New energy vehicles: a new outlet for the Southeast Asian economy
The automobile industry has the characteristics of a long industrial chain and a large scale of output value, and is a typical pillar industry. Southeast Asian countries are taking new energy vehicles as an important breakthrough in energy transformation and even economic transformation.
A latecomer in the new energy vehicle market
With the increasing uncertainty of the global economy, new energy vehicles have continued their rapid growth. In 2021, the total sales of new energy vehicles in the world will reach nearly 6.6 million, setting a new record again; in the first half of 2022, it will exceed 4.22 million, a year-on-year increase of 66.38%, and the market penetration rate will continue to increase. In general, the new energy vehicle market presents a “bipolar pattern” between China and Europe. Among the TOP20 global new energy brand sales rankings in 2021, there are eight Chinese brands, seven European brands, two American brands, two Korean brands, and one Japanese brand. The production capacity of the American brand Tesla is highly dependent on Gigafactory in Shanghai. With the further development of the new energy vehicle market, the future structure of the global automotive industry may undergo structural adjustments. This provides an opportunity for emerging market countries such as Southeast Asia to change their own development models and catch up.
In 2021, the sales of electric vehicles in Southeast Asia will only be about 500 million US dollars, but large economies in the region such as Indonesia, Thailand, and Malaysia have accelerated their entry into the “track” of new energy vehicles. This is related to the challenges faced by Southeast Asian countries in the fields of economy, society and environment. On the economic level, except for Malaysia and Brunei, Southeast Asian countries generally rely on imported crude oil. The current shortage of crude oil in Southeast Asia is as high as 40%. Cars alone consume 114 million tons of crude oil every year. As the number of cars in Southeast Asia increases, the region’s dependence on foreign crude oil will continue to rise. A large amount of energy import has become a major burden and unstable factor for the country’s economic development. Since the end of 2021, international crude oil prices have soared, and Southeast Asian countries generally face greater pressure from imported inflation. At the social level, Southeast Asian countries generally face severe pressure on environmental protection. The Asian Development Bank estimates that Southeast Asia will suffer more severe losses than other regions due to climate change, which may reduce the region’s gross domestic product (GDP) by 11% by the end of this century. Therefore, accelerating the adjustment of energy consumption structure and the transformation of economic development model is not only an economic issue but also a national security issue for Southeast Asian countries. However, Southeast Asia “just happens” to have abundant renewable energy sources such as wind energy, water energy, solar energy, and bioenergy, which have yet to be developed, which provides favorable conditions for Southeast Asian countries to implement energy and economic transformation. ASEAN has approved a plan to increase the share of renewable energy in energy consumption from 10% in 2015 to 23% by 2025; at the same time, countries have also made corresponding emission reduction commitments according to their own conditions. In order to achieve the above commitments to combat climate change, the governments of Southeast Asian countries have introduced a wide range of incentives to promote electric vehicles and actively attract investment in the assembly and parts manufacturing of electric vehicles.
Southeast Asian countries have generally chosen the technological development route of electric vehicles because compared with other types of new energy vehicles, electric vehicles have advantages such as mature technology and zero emissions. Moreover, electric vehicles have become the mainstream models of new energy vehicles. A report pointed out that by 2040, electric vehicles will account for 54% of global new car sales and 1/3 of car ownership, which is a market with huge potential. The choice of Southeast Asian countries to develop the electric vehicle industry will help them obtain technical and capital support based on a relatively mature international division of labor system, and shorten the profit cycle of the new energy vehicle industry. This is also more suitable for the relatively small domestic market and limited technical reserves. Therefore, vigorously developing new energy vehicles is a part of Southeast Asian countries’ promotion of the country’s overall economic transformation based on resource endowment and the actual needs of social development.
Multiple Development Paths
The automobile industry in Southeast Asia is mainly concentrated in Indonesia, Thailand, and Malaysia. All three countries have shown great initiative in entering the new energy vehicle market. However, the natural resources and national development strategies of the three countries are different, and there are also certain differences in the development path of new energy vehicles.
In August 2019, Indonesian President Joko Widodo signed Presidential Decree No. 55 and Government Decree No. 73 and No. 74 to encourage the cultivation of the local electric vehicle industry. Subsequently, the Indonesian government introduced a series of supporting policies, such as reducing import tariffs on electric vehicles and related technologies and raw materials, lowering the value-added tax of the electric vehicle industry, providing subsidies for electric vehicle purchases, and providing free parking spaces for electric vehicles. In July 2021, the Indonesian government released the country’s electric vehicle production roadmap, planning to produce 400,000 electric vehicles in 2025, 600,000 in 2030, and 1 million in 2035. Indonesia also requires electric vehicle manufacturers to gradually increase the localization of parts and components. In 2030, the localization rate of parts and components must reach at least 80% in order to receive subsidies. Indonesia has the confidence to vigorously promote the electric vehicle industry and strive for localization. Nickel is an important raw material for new energy batteries. Indonesia’s nickel ore reserves are about 21 million tons, accounting for 24% of global reserves, ranking first in the world. Indonesia is trying to rely on its rich mineral resources and attract international capital into its new energy vehicle industry to establish a full industrial chain from mining to electric vehicle production. In 2022, Volkswagen Group (China), Ningde Times, and LG Energy have entered Indonesia’s nickel mining and battery production links. In March and August 2022, auto companies such as Hyundai and Wuling have started production of electric vehicles in Indonesia. Toyota, Honda, and Mitsubishi have also expressed plans to produce new energy vehicles in Indonesia.
