INDONESIA AND THAILAND REPORT
Competition in the development of EVs is fierce, and the momentum for their introduction is growing in Southeast Asia. While Chinese and Korean manufacturers are aggressively entering the market, Japanese manufacturers, which hold an 80% share of the new car market, have not made any significant moves.
Although the COVID-19 disaster has brought the market to a standstill, Southeast Asia, with a population of 660 million and a rising middle class, will continue to be a promising growth market.
A proactive EV strategy is required to protect the current market dominance. In Indonesia and Thailand, the two largest markets in the region, Japanese cars have a 90% share of the market. However, it is only the Chinese and South Koreans who are providing the buzz about EVs.
In Indonesia, South Korea’s Hyundai Motor Co. will begin producing EVs in March at its completed vehicle plant that recently went into operation. For the time being, it will rely on imports for key components, but it is building a plant for mass production of onboard batteries in collaboration with LG Group, another Korean electronics giant.
In Thailand, China’s SAIC Motor Group and Great Wall Motor have already started selling EVs. The latter plans to start mass production of EVs in 2023 at a plant it acquired from GM in the US. Compared to China and South Korea, which are trying to secure a scale of production with an eye to exports, Japan is generally cautious, with Toyota and Mitsubishi considering local production of EVs in Thailand starting in 2023.
There is a reason for this reticence. In Southeast Asia, thermal power generation using coal and natural gas is the main source of electricity, and the government claims that increasing the number of EVs alone without the support of renewable energy sources will not reduce greenhouse gas emissions. There is also a delay in the development of charging facilities. There seems to be a desire to prioritize the production of EVs in Europe, the U.S. and China, where environmental regulations are stricter and purchasing power is higher, while leaving Southeast Asia as a production base for gasoline and diesel vehicles.
However, the demand for the introduction of EVs by the governments of various countries is not only for environmental measures, but also for the creation of next-generation industries. Chinese car manufacturers have begun to build their own charging facilities in Thailand.
If Japan continues to give reasons why it can’t, it will find itself in an “innovation dilemma” where the winners of existing businesses lag behind in entering new ones, and Japan may see China and South Korea cut into its tiger markets. Japan needs to be more proactive in demonstrating its support for the shift to EVs in Southeast Asia while engaging in dialogue with the governments of other countries.
Source: The Nikkei
PSR Analysis: The views expressed in this article are exactly what I am concerned about. As I have mentioned many times in past PowerTALK™ News articles, there is a risk that the shift to EVs will result in the loss of the presence of Japanese manufacturers in the Southeast Asian mobility market, which has been built up through the great efforts of their predecessors, not only for automobiles but also for motorcycles.
The trust that the Japanese brand enjoys among local citizens today is very strong. This is only because the industry itself, including the maintenance network from dealers to repairers, has been nurtured and a system to respond to users’ problems and concerns has been built locally. The fact that they listened to local demands and reflected them in their products was also significant.
However, Chinese and Korean companies, which have price competitiveness that far surpasses the products of such Japanese manufacturers, are looking for business opportunities by taking advantage of the preferential measures offered by Southeast Asian governments, such as EV subsidies and tax exemptions when attracting investment.
Southeast Asia, where purchasing power was weak and motorization was considered to be a long way off, no longer exists. Especially for EVs, there are abundant resources for battery materials, and the potential for the EV market to grow is high. Demand is particularly strong in urban areas, and if the right product with the right price and quality is introduced to the market at the right time, it will be accepted, even if it is not made in Japan. PSR
Akihiro Komuro is Research Analyst, Far East and Southeast Asia, for Power Systems Research
