"Southeast Asia EV Market Led by Indonesia and Thailand... Local Production Could Be an Opportunity"

Automotive Research Institute, Industry Trend Report

The Genesis G80 electrified model, designated as the official protocol vehicle at the G20 Summit held in Bali, Indonesia, last October [Image source=Yonhap News]

[Asia Economy Reporter Choi Dae-yeol] As the focus of automobile production shifts from internal combustion engines to electric vehicles, there is an analysis that the Southeast Asian region, backed by a large market and vast resources, is likely to become a global hub.

Lee Seo-hyun, Senior Researcher at the Korea Automotive Technology Institute, analyzed in an industrial trend report released on the 19th, "With the smooth intra-regional trade in the ASEAN market and emerging opportunities for electric vehicle entry, interest in Indonesia and Thailand is increasing."

The Southeast Asian region eliminated tariffs on complete vehicles under the ASEAN Trade in Goods Agreement, which came into effect in 2018, and this year, the approval procedures for trading specific automotive parts among member countries have been simplified. Typically, approval procedures for automobiles or parts are stringent in each country due to safety concerns, acting as trade barriers, but these have been lowered to foster the automotive industry and expand the market.

Since the mid to late 20th century, Japanese complete vehicle companies have actively entered the market, capturing a significant share of the internal combustion engine market, but it is expected to change in the growing electric vehicle market. Recently, South Korea and China have been aggressively entering the ASEAN region. In particular, Indonesia, rich in key minerals such as nickel, a raw material for batteries, and with a large domestic market, and Thailand, which has accumulated sufficient production capacity centered on internal combustion engines, are the main targets.

The launch event of the Chinese Hozon Auto's electric vehicle Neta V held in Bangkok, Thailand, this August

Both countries have a strong will to nurture their domestic markets centered on Battery Electric Vehicles (BEV). Indonesia banned the export of nickel ore in 2020 to promote battery manufacturing and processing domestically and decided to exempt luxury tax of 15% only on electric vehicles that meet the parts localization rate. According to media reports, they are considering providing subsidies of 80 million rupiah (about 6.7 million KRW) for electric vehicles made by companies with local factories.

Thailand started providing electric vehicle subsidies this year. It is the only country in the ASEAN region offering subsidies and imposes requirements to use domestically produced batteries or parts, encouraging the establishment of a local battery manufacturing base. Judging that it is less advantageous than Indonesia in terms of key mineral reserves, Thailand broadly offers tax benefits to electric vehicle and parts companies and imposes penalties if local production requirements are not met.

Meeting local production conditions may be somewhat burdensome for companies, but Lee Seo-hyun analyzed that it could also act as an opportunity for Korean companies. This is because the ASEAN tariff rate for Korean passenger cars is 40%, which is higher than China (0%) and Japan (20%), making exports disadvantageous.

Lee explained, "Due to BEV industry support policies, complete vehicle manufacturers from Korea, China, and Japan inevitably have to produce locally, placing them on the same competitive footing," adding, "There is also a possibility that this could serve as an opportunity to offset the disadvantageous Korean tariff conditions compared to competing countries."

This content was produced with the assistance of AI translation services.