The electric vehicles (EV) industry has grown in popularity in Southeast Asia as the region adopts sustainability and environmentally friendly solutions in its various sectors. According to Statista Research, revenue in the EV technology market will reach USD 1,510 million in 2024 and grow annually by 5.51% to USD 1,871 million in 2028. Moreover, unit car sales are likely to be over 37.24k in 2028.
In the third quarter (Q3) of 2022, Thailand had the most significant market share in EV sales at 59.2%. Indonesia was second at 25.2%, Singapore at 11.8%, Malaysia at 3.1%, Vietnam at 0.7%, and the Philippines at 0.02%.
Will V2X technology be the next big thing in Southeast Asia?
There are many EV startups and established companies in the Association of Southeast Asian Nations (ASEAN) establishing two-wheel, three-wheel, and four-wheel electric vehicles. One Scorpio Electric, which designs eBikes with futuristic designs, connectivity, smart rider technology, and top-notch handling abilities.
Other up-and-coming eVehicle businesses include Vietnamese-based VinFast, which sells EVs, eScooters, and eBuses. Indonesia’s Electrum seeks to boost EV production, scale the company, and innovate renewable energy solutions.
Factors driving the adoption of EV technology in the region
EVs are bringing many benefits to the region. They reduce air pollution by not burning fossil fuels like traditional cars. The industry creates jobs in research and development, while the vehicles provide comfortable and efficient solutions for preventing the creation of greenhouse gases.
Here are several factors driving the adoption of EVs in ASEAN:
- Environmental consciousness: The whole world is now more aware of their impact on the environment. Thus, people are willing to support alternative solutions to the issues of air pollution and greenhouse gases.
- Tech-savvy population: Southeast Asians are very tech-savvy and willing to try out new technologies. EVs represent a view into the future, and many people are keen to try them out for themselves.
- Government subsidies and tax exemptions: Regional governments are competing to subsidise local and foreign car companies to encourage them to settle in their countries. Many automotive firms are getting tax incentives to help build EV factories in the host nation.
Furthermore, governments are also offering tax exemptions to encourage skilled tech workers to relocate there.
- Raw materials available: ASEAN is lucky to have many raw materials suitable for various industries. For EVs, Indonesia has one of the largest Nickel reserves in the region. That means companies can explore the nickel and develop factories to build locally.
- Investor funding: Local and foreign investors are constantly searching for the next big project to invest in. The EV ecosystem is showing its potential for innovation, scalability, and profitability and is receiving funds to enhance its capabilities.
- Increased car company competition: Companies like Tesla and China’s BYD are setting up in Southeast Asia and continuing their battle for EV market supremacy. The region has a cheap manufacturing base, which is ideal for cost-cutting while still producing quality work.
Challenges for EV startups in ASEAN
Even though the electric vehicle industry is on an upward trajectory, the industry faces many challenges:
- Adoption and implementation costs: Industry stakeholders realise that implementing new technologies can involve too many costs. Some raw materials and parts may need to come from countries outside ASEAN. Production costs will also be high due to the poor state of the global economy.
- Accessibility of EV technology: While developing and implementing EV tech is a game changer for the automotive industry, more infrastructure needs to be in place to support EVs. That makes it challenging for startups to scale and consumers to afford the vehicles. Few charging ports are available in Southeast Asia, and fixing them will take a while.
- Ethical considerations: EVs pose a few moral and environmental questions. First, it takes a lot of effort and human resources to mine the minerals—such as cobalt and nickel—needed to build an electric car. Unfortunately, in other situations, reports show that some of the mine sites were using forced child labourers.
Moreover, there is no uniformity in the sourcing of raw materials. Therefore, some questions about durability and product quality may arise.
Environmental health concerns have arisen due to an increase in electronic waste. These older devices and batteries can begin leaking harmful chemicals into the environment, causing poisoning of water supplies and land used for growing food.
- Funding issues: Due to global economic headwinds, investors may be struggling to fund EV startups in the region. Thus, founders must find creative ways of encouraging investors to back the industry.
- Government support and regulations: Investors and companies need a good business environment in which to work. The government must create and set a supportive climate through regulations for people to work and innovate in the EV technology sector.
Overall, electric vehicles are increasingly impacting the car industry in Southeast Asia and will continue to revolutionise the transport and logistics sector.