With an increasing focus on reducing climate risks and meeting the Paris Agreement goals by 2050, countries throughout the world are recognising the necessity of decarbonising the transportation sector, which accounted for one-fourth of global greenhouse gas (GHG) emissions in 2019. The most efficient way of reducing sector emissions is by direct electrification of transportation via the deployment of electric vehicles (EVs) and the use of green electrolytes. The spread of Covid-19 has drastically affected working and commuting habits, presenting the ASEAN government with an opportunity to change the course of how land transport systems develop in their cities.

One of the major advances in transportation has been the development of EVs in the region, with significant capital being devoted to the rapid commercialisation of this mode of transportation and the value chain that supports it. Other alternative technologies such as hydrogen will also contribute towards decarbonising the sector. The report by KPMG called “Decarbonisation of Transport: The Journey of Electric Vehicles in ASEAN” evaluates the present state of EVs in ASEAN markets and makes recommendations for developing an effective decarbonised land transport industry. Excerpts ….

Emergence of the ASEAN EV market 

Electrification of transportation, or e-mobility, is gaining increased interest in ASEAN countries. In the context of transformation in the transportation industry and the push towards decarbonisation, electrification is a game changer. The movement is being driven by the strong will of all stakeholders — the government, corporates (including commercial fleet owners) and consumers — who, as part of their own personal carbon journeys, are increasingly skewing towards EVs. As a result, the region has developed a favourably evolving policy environment to provide the right push to the EV market and attract foreign players. However, China remains a critical part of ASEAN’s EV dreams. The country has a free trade agreement (FTA) with ASEAN countries that makes EV imports from China tax free. This adversely impacts local and other foreign EV makers in ASEAN, such as those from Japan, who have to pay 20 per cent import duty under their FTA with Thailand.

Growing strength of battery manufacturing 

The region has not only become a hot zone for EVs, but also for battery manufacturing. The growing appetite for EVs and learnings from China have encouraged the member states to invest in battery manufacturing capabilities.

  • Thailand is taking a lead in battery market in the region, with Honda, SAIC, Mercedes and Toyota operating manufacturing plants in the country. The Thai Board of Investment introduced a slew of incentives to account for key components of the supply chain. It includes approving 10 battery manufacturing projects with an annual capacity of 0.5 million units and two charging station manufacturing projects that will produce more than 4,400 outlets each year.
  • Indonesia has plans to build battery plants by 2023 to support EV development. The country is endowed with abundant nickel reserves, the main component of EVs, giving it the confidence to venture into the battery manufacturing space. The Indonesian government is looking to set up a state-owned battery holding company to claim its share in global market. The entity will be founded by Mind Id, PLN and Pertamina and is likely to establish an end-to-end EV battery supply chain and manufacture 8 to 10 GWh worth of batteries annually in next four years. The country is also seeking support from multinational vehicle manufacturers to develop its battery supply chain. It is primarily focusing on lithium-cobalt-nickel-aluminum and nickelcobalt-manganese battery blends, two of the most known EV lithium-ion batteries, indicating the country’s ambitions to become a global battery major.
  • The Philippines aims to emerge as a key node in the global EV battery landscape. The Electric Vehicle Association of the Philippines (EVAP), with assistance from the Department of Trade and Industry (DTI), joined forces with the Power Battery Application Committee of China Industrial Association of Power Sources (CIAPSPBA) to foster EV battery technology development and manufacturing. CIAPS-PBA has also partnered with the Philippine Nickel Industry Association (PNIA) to help broaden the role of the Philippines’ nickel industry in the global battery supply chain.

Charging infrastructure investment in ASEAN and China 

Though most ASEAN countries are adopting EVs, the strength of the market’s future growth, to a large extent, depends on establishing adequate charging infrastructure — which is currently a challenge in many parts of the region. However, the region can take a cue from China — a clear leader in the EV market, thanks to the advantage of scale it holds and establishment of a value chain of manufacturers that rely on the growth of the industry. At about 1.2 million in 2019, China has the highest number of charging stations and aims to add another 600,000 more stations. To achieve this target, the country provided an infrastructure stimulus package of USD1.4 billion in 2020, which will be solely used for building EV charging infrastructure.

  • Since 2014, the Chinese government (both state and local) has been offering various incentives and introduced national charging infrastructure programs and policies for facility planning, construction and operation, land acquisition, power access and electricity prices, and others.
  • The government encourages the development of charging stations by setting targets and mandate standards. For instance, in 2015, the state council released guidance on expediting the construction of EV charging infrastructure under which it has not only laid down set targets but also called for public private partnerships to develop charging infrastructure.
  • Shenzhen provides subsidies of up to USD3,092.3 (RMB20,000) to buyers for vehicle insurance and charging equipment installation.9
  • In 2017, the Beijing municipal government mandated that all parking areas in new residential buildings should leave space for EV chargers and new government/state-owned enterprise buildings were asked to install chargers at 25 percent of parking spots.

EV policy in ASEAN states 

ASEAN countries have begun to wake up to the opportunity in the EV space. While the journey in the region has been slow, it cannot be called dull. The region appears promising in pockets, with Singapore, Thailand, Indonesia and the Philippines showing momentum. ASEAN member states have introduced regulatory changes as well as tax benefits and subsidies for consumers and manufacturers to propel sector growth. The following table provides an overview of key policy changes across some of the ASEAN states:

The full report by KPMG can be accessed by clicking here