ASEAN Electric Vehicle Market Tipped to Take Off from 2025

Growth of ASEAN’s electric vehicle market is likely to be led by taxis and commercial fleets — or even two-wheeled vehicles — rather than passenger cars, according to a new Bain & Company report, Finding a New Route to Southeast Asia’s Electric Vehicle Future.

Bain estimates that Asean’s annual new investment in passenger electric vehicles will reach US$6 billion by 2030. Growth in electric mobility brings other opportunities, with another US$500 million in new charging infrastructure possibly required in the region, and “billions” likely to be invested in related areas such as telematics, fleet management, and passenger services.

But with various obstacles to widespread consumer adoption, progress will be slow-going in the next few years, with Bain expecting the region’s electric vehicle growth to take off only after 2025.

Supply. Global manufacturers are ramping up supply, but are likely to favour their home markets in China, Europe, and the United States, instead of looking to Asean.

Consumer economics. Limited supply means higher prices, a problem intensified by policies in Indonesia, Malaysia, and other markets that discourage imports in favour of local production. The price question is expected to prevent widespread sales in most Asean markets before the mid-2020s. The good news is that battery costs will fall some 40 per cent from 2018 to 2025, according to Bain’s analysis, allowing for parity between battery-powered electric vehicles and conventional ones.

Government incentives. In other markets, price barriers were overcome by early government support for electric vehicles, from direct tax credits in Norway and the US to preferential licences in China. In Asean, government incentives have been limited, with authorities more focused on mass transit and last-mile solutions.

Charging infrastructure. With low adoption, it is hard to make charging stations profitable; yet without sufficient infrastructure to support consumers, adoption will stay low.

To best capitalise on Asean’s electric mobility wave, incumbents, challengers, and investors should “rigorously watch for the major signposts of imminent disruption– for example, major logistics or taxi companies scaling up a pilot effort or wider adoption of electric public transport”, said Bain.

Players can explore different models of participating in the market, from partnering local fleet operators to investing in fleet management software, charging infrastructure, telematics or passenger services.

The report identifies several potential ways forward for the industry:

Commercial fleets. Fleet owners can develop their own charging infrastructure. There is also a stronger economic case for switching to electric vehicles for higher-intensity operations with light vehicles or trucks, especially in markets where fuel costs are relatively high.

Two-wheeled vehicles. Motorcycles and scooters may not consumer much fuel on a per-kilometre basis, but “do represent a source of considerable air pollution and congestion in most Asean cities”, said the report. Incentives for electric two-wheelers would help the neediest segment of society, make it easier to scale back fuel subsidies, and encourage local manufacturing. Indonesia and Vietnam are already considering options to promote electric scooters and bikes.

Disruption through new models. Another, “more uncertain” path would be the introduction of new vehicle models: smaller, lower-cost electric cars designed for use in cities, instead of the traditional “high range, high performance” luxury model.