Asia’s electric-vehicle market is poised for growth. Those who approach the challenges and opportunities with an ecosystem view can create signs for their business. In Asian countries, consumers are adopting EVs at different paces. Compare with mature markets, such as China and Japan, emerging Asia—particularly India and ASEAN—is lagging. In 2021, EVs made up less than 1% of new-vehicle sales in the region.
Building an EV ecosystem in emerging Asia is imperative for ASEAN countries to accelerate consumer uptake. Building tomorrow’s EV ecosystems means radically building the EV value chain by stimulating supply and demand. This requires greater investment in partnerships, infrastructure, and technology development, accelerated low-cost EV model distribution (with total cost f ownership at or ahead of parity with internal combustion engines), integrated finance, government incentives to encourage EV adoption and discourage ICE, and a supporting green investment framework.
According to McKinsey’s adoption model, mature Asia markets will continue to see strong momentum in adopting electric four-wheelers (E4W). China will become the largest EV market in absolute terms. On its current trajectory, the adoption rate in China will reach 60%, and China will represent more than 40% of total new EV’s sold by 2030. In emerging Asia, the production of E4W will pick up rapidly. Thailand and Indonesia are already major regional automotive production hubs. E4W production will scale rapidly from low levels to a significant 45%. Together, countries within emerging Asia could produce more than two million E4W units annually by 2030.
Emerging Asia markets today represent the largest micro-mobility markets. India, for example, overtook China to become the largest electric two-wheeler (E2W) market in 2017. With the increasing cost-competitiveness of electric models and regulators incentivizing consumer adoption, E2Ws will become a predominant mode of transport in the region.
Source: HIS Market Light Vehicle Powertrain and Alternative Propulsion Forecast Model, McKinsey
Source: McKinsey EVOLVE tool, etc.
Source: Government websites, McKinsey
The Thailand automotive industry has been growing significantly over the past 55 years. It has contributed to 10% of the nation’s GDP, with more than 759K vehicle units sold in 2021. This success has made the country the biggest automotive manufacturer in the Association of Southeast Asian Nations (ASEAN) and the 10th largest car producer in the world. As the Automotive Hub of Asia, Thailand continuously positions itself as the next-generation automotive manufacturer with higher value-added manufacture and environmental protection policy.
On the demand side, in February 2022, the government announced its latest incentive package, including a reduction in port duty for CBU BEVs, an excise tax cut for imported EVs, and an EV subsidy for passenger cars. Until the end of 2022, a subsidy of USD 90.4 million is sanctioned, while a subsidy of USD 1.2 billion is expected until the end of 2025. In addition, the government offers a five-year CIT exemption for EV charging operators that build at least 40 chargers, given that the National EV Policy Committee sent targets for the development of charging stations to support e-mobility and EV infrastructure nationwide. These are indications that EV adoption is also evident from preferential tax treatment.
Source: McKinsey center for Future Mobility, Passenger Car Total Cost of Ownership Model
Electrification is a dominant reality that every major automotive market must encounter. However, each market is unique concerning customer behavior, the seriousness of regulatory push, market incumbents, and supply chain conditions. Such factors play out in the real world, offering fundamental challenges and issues that stakeholders must overcome to achieve that dream of being an EV hub. Thailand is believed to be well-positioned to tackle these challenges and achieve EV commitment, provided it focuses on the identified challenges and develops targeted solutions. These criteria must be fulfilled for Thailand to realize its EV dream and emerge as a global powerhouse in EV, especially in the SEA region and emerging countries.
Article by: Asst. Prof. Suwan Juntiwasarakij, Ph.D., Senior Editor