Thailand is trying to become an important part of the emerging global electric vehicle industry chain, which is a continuation of the development model of Thailand’s fuel vehicle industry. Surapong, vice chairman of the Federation of Thai Industries and spokesman for the Auto Industry Group, said that it is estimated that in 2022, Thailand’s auto production will exceed 1.8 million vehicles, and about 1 million vehicles will be exported, accounting for 55.56% of the total production. Since 2015, the Thai government has begun to pay attention to electric vehicle technology, and has successively introduced and improved a number of measures including corporate income tax and consumption tax reduction and exemption, and is committed to building the country into a Southeast Asian electric vehicle manufacturing center and export base. Thailand plans to achieve the goal of producing electric vehicles by 2024. However, with the entry of Chinese companies such as Shanghai Automotive Group, Great Wall Motors, and BYD into the Thai market, Thai Prime Minister Prayut Chan-o-cha said that the goal will be realized by July 2023.
Malaysia’s automobile industry has the nature of “import substitution” since its establishment. In the early 1980s, Malaysia began to try to establish a national auto brand. Until the establishment of VinFast, a Vietnamese domestic car, in 2017, Malaysia was the only country in Southeast Asia that had a completely independent domestic car brand. But this affects its industrial development path in the field of electric vehicles. Unlike Indonesia and Thailand, which take the international route, Malaysia still adopts the development model of “national brand” in the field of new energy vehicles. The Malaysian government is trying to integrate existing domestic industrial resources to establish an electric vehicle industry ecosystem that includes production and service. In July 2022, Malaysian Prime Minister Sabri Sabri suggested that Perodua, National Energy (TNB) and National Telecommunications Corporation should cooperate to explore the provision of affordable electric vehicles, charging fees and network data packages for the people. However, although a sound industrial ecology can boost the popularization of electric vehicles in Malaysia, it may also cause the relative closure of the Malaysian electric vehicle market.
An important partner of China’s new energy vehicles
Southeast Asia is becoming an important target market for Chinese new energy car companies. In the first half of 2022 alone, China will export 53,800 new energy passenger vehicles to Southeast Asia, accounting for 16% of total exports. In addition to vigorously exporting various models to Southeast Asia, China’s new energy automobile companies also take advantage of the favorable opportunity for Southeast Asian countries to support the new energy automobile industry to form an investment layout that focuses on Thailand and radiates surrounding areas. Nezha, Great Wall, and BYD have all entered Thailand, where they have carried out strategic layouts in terms of sales, charging facilities construction, and factory opening. China has a complete set of technologies from battery design to automobile production in the field of electric vehicles. For Southeast Asian countries such as Thailand, the introduction of Chinese companies can form productivity in the shortest possible time and accelerate their own economic transformation. In short, the cooperation between China and Southeast Asian countries in the field of new energy vehicles has formed a win-win situation.
Southeast Asia is becoming an important target market for Chinese new energy car companies. The picture shows a new energy vehicle in the exhibition hall of an auto brand at the 12th China-ASEAN (Liuzhou) Automobile Industry Expo on November 3, 2022.
Traditional auto giants such as Toyota, Hyundai, Mercedes-Benz, and Volvo have entered the Southeast Asian electric vehicle market one after another. Among them, Japanese cars may show a trend of accelerated development. In the era of fuel vehicles, the share of Japanese cars in Southeast Asia exceeds 80%, and the share of major Southeast Asian car markets such as Indonesia and Thailand is as high as 90%.
In the Southeast Asian market, Japanese cars are still superior to Chinese companies in terms of brand awareness and service network perfection. Therefore, in the context of the continuous “crowding” of the electric vehicle market in Southeast Asia, Chinese companies can try to open up a “new track” to reduce market risks, and hydrogen energy vehicles may become a new cooperation hotspot between China and Southeast Asia. Compared with electric vehicles, hydrogen energy vehicles are better able to adapt to the needs of long battery life, high temperature, and high cold environments. Heavy trucks with large load, long battery life, and high efficiency requirements may become a breakthrough in the commercial application of hydrogen energy vehicles, thereby competing with electric vehicles in passenger vehicles. The dominant positions in the automotive field complement each other. Most importantly, the hydrogen energy storage system has the advantages of high economic benefits and good environmental compatibility. This is of great significance for realizing the commercial operation of renewable energy storage and providing cleaner electric energy for electric vehicles. Therefore, the development of the hydrogen energy vehicle industry will not “squeeze” the electric vehicle industry, but the two can form complementary advantages in application scenarios and other aspects.
In August 2021, the ASEAN Energy Center released the report “ASEAN Hydrogen Energy-Economic Prospects, Development and Application”, considering hydrogen energy as one of the supply options for green energy. On March 23, 2022, China’s National Development and Reform Commission and the National Energy Administration jointly researched and formulated China’s first medium- and long-term plan for the hydrogen energy industry, “Mid- and Long-term Plan for Hydrogen Energy Industry Development (2021-2035)”. Therefore, whether it is from the perspective of broadening the cooperation between China and Southeast Asia in the field of new energy vehicles, or from the perspective of deepening the overall docking of the two parties in the renewable energy industry, China should encourage qualified companies to accelerate their entry into Southeast Asia and promote the two sides in the field of renewable energy. In-depth cooperation in the field of hydrogen energy vehicle industry.
