Southeast Asia Emerges as a Key Electric Vehicle and Battery Manufacturing Hub as Europe & US Reduce Reliance on China
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As the global automotive industry moves towards electrification to achieve zero-emissions by 2050, the increasing demand for electric vehicles (EVs) and batteries is primarily fulfilled by China, which accounts for over 70% of global EV assembly, battery manufacturing and refining of key materials and minerals. Fueled by a global supply chain crunch following COVID-19 lockdowns and Russia’s war on Ukraine, major EV markets such as the US and Europe are looking to reduce their reliance on China and diversify into different markets that provide greater reliability and stability. As such, Southeast Asia has emerged to become a key alternative manufacturing hub for EVs and EV batteries, leveraging its overall manufacturing potential as well as its rich nickel reserves, particularly in Indonesia.
Currently, Southeast Asian LDV sales make up about 3% of global sales, with its 2-wheeler sales further accounting for about 25% of the global 2-wheeler market. Two-wheelers are the primary mode of transportation in most countries in the region, largely due to the lack of developed public transportation systems and their low cost of ownership. The largest market for 2-wheelers other than China is Vietnam, followed by Taiwan, Indonesia, Thailand, and Malaysia, with 2-wheelers estimated to represent about 80% of the total vehicle fleet in the region in 2022.
Southeast Asia is an important manufacturing hub for vehicles. The region is the seventh-largest automotive manufacturing hub globally, producing 3.7 million vehicles in 2022. Thailand has the largest car production capacity in the region followed by Indonesia, Malaysia, and Vietnam. These countries are leveraging policies, tax incentives and purchase subsidies to attract foreign investments into domestic EV and battery manufacturing and to encourage domestic EV uptake.
As EV adoption grows in Southeast Asia, annual regional electric LDV sales are expected to triple in 2030. With regional EV production growing at a CAGR of 11% over the same period, accounting for almost four times the volume of local demand by that time. Similarly, annual regional electric 2-wheelers demand is expected to grow at a CAGR of 14%, while supply grows exponentially to roughly twice the level of demand.
With a robust manufacturing base and government incentives, Thailand and Malaysia are well positioned to become key EV hubs in Southeast Asia. In terms of battery production, the region offers the automotive industry diversification opportunities in a highly concentrated market, with Indonesian nickel projects potentially spurring further investment in domestic battery cell manufacturing in the medium term.
- Electric LDV sales in Southeast Asia will remain significantly smaller in volume than electric 2-wheeler sales, though new registrations of electric LDVs are projected to triple by 2030
- Thanks to its large nickel reserves, Indonesia is expected to increasingly pull significant investment in domestic HPAL facilities to produce intermediate products for battery-grade nickel sulfate supply
- Regional supply is projected to grow ten-fold by 2030, growing at a much faster pace than regional demand. This provides an opportunity for global exports, although more investment is needed to compete against major EV and battery powerhouses inside and outside of China.
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