Destination EV. Spotlight on Asia’s growing electric vehicle market and what it means for fossil fuels
On the road to recovery, it’s best to drive. Drive electric to be precise: a booming EV market is expected to account for almost half of all global vehicle sales by 2030.
At the centre of this growing demand is Southeast Asia, where consumer enthusiasm is amongst the highest in the world. In this same period, the region’s annual investment in electric vehicles will grow up US $6 billion.
Asian Downstream Insights explores how the EV evolution will drive Southeast Asia’s rise as a global technology and energy hub, the challenges in going electric post-pandemic, and the impact of electric vehicles on the fate of fossil fuels.
New business verticals, new opportunities
The growing interest in EV coincides with ominous predictions about the future of oil and gas. The International Monetary Fund predicts global oil demand could peak as early as 2030.
But for future-savvy operators, EV’s move towards mainstream could also represent a bolster for business during hard times. As consumers and stakeholders become more alert to organisations’ environmental impact, diversifying into alternative fuel sources is an opportunity for operators to show commitment to sustainability goals.
New business verticals also means potential new revenue streams, and with a forecasted market value of $US 162.34 billion by 2027, electric vehicles present a lucrative opportunity for traditional fossil fuel operators to support their existing business models. Many major downstream operators, including BP, Chevron Phillips, and ExxonMobil are exploring ventures in the EV space. In 2019, Shell announced the rollout of their EV charging service – Shell Recharge – over 10 stations across Singapore: a first for the company, and the region. And just this February they continued the electric energy push with their plan to roll out 500,000 EV charging stations within the next four years.
Headlights on Southeast Asia
The fast-growing city infrastructure and increasingly urbanite culture in many Southeast Asian countries lends itself to car consumption. Vehicle ownership is predicted to grow by over 40% by 2040.
Southeast Asian vehicle sales are set to outpace all other regions in the world, with consumers across the Philippines, Thailand and Indonesia being the most enthusiastic about the future of electric vehicles, with a third saying they were open to the idea of buying an electric car.
What’s more, they are willing to invest in a more sustainable means of transport: customers are willing to pay up to 50% more for an electric vehicle than a similar conventional car.
In different countries, different initiatives are taking place. Last month, Hyundai chose Singapore as the base for their US $400 million EV manufacturing facility, which, after its completion in 2022, will have the manufacturing capacity of up to 30,000 electric vehicles a year. It’s not just the private sector that’s making sustainable investment. The Monetary Authority of Singapore has announced an investment of US$ 2 billion in green funds, which, among other positive climate actions, would help accelerate the deployment of low emissions electric vehicles in Singapore.
The Thai government’s 2016 EV action plan holds an ambitious target of 1.2 million electric vehicles in use by 2036, a goal they’re making more attainable through the grant of preferential tax treatment for EV’s to 13 select firms. Last year, the kingdom introduced an EV roadmap, which aims to produce 250,000 EV’s and cement Thailand’s place as an ASEAN EV hub by 2025. Spurred on by the national ‘Electric Vehicle Promotion Plan for Thailand’, registered hybrid passenger cars in Thailand jumped to 102,308 from a 2014 total of 60,000.
Not to be outdone, Indonesia also aims to establish itself as a rising EV star in the region. The government have provided local tax incentives which may include the production and development of electric vehicles and plug-in electric vehicles. Off the back of this pledge, Toyota announced last year their plans to produce HEV’s and develop PHEV’s in Indonesia and Hyundai has also announced plans to complete the first phase of a vehicle manufacturing plant in Indonesia by the end of 2021. Rich in cobalt, zinc and manganese, EV batteries’ raw materials, the country’s natural ecosystem is well-positioned to give it a head start in the EV race.
Brunei, ASEAN’s smallest nation, is also making big moves towards EV. The recent Brunei Darussalam National Climate Change Policy pledges commitment towards low emissions transportation policies, and aligns with President of the Brunei Darussalam Auto Traders Association Teng Chee Kiong’s prediction that “By 2035, 60% of cars in this country will be EVs”
“We are not too late in introducing EVs to this country” he affirmed this January. “We are still quite okay, compared to other ASEAN member countries.”
Redefining our relationship with transport
The path to EV is not all smooth driving. Some Southeast Asian nations such as Singapore and Thailand will need to balance EV promotion with their prioritisation of public transport. On the global landscape, some Southeast Asian economies may find it hard to compete with the EV implementation subsidies in Europe, China and the USA. The pandemic saw demand for vehicles plummet, including EV’s.
But it also brought new opportunities. Long-term EV sales are estimated to be more resilient than conventional vehicles, with Bloomberg New Energy Finance predicting they are set to make up 58% of worldwide passenger car sales and 31% of all global cars by 2040. Lockdown and its empty roads has accustomed city-dwellers to a new standard of air quality and invoked an awareness for long-term sustainability.
EV development is more than just a way for Southeast Asian countries to establish themselves as energy leaders both as – and within – the region, or a platform to adopt further innovations to capitalise on other local sustainable resources, such as biofuels. It is a fundamental vehicle to recharge, and redirect operators’ relationship with energy, with fossil fuels, and with business, in the generation to come.