Electric vehicle (EV) sales expected to see sharp growth across ASEAN-6 markets: EY-Parthenon study

• EV sales value across ASEAN-6 expected to hit US$80b-US$100b by 2035 from sales volume of 8.5 million units
• Singapore leads in EV market readiness due to high market acceptance, emerging charging network and strong government support
• Vehicle manufacturing, retailing and aftermarket; raw materials and processing; and battery production, assembly and recycling account for bulk of value pool

Motivated by climate concerns, EV adoption and its value chain have seen growing interest from consumers, governments, corporates and investors. While Southeast Asia’s EV market has been rather nascent – accounting for less than 2% of global total sales – an EY-Parthenon study estimates that EV sales across the ASEAN-6 markets of Indonesia, Malaysia, Thailand, Vietnam, Philippines and Singapore will see a sharp growth – at a compound annual growth rate (CAGR) of 16%-39% between 2021 and 2035. The annual potential sales opportunities are expected to hit US$80b-US$100b, up from US$2b in 2021, and sales growth is expected to occur across all three major EV segments of passenger vehicles, commercial vehicles and two- or three-wheeler vehicles. 

The EY-Parthenon study examines the EV value chain to understand the consumer awareness and sentiments as well as infrastructure and government policies across the ASEAN-6 markets to determine the market readiness, opportunities and potential for companies and investors.

Across the ASEAN-6, the key challenges in driving EV adoption are cost, availability of charging infrastructure and EV supply chain readiness. Singapore’s overall EV adoption readiness is the highest due to the growing awareness and market acceptance of EVs, emerging charging network and growing base for EV R&D, as well as strong government support through policies and incentives to enable infrastructure readiness. This is followed by Thailand, Indonesia, Vietnam, Malaysia and the Philippines. 

Ms. Susana Utama, EY-Parthenon Partner, Industrial and Value Creation at Ernst & Young Solutions LLP says:

“While the ASEAN-6 nations had been slow to adopt EVs, societal concerns over climate change are now driving a rapid shift in policies and consumer attitudes toward EVs. Financial incentives to improve the affordability of EVs have been widely adopted across these markets, accompanied by national programs and policies to improve sustainability and decarbonize the transport and energy infrastructures have helped to encourage consumer sentiments and adoption of EVs.

For now, across the ASEAN-6 markets, two- or three-wheeler vehicles are swiftest to electrify as electric cycles, scooters and motorcycles are relatively affordable and less reliant on specialist charging infrastructure. However, as consumers in the region become more affluent, the sales of electric passenger cars will look to grow in dominance.”

According to the study. EV sales volume across the six Southeast Asian markets are expected to hit about 8.5 million units by 2035. Of ASEAN-6, Indonesia is expected to be the largest by volume, with estimated annual sales volume of 4.5 million units and sales value of US$26b-US$30b by 2035. This is followed by Thailand (estimated sales volume of 2.5 million units and sales value of US$35b-US$42b); Vietnam (estimated sales volume of 1 million units and sales value of US$6b-US$9b); Philippines (estimated sales volume of 750,000 units and sales value of US$7b-US$11b).

Vehicle manufacturing, retailing and aftermarket; raw materials and processing; and battery production, assembly and recycling account for bulk of value pool

As well, the expected growth of the region’s EV market looks to present opportunities for incumbents and new entrants looking to expand in Southeast Asia. Such opportunities extend across the end-to-end EV value chain, from raw materials processing to charging infrastructure and software. The six key value pools include:

• Raw materials and processing
• Energy production
• Battery production, assembly and processing
• Vehicle manufacturing, retailing and aftermarket
• Charging infrastructure
• Charging management software.

Of them, the largest opportunity is in vehicle manufacturing, retailing and aftermarket, which is expected to account for 69% of the region’s total EV ecosystem value of US$80b-US$100b by 2035. Raw materials and processing, as well as battery production, assembly and recycling are expected to account for 9% and 11% of the total value respective.

Utama says:

“The ASEAN-6 markets possess strengths and core competencies that span the entire value chain. Nickel and copper – two essential metals in lithium-ion EV batteries – are available in the region in substantial quantities, while incumbent automotive manufacturing capacity and supply chains in Thailand, Indonesia and Vietnam can be leveraged to accelerate EV manufacturing. Foreign investors are looking to tap into EV growth opportunities in ASEAN-6, and vehicle and battery manufacturers can also benefit from a range of trade and production incentives across the region.”

Oliver Redrup, Associate Partner, Strategy and Transactions at EY Corporate Advisors Pte. Ltd. adds:

“Charging infrastructure and charging management software also present an attractive opportunity for investors in the region. They are less capital intensive and have the potential to be highly profitable. Alongside the affordability of EVs, the availability and ease of use of charging stations will be crucial to winning over consumers to the EV cause. A barrier to EV adoption is the lack of charging stations, where market forces alone will not address the issue. Governments in the region recognize this, and as a result, we are seeing incentives to support the building of more chargers in their respective markets.”

Four strategies for EV market players to succeed in ASEAN-6

As the region’s EV market is currently relatively nascent and underexploited, there are good opportunities for industry incumbents as well as smaller and new startups. The EY-Parthenon study highlights four factors that are also critical to players seeking to succeed in the EV value chain in ASEAN-6 should address:

• Sector experience: Companies need to consider existing capabilities, assets and relationships that could give them a leg up in a related, new EV market.
• Scalability: Companies need to leverage financial and nonfinancial resources to launch EV-related products and services, and manage rapid growth.
• Funding: Companies must address this critical factor to overcome high initial acquisition costs and low initial utilization in many parts of the emerging ASEAN-6 value chain.
• Technological advantages: This gives a competition advantage in the EV-related market, such as software or specific battery and EV component manufacturing technologies. 

Utama concludes:

“Compared to the more established EV markets, ASEAN-6 can be a potentially lucrative market with high growth potential. Its many advantages, including significant reserves of key raw materials for battery production, an established capacity for car manufacturing and favorable environment for foreign investors, are attractive to investors. Yet, winning in the region will not be easy. Success requires a strong understanding of the local markets, the value pools available as well as the existing operations within the value chain. Importantly it requires long-term commitment, a well-defined vision and a detailed strategy. But the prize is worth the effort.” 

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