to develop and produce an all-electric small and affordable sedan in China.
New players such as Foxconn are establishing a JV with PTT to produce EVs in Thailand, leveraging its MIH platform. Such partnerships could shorten the product development lead time, as well as lower product development cost.
This partnership approach will help accelerate the forming of EV ecosystems in the nascent Southeast Asia market.