Southeast Asia hopes to become the next global hub for electric vehicles – The Diplomat

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As countries around the world strive to meet their climate goals, many are turning to electric vehicles (EVs) as a way to reduce carbon emissions. Global efforts to diversify supply chains, combined with the drive to embrace green technologies, have created an opportunity for electric vehicle production that is ripe for the taking, particularly in Southeast Asia. According to the International Renewable Energy Agency, 20% of all vehicles in the region will be electric by 2025, and the potential for growth is even greater given the region’s total population of over 680 million. inhabitants and a growing middle class. Southeast Asian countries are taking notable steps to make their domestic industries a vital part of the electric vehicle ecosystem by developing materials that support supply chain resilience and implementing policies economic to facilitate national adoption.

Battery manufacturing

The electric vehicle battery market in the Indo-Pacific is expected to exceed $90 billion by 2028. As countries like the United States seek to strengthen their supply chains for emerging technologies and avoid depending on China, Southeast Asia offers an interesting alternative. Although nearly 75% of all lithium-ion batteries and 50% of battery refining materials currently come from China, Indonesia is well positioned to become an epicenter of battery production; the largest deposits of nickel, tin and copper in the world are located in the country.

To achieve this goal, Indonesian President Joko “Jokowi” Widodo recently called on the country to build an “industrial ecosystem for lithium batteries”..“In 2020, the government banned nickel ore exports in anticipation of increased demand in the battery supply chain. In June 2022, Indonesia opened its first electric vehicle battery production plant with upstream and downstream components of battery production in Central Java. South Korea’s LG Energy Solution and Hyundai Motors also recently began construction of an electric vehicle battery factory in Indonesia with the hope of starting mass production of battery cells in 2024.

Vietnam’s vast nickel reserves also make it a prime location for battery production. Vinfast, Vietnam’s largest private conglomerate, began construction in December 2021 on a facility to produce 100,000 EV batteries per year for sale and use in its own vehicles. Localizing supply chains will increase Vietnam’s capacity as a manufacturing hub, and Vinfast’s reputation will likely make the country an attractive target for investment.

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Other international companies have also noticed the potential of Southeast Asia. China’s CATL and Taiwan’s Foxconn are both considering investing in Indonesia’s efforts to lead battery production, while Malaysia’s Hong Seng Consolidated Berhad and EoCell signed a memorandum of understanding in June 2022 to develop a regional electric vehicle battery manufacturing center in Malaysia.

Manufacture for export

Another sign that Southeast Asian countries are gearing up to take the next step in electric vehicle manufacturing is that they are ramping up production for export. Indonesia aims to export 200,000 electric vehicles by 2025, which will account for almost 20% of all its car exports. Investment Minister Bahlil Lahadalia confirmed in May 2022 that Indonesia had signed an agreement with Tesla to build a battery and electric vehicle factory in Central Java.

Vinfast also hopes to become a major player in the electric vehicle market, and its operations are emblematic of Vietnam’s emphasis on incorporating emerging technologies into its manufacturing facilities. Vinfast has both its own electric vehicle manufacturing plant in the country with the capacity to build around 950,000 electric vehicles per year, and is also rapidly expanding overseas. It announced plans to invest $2 billion to start electric vehicle manufacturing in North Carolina and $200 million to establish a US headquarters in Los Angeles – as part of its plan to sell its first vehicles electricity in the United States this year. Operationally, the move makes sense, as the United States is the world’s second-largest auto market, Vietnam’s largest export market and second-largest trading partner. Vinfast also recently announced plans to expand sales to at least 50 stores in Europe.

Encourage foreign investment and domestic adoption

Another tool in the region’s arsenal to become an established EV hub is financial incentives to attract foreign investment. Many countries have also made greater adoption and manufacturing of EVs part of their economic and sustainable development goals. In Thailand, the government has identified “Next Generation Automotive” as one of its 10 S-Curve industries to boost the country’s competitive advantage. In February this year, the government announced that it would reduce excise taxes on imported electric vehicles from 8% to 2% and reduce import duties from 20% to 40% for fully-built electric vehicles. These policies come with incentives to attract skilled foreign professionals in targeted industries, including reducing income tax from 35% to 17%.

Singapore has similar incentives in place to encourage domestic adoption. In 2021, the Department of Transportation distributed approximately $31 million in rebates to reduce the initial cost of purchasing an EV, resulting in an increase in the proportion of EV registrations of 0.2% in 2020 to 4.4% in 2021. The Land Transport Authority has set a target of installing 60,000 charging stations on the island by 2030 to meet expected demand. Meanwhile, in Cambodia, the country’s long-term strategy for carbon neutrality pledges that 40% of cars and 70% of motorcycles on the road will be electric vehicles by 2050. Additionally, the government reduced import duties on electric vehicles in 2021 to around 50%. lower than those of traditional vehicles. Malaysia and the Philippines have followed suit, with Malaysia exempting owners of electric vehicles from road tax and the Philippines implementing the Electric Vehicle Industry Development Act which exempts manufacturers of electric vehicles from the income tax for four to seven years.

Electric Vehicles and Energy Security in Southeast Asia

Environmental considerations notwithstanding, efforts by Southeast Asian countries to develop their domestic electric vehicle industries are also impacting the region’s energy security, particularly in the wake of the ongoing conflict between Russia and the United States. ‘Ukraine. The costs of building an EV battery and buying an EV have come down over the years, giving them a competitive edge in the face of soaring gas prices. The sixth edition of the ASEAN Energy Outlook (AEO6), released in 2020, indicated that ASEAN’s total final energy consumption is expected to increase by 146% by 2040, partly due to the increase transport demand. However, the energy demand in the transport sector in a model scenario where the national climate targets of ASEAN member states were met would decrease by 18%, resulting from the promotion of electric vehicles.

The biggest challenge to the growth of the electric vehicle industry in Southeast Asia remains the lack of charging infrastructure and a reliable power grid that does not rely on fossil fuels. However, many countries are taking steps to increase the number of charging stations available. With rising inflation and rising commodity prices threatening political and economic stability in the region, Southeast Asian countries should be encouraged to take steps to improve their energy security. Electric vehicles can help lead the way.

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This article originally appeared in New Perspectives on Asia from the Center for Strategic and International Studies and is reproduced with permission.

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