Keys to Success: Southeast Asia’s Drive to EV Adoption

Authors: Elena Rose, Executive Director, Partnerships for Infrastructure and Oliver Redrup, Associate Partner, Strategy and Transactions — Infrastructure Advisory, EY Singapore

The global automotive industry is rapidly powering towards sustainable mobility, and Southeast Asia is shifting gears to join the switch. Adoption of electric vehicles in the region has gained momentum, and there are exciting opportunities to use this transition to drive more sustainable, inclusive and resilient growth.

The transport sector has an outsized role in generating emissions – it currently generates 20% of emissions globally. The electric vehicle (EV) transition is therefore vital to efforts to tackle climate change, decarbonise economies and meet international climate commitments.

By leveraging manufacturing capabilities, Southeast Asian nations can play a key role in the global EV market. Many Southeast Asian countries are already setting ambitious goals to exploit the potential of EV manufacturing due to the upsurge in domestic and global demand. But what factors determine whether a country is well-placed to successfully transition to EVs and reap the full benefits of this switch? 

As speakers at Future Mobility Asia 2023, we joined panels to discuss the region’s accelerating adoption of EVs – both buses and private vehicles. This blog shares insights from those discussions and the perspective from Partnerships for Infrastructure (P4I).

Embracing Industry 4.0 for EV manufacturing

On one level, becoming an EV manufacturing hub appears straightforward. The basic ingredients are access to inputs, and good processes and skills to transform those inputs into quality, competitive outputs. But that only goes so far, and particularly in today’s world when Industry 4.0 is reshaping the global manufacturing landscape. To become a competitive EV manufacturing hub, countries must navigate and adapt to the very different kinds of supply chains.

The COVID-19 pandemic, recent economic shocks and geo-economic competition have taught us a lesson that holds as true for EVs as other sectors: developing diversified, resilient supply chains will be key to any country’s longer-term success.

Countries need to consider access to relevant raw materials such as lithium, battery production, opportunities to innovate, and how they can best play to their strengths. For instance, Malaysia is setting its sights on manufacturing EV components, and Indonesia is taking steps to become a battery production hub to capitalise on its large deposits of key minerals.

Underpinning innovative processes is, of course, skills. The countries that possess, or are rapidly investing in, the skills needed to play a role in EV manufacturing are more likely to succeed.

The Policy X Factor

The role governments play in enabling this emerging industry’s success cannot be underestimated. Governments have the policy levers to set a clear vision, and incentivise and give confidence to investors. They also establish the standards and parameters to guide the development of the infrastructure that will underpin EV manufacturing and charging (the latter being a key enabler for communities and businesses to ultimately reap the benefits of the EV transition). 

Good policies on vehicle emissions, charging infrastructure, the interface with grids, and safety are critical to guide manufacturers, and to protect consumers and communities. This vital policymaking role is, however, becoming more complex with the accelerating pace of global change – change in technology, in climate impacts and commitments, in supply chains and in market demand.

We are already seeing great momentum in the ASEAN region – in line with ASEAN Leaders’ Declaration on Developing Regional Electric Vehicle Ecosystem (2023). For instance, Thailand has introduced its 30/30 policy where 30% of all new vehicles produced are zero-emission by 2030. And Indonesia is using incentives for EV automakers to spur progress towards exporting 200,000 EVs by 2025 and is committed to selling only electric cars and motorcycles by 2050.

To help get policy settings right, governments should also consult a broad array of domestic stakeholders, and create opportunities to experiment and innovate. And, although policy settings must be tailored to each country’s context and ambitions, governments do have much to learn from one another and many shared interests. 

This is why Australia is partnering with government agencies across the region through P4I and other cooperation mechanisms to build expertise and help develop policy and regulation that will enable EV expansion.

Competition is good, but so too is cooperation

The open, transparent, and agreed rules, standards and norms that underpin global trade have long benefited Southeast Asia’s economic prosperity and growth, including by encouraging economic competition and diversification.

But economic cooperation through ASEAN and with other partners such as Australia is also vital, and has been a key part of the region’s growth story for decades now. 

Australia can play an important role in EV supply chains by leveraging our strengths in areas such as critical minerals, training and education, and clean energy technology and know-how; and is working with Southeast Asian partners to make the most of our economic complementarities and shared interests. 

The International Energy Agency forecasts that demand for minerals to use in EVs and battery storage could grow by at least 40 times by 2040 – Australia has a lot of these minerals, which are mined with the highest environmental social and governance standards.

Australia is also a globally competitive provider of training and education, and is investing even more in programs to develop the skills required to enable EV manufacturing.

Australian companies are leading the charge to develop EV chargers and components. And, through initiatives like P4I, we are working together with partner governments to help assess renewable energy technology options that will enable green manufacturing and accelerate an inclusive energy transition.

Domestic consumption matters

To achieve global net-zero targets, accelerating consumer demand for EVs is crucial. Strong domestic consumption not only reduces a country’s emissions but can also attract investors to help establish EV manufacturing hubs. In 2012, 120,000 EVs were sold globally each year; in 2023, this figure had increased to almost 14 million. 

In April 2023, the Australian Government released its first National Electric Vehicle Strategy. This strategy aims to decarbonise the transport network and achieve net-zero emissions by 2050 by improving EV availability, choice, charging accessibility, and affordability. Australia is also boosting demand through incentives such as EV purchasing subsidies, green car loans, and tax discounts. This growth is exciting for businesses in Australia, and for overseas manufacturers given the opportunities to expand EV exports to Australia. For example, over 60,000 traditional automobiles made in Thailand were sold in Australia last year – this could increasingly become EVs.

P4I, an Australian Government initiative, collaborates with Southeast Asian governments to share Australia's EV expertise, foster partnerships and support the transition. For instance, P4I worked with Thailand’s Ministry of Transport to prepare a roadmap for transitioning its public bus fleets to EVs. This effort reflects Australia's commitment to help decarbonise Southeast Asian economies.

A wider clean energy switch

For the EV transition to succeed, it must be underpinned by a clean energy transition. 

More renewables must be introduced into the electricity generation mix to ensure that the electricity powering EV charging is clean. Increased renewable energy will also help to offset emissions from EV manufacturing, which are still higher than that of internal combustion engine automobiles.

The countries that have the skills and technology in place to innovate on reducing the intensity of EV manufacturing emissions will win twice over – they will accelerate decarbonisation of their transport sector and become increasingly competitive as more markets and consumers insist on lower-road emission products.

Transitioning to EVs is a tangible step that countries can take to decarbonise the global economy, and Southeast Asia’s active participation in this growing market represents a significant opportunity for collaboration, economic growth, and sustainable development. 

With concerted efforts and cooperation, the region’s journey towards electric mobility can usher in a more sustainable, inclusive, and resilient future for all.

Disclaimer
Any views or recommendations included in this publication do not reflect the views of the Australian Government or indicate its commitment to a particular course of action. The Australian Government accepts no responsibility or liability for any damage, loss or expense incurred as a result of the reliance on information contained in this publication.