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Southeast Asia Hopes to Become the Next EV Hub
TECHNOLOGY Beyond

Southeast Asia Hopes to Become the Next EV Hub

Many nations are looking to electric vehicles (EVs) as a means of lowering carbon emissions as they work to meet their climate commitments. A window of opportunity for EV production has opened up due to global attempts to diversify supply chains and the need to adopt green technologies, particularly in Southeast Asia.

By 2025, 20% of all vehicles in the region will be electric, according to the International Renewable Energy Agency, and there is much more room for expansion given the region's population of over 680 million people and growing middle class.

Keterangan Gambar (© Pemilik Gambar)

The nations of Southeast Asia are making noteworthy efforts to position their domestic industries as a crucial component of the EV ecosystem by creating materials that support supply chain resilience and putting in place economic regulations that encourage domestic adoption.

Manufacturing batteries

By 2028, it is anticipated that the Indo-Pacific EV battery market would reach a value of over $90 billion. Southeast Asia presents a compelling alternative for nations like the United States that want to improve their supply chains for cutting-edge technologies and reduce their reliance on China.

Although China presently supplies 50% of the materials used in battery refinement and about 75% of all lithium-ion batteries, Indonesia is ideally positioned to become a hub for battery manufacture as it is home to the greatest nickel, tin, and copper reserves in the world.

Joko "Jokowi" Widodo, the president of Indonesia, recently urged his nation to create a "industry ecosystem for lithium batteries" in order to accomplish this goal. The government forbade the export of nickel ore in 2020 in anticipation of the rising need for batteries.

Indonesia opened its first EV battery manufacturing facility in Central Java in June 2022, complete with upstream and downstream battery production components. LG Energy Solution and Hyundai Motors of South Korea have also just started building an EV battery facility in Indonesia with plans to begin mass-producing battery cells in 2024.

Vietnam is a top destination for the manufacture of batteries due to its extensive nickel reserves. The largest private company in Vietnam, Vinfast, started building a factory to make 100,000 EV batteries per year for sale and use in its cars in December 2021.

Vietnam's capacity as a manufacturing hub will increase with the localization of supply chains, and the country will likely become a more appealing investment target due to Vinfast's reputation.

Producing for Export

The expansion of production for export is another indication that Southeast Asian nations are getting ready to move on to the next phase of EV production. By 2025, Indonesia wants to export 200,000 electric vehicles, or around 20% of all the cars it exports.

In May 2022, Indonesian Investment Minister Bahlil Lahadalia revealed that the country had a contract with Tesla to establish a battery and electric vehicle plant in Central Java.

Vinfast's efforts are representative of Vietnam's emphasis on integrating emerging technology with its production capabilities and its ambition to become a significant participant in the EV industry.

Vinfast is rapidly developing both domestically, where it has an EV production facility with a capacity to produce about 950,000 EVs yearly, and internationally. As part of its strategy to sell its first EVs in the United States this year, it has revealed plans to invest $2 billion to start EV manufacturing in North Carolina and $200 million to build a U.S. headquarters in Los Angeles.

Operationally, this decision makes sense given that the United States is Vietnam's top export market and second-largest trading partner, as well as the second-largest automobile market in the world. Additionally, Vinfast has disclosed plans to increase its sales to at least 50 locations across Europe.

Encouraging Foreign Investment and Domestic Adoption

Financial incentives to draw foreign investment are another weapon in the region's toolbox for becoming a recognized EV hub. Many nations' economic and sustainable development objectives now include increased EV adoption and production. In order to strengthen the nation's competitive advantage, the Thai government has named "Next Generation Automotive" as one of its 10 S-Curve Industries.

The government declared in February 2022 that it will lower import charges for fully constructed EVs by 20 to 40 percent and lower excise taxes on imported EVs from 8 to 2 percent. Incentives, such as a reduction in the income tax from 35 percent to 17 percent, are used in conjunction with these policies to entice competent foreign workers to work in the targeted industries.

Similar incentives have been put in place in Singapore to promote domestic adoption. The percentage of EV registrations increased from 0.2 percent in 2020 to 4.4 percent in 2021 as a result of the Transport Ministry's 2021 rebate distribution of roughly $31 million.

To satisfy anticipated demand, the Land Transport Authority has set a goal of establishing 60,000 charging sites around the island by 2030. According to Cambodia's Long-Term Strategy for Carbon Neutrality, by the year 2050, 40% of cars and 70% of motorcycles will be electric vehicles.

Additionally, in 2021, the government cut import taxes on EVs so that they would be roughly 50% lower than those on conventional automobiles. Following suit, Malaysia and the Philippines have implemented laws exempting EV makers from income taxes for four to seven years in the Philippines and exempting EV owners from paying road tax in Malaysia.

Source: CSIS.org

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