Four of the largest two-wheeler markets in the world are Vietnam, Indonesia, Thailand, and Malaysia. The region is home to over 200 million two-wheelers, the same as all of India. Their popularity creates a potential USD 15 billion market that two-wheeler EVs can target, ensuring many investors’ eyes are on the EV market in Southeast Asia.
One of the most promising areas of sustainability tech in Southeast Asia is this EV potential, with the two-wheeler at the forefront of interest. Let’s take a closer look at how this sector is evolving.
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Rising demand for two-wheeler EVs
As of 2022, EVs accounted for less than 1% of the new two-wheelers sold in the region. However, estimations show this figure will proliferate in the coming years. Government initiatives and subsidies, improving infrastructure, making it easier to own an EV, and changing consumer preferences will likely drive this shift.
Numerous EV stakeholders have emerged in the region over the past decade. The primary focus of these companies is manufacturing the battery, which is the most critical component of an electric vehicle. One of the essential resources required to manufacture such batteries is nickel. Indonesia has vast untapped reserves of nickel, making it a significant exporter.
Many currently view electric vehicles as a novelty and style statement in Southeast Asia. The practical value of owning one lags behind traditional two-wheelers due to unfriendly infrastructure and higher costs. Additionally, they are more prone to malfunction since the technology is still relatively new. However, these challenges may prove to be short-lived.
While Southeast Asian governments already provide subsidies to incentivise EV adoption, long-term growth will likely occur as costs reduce thanks to economies of scale and technological innovation.
A preference for two-wheelers
Two-wheeler EVs will likely gain precedence over their four-wheeler counterparts in the region as there is an existing preference for motorbikes. This preference is primarily due to two-wheelers being a significantly more cost-effective, eco-friendly travel solution than four-wheelers. They are also highly convenient to use and maintain and can be parked easily without requiring garage space.
In some countries, consumers increasingly use ride-sharing apps to book on-demand two-wheeler rides. Depending on the user’s preferences, these can be either traditional or electric. The move towards EV bikes on-demand is driven by higher convenience and a desire to contribute to sustainability efforts. The adoption of this mode of transport can lead to more liveable and breathable urban areas with reduced traffic congestion.
Government action and sustainability initiatives
Southeast Asian governments have realised the benefits of early EV adoption. They view the electric vehicle industry as a sunrise sector and see that it represents a significant opportunity for economic growth and how early investments can help companies from the region play a part in the global market.
With Indonesia rich in nickel, its government is already taking steps to make the most of this opportunity and position itself as a nickel exporter and a key battery manufacturer.
There are several diverse ways in which governments are helping along the development of their respective local EV industries. For example, Thailand has moved towards providing incentives beyond scaling production. It has significantly reduced income taxes for skilled professionals working in the space from 35% to 17%.
Similarly, Malaysia has provided complete exemption from paying road tax to owners of electric vehicles. Parallelly, the Philippines offers a total exemption from income tax to electric vehicle production companies for a designated period.
Challenges facing the EV market in Southeast Asia
The way forward for the sector is challenging. The companies that manage to ride the storm can expect a significant upside, not just domestically but also as global exporters. Currently, most brands operating in the space are creating proprietary charging hardware to maintain a walled garden to stave off competition. However, the lack of a standard charging protocol hinders the industry’s overall growth since electric vehicle users cannot use chargers from other brands, making the overall experience more expensive and inconvenient. Governments will likely have to step in and demand a standard charging protocol similar to other electronic technology.
Further, since most players in the EV industry are pretty new, they lack the dealership and servicing networks that traditional automobile brands have built over decades. The immediate challenge is for brands to create partnerships so consumers can purchase their vehicles and conveniently maintain them throughout their lifecycles.
Overall, the two-wheeler EV market in Southeast Asia looks poised for explosive growth. The development of better batteries that can travel longer distances without charging, upgrading the required infrastructure, and cost reductions are occurring, all of which should help bolster the sector.
As sustainability tech in Southeast Asia develops, consumers will likely flock towards electric vehicles and the better urban environment that goes hand-in-hand with these more eco-friendly modes of transport.