ASEAN’s EV ecosystem ambitions

Author: Suryo Ariyanto Nugroho, Asia Pacific Foundation of Canada

Electric vehicle (EV) popularity has been surging as countries increasingly incentivise their citizens to transition to EVs to reduce carbon emissions. China leads the way, manufacturing approximately 44 per cent of all EVs between 2010 and 2020 and 77 per cent of lithium-ion batteries in 2022. But the ongoing global supply chain diversification will transform this landscape, presenting a remarkable opportunity for ASEAN.

ASEAN possesses the essentials necessary to establish itself as a thriving hub for EV manufacturing. Indonesia — the largest country in the region — boasts the world’s largest nickel deposits. It is also a major producer of tin and copper which are essential for EV batteries.

Vietnam’s abundant nickel reserves make it an ideal destination for battery production. Leading the charge is Vietnam’s prominent private conglomerate VinFast which is constructing a 14 hectare battery factory. Its annual capacity of 5 gigawatt-hours is equivalent to 30 million battery cells.

Thailand — the largest producer and market for EVs in the region — is offering incentives to establish itself as an EV production base. This strategy will result in lower import duties and make locally produced EVs more affordable.

In 2023, ASEAN leaders issued a declaration aimed at cultivating a regional EV ecosystem, showcasing their political commitment to developing the region’s EV supply chain and positioning it as a global EV manufacturing hub. This initiative enhances the implementation of the ASEAN Economic Community, which is the region’s ambitious economic integration initiative.

The declaration highlights two key strategies — the alignment of regional EV standards to facilitate seamless cross-border trade and interoperability and the nurturing of human capital through training and certification programs. By unifying standards and promoting compatibility, ASEAN aims to streamline trade and create a cohesive EV market that transcends national boundaries. By investing in training and certification, the region aims to cultivate a skilled workforce capable of driving the EV revolution.

The objective of these initiatives is to cultivate a well-connected and fair EV ecosystem in a region presently dominated by Chinese and South Korean battery and EV manufacturers. These initiatives also aim to promote knowledge exchange and enhance workforce skills. This will fortify the region’s reputation and competitive advantage in this rapidly growing industry.

Implementing the declaration will undoubtedly be a challenge. First and foremost, despite ASEAN member states’ immense potential as suppliers of critical minerals, their EV supply chains remain at a nascent stage. While the region boasts a substantial market of 664 million people and a burgeoning middle class, its EV adoption rate lags behind. The barrier is the high cost of owning an EV compared to traditional internal combustion engine vehicles. This renders EVs out of reach for middle- and lower-income individuals. Range anxiety and charging infrastructure scarcity further complicate the shift towards EV.

But the most daunting hurdle lies in the establishment of regional standards for EVs, a pivotal strategic measure in the declaration. Establishing these standards likely involves developing an ASEAN-wide mutual recognition arrangement (MRA). The journey ahead is arduous. The ‘ASEAN Way’ of developing a MRA entails lengthy negotiations among ASEAN member states, as demonstrated by the 14-year marathon of the ASEAN Mutual Recognition Arrangement on Type Approval for Automotive Products. Such a protracted process risks undermining the foundation of the EV ecosystem that ASEAN seeks to cultivate.

Every ASEAN member country should prioritise enhancing their national EV ecosystems. This can be accomplished by employing fiscal incentives, issuing favourable investment policies and rapidly establishing well-planned charging infrastructure. These actions will not only bolster production but also spur domestic demand for EVs. Indonesia, Malaysia, Thailand and Vietnam are actively formulating measures to advance these critical objectives.

To kickstart a regional EV initiative, ASEAN governments can begin collaborating with the private sector to create an idea-sharing platform. This platform would facilitate discussions on a suitable policy framework to nurture the EV ecosystem. This step may not be as grand as developing a MRA, but it offers a practical starting point that can generate valuable knowledge and, crucially, build trust among member states. This trust can accelerate future MRA negotiations.

Another recommended initiative is the development of a comprehensive regional program for technical and vocational education and training (TVET) to nurture human capital and keep pace with EV technology advancements. This initiative should be spearheaded by the ASEAN TVET Council, a public–private body entrusted with designing and overseeing regional programs to support TVET progress in the region. A collaborative effort between the public and private sectors is crucial for this initiative, as the private sector’s input is necessary to identify and cultivate the requisite skills and competencies demanded by the EV industry.

ASEAN has the potential and ambition to claim the title of the world’s foremost EV manufacturing hub. Yet to ensure success, the region must concentrate its efforts on seizing opportunities within its reach and avoiding the temptation to exceed its current capacity.

Suryo Ariyanto Nugroho is Program Manager of Networks and Partnerships at the Asia Pacific Foundation of Canada. He previously served as Senior Officer of Enterprise and Stakeholder Engagement at the ASEAN Secretariat. The views expressed in this article are the author’s own and do not reflect the views of the Asia Pacific Foundation of Canada.

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