One of the principal points of discussion at the 42nd ASEAN Summit in Labuan Bajo last month was advancing the regional ecosystem for electric vehicle market expansion. The increasing international urgency for reduced GHG emissions and sustainable products is behind the need for electric vehicles. Nevertheless, limited national capacities compared to others may hinder the success of this market penetration in each country; this is the case for Southeast Asia. In comprehending ASEAN’s EV market potential, we can utilize the fundamental economic model of supply and demand. The variables related to this economic analysis alongside stakeholder collaboration will determine the success of ASEAN’s EV market.

Alongside the incessant dire situation of the Myanmar conflict, the violation of humanitarian values that is the trafficking of migrant workers and the large visions of development plans, advancing the regional ecosystem for the electric vehicle market was one of the key points of discussion during the 42nd ASEAN Summit in Lajuan Bajo the previous month (Ministry of Foreign Affairs, 2023). Electric vehicle market expansion has been a prioritized target set out by many countries with the existence of agreements such as the 2015 Paris Declaration on Electro-Mobility and Climate Change & Call to Action, as well as the recent A2Z Coalition launched at COP27. With the ever-so-substantial international call for reduced GHG emissions and increased sustainable products, electric vehicles are part of the solution to our environmental and energy security concerns. In larger economies such as the US, China and several European nations, the shift towards greener transportation has been deemed efficacious (World Bank, 2022). Can Southeast Asia reflect the same success?

In gauging Southeast Asia’s potential vis-a-vis the electric vehicle market, we can utilize the most fundamental model in economics, supply and demand. Understanding the market calls for thorough economic analysis, where supply analysis encompasses the variables that affect and are constituent to the region’s production activities and available quantity of supply while demand analysis takes into account the variables that affect and are constituent to the region’s consumer behavior and current quantity of demand.

Supply: The Question of Sufficient Resources & Infrastructure

With the numerous investment initiatives centered upon environmentally friendly and sustainable technology advancements by the private sector, further supported by well-targeted policies by the government, electric vehicle supply is only increasing. Tesla, Ford Motor Company and Volkswagen Group are only a few of the hundreds of companies that markets electric vehicle products in Southeast Asia. There are also producers from within the region itself, such as VinFast and Dat Bike from Vietnam, Electrum, the joint venture by Gojek and TBS Energi Utama from Indonesia, as well as Neuron Mobility from Singapore (Tech Collective, 2022).

What is missing, however, is the supply of electric vehicle infrastructure or what is also known as electric vehicle supply equipment (EVSE). There is an immense need for more charging facilities in Southeast Asian countries (Hashim & Safrina, 2022). This implies not only the importance of an increased quantity of charging stations and their widespreadness in various locations, but also an increased quality of these facilities, such as fast-charging capabilities.

The supply of Electric Vehicles (EVs) in ASEAN can also be affected through governments’ supply-side policies. Taking an instance of Brunei Darussalam, where its electromobility trend was not as felt in 2017 as the share of registered EVs in the nation was as low as around 300 units or 0.1%. Nonetheless, as green vehicle technology projects possess a miniscule role in the country’s development planning, making up a mere 0.2% of their Land Transport Master Plan’s budget, this small number is not questionable (Schröder & Iwasaki, 2021). Fortunately, in the present, ASEAN governments have made greater efforts to support the EV market expansion, such as through the adoption of the Regional Electric Vehicle Ecosystem Development Declaration. Through this declaration, ASEAN leaders portrayed their commitment to build ASEAN as a global production hub, increase training and certification for expertise in the electromobility field, and encourage private-public partnerships, encouraging the production of EV.

Demand: Comprehending Consumer Behaviour & Preferences

The demand for electromobility in Southeast Asia has been growing; yet, its levels haven’t reached those of developed economies. As for most products’ demand, the willingness of ASEAN consumers to buy an electric vehicle is influenced by their income. On average, the initial cost to purchase a car powered by electricity is, more or less, $10,000 more expensive than internal combustion engine (ICE) based cars (CNBC, 2021). Therefore, with their low purchasing power compared to Western nations, ASEAN consumers are less inclined to make a purchase. What many Southeast Asians don’t know is that although the market price of EVs is high, the maintenance fees are relatively low and thus, when examined in the long term, this technology yields fewer costs than gas-powered vehicles. Of course, due to unawareness, the larger initial cost of these cars scare off the normal customer.

This is where consumer preferences become a crucial parameter in measuring demand. Based on a survey in Thailand, The EV ASEAN market can be segmented into three groups, which are: (1) trendy enthusiasts, those who value luxury, looking for innovative car models with premium features; (2) basic utility drivers, those who prioritize low costs, seeing cars as a means of transport over pleasure and all else; as well as (3) environmentalists, those who are the most concerned about climate change and today’s environmental issues, putting much emphasis to the transformation of the current transportation sector to be more sustainable (Frost & Sullivan, 2018). Using the STP (Segmentation, Targeting, Positioning) Analysis, in order to execute a successful market penetration in ASEAN, it is of great significance that the EV targets all prospective customers, regardless of their segmentation. With that, EV should position itself as an inclusive industry, catering to the preferences of all customers.

Furthermore, just like supply-side policies to supply, demand-side policies affect the overall demand of consumers in buying a product or service. Governments can encourage spending through both monetary and fiscal policy. For example, in the Philippines, in January, the government began to implement several strategies to increase EV demand. Completely built EVs are exempt from tax, and EV owners receive priority registration and discounts on fees, special license plates, and dispensation from traffic volume reduction schemes (ADB, 2023).

Optimizing the Equilibrium

Within the law of supply and demand, the equilibrium is the state where supply balances demand, determining the “perfect price” for producers to sell and consumers to buy a particular good. At times, we can sit back and let market forces do their work to reach an optimum quantity of supply, quantity of demand and market price. Nonetheless, at other times, which is the present situation in Southeast Asia regarding EVs, the market is not yet able to reach an effective equilibrium by itself. Different from developed nations with a stronger resource landscape and other greater capabilities, Southeast Asia has many other economic issues to prioritize, such as inapt natural resource and waste management, as well as widening development inequalities and poverty. Nevertheless, the result of this year’s ASEAN Summit shows promises for a more advanced and efficient ecosystem for electric vehicles in the region. With continuous increased government efforts and collaboration with relevant stakeholders, the increase of the supply and demand along with an optimum market price of Southeast Asia’s EV market can be reflected in its further penetration; and thus, can be deemed as a success.

Christansya Eliora Manossoh is an ISAFIS Research and Development member currently studying in Universitas Gadjah Mada as a first-year undergraduate student. Hailing from the Faculty of Economics & Business, she has developed an interest in macroeconomics, sustainable development and how they go hand-in-hand. For discussions and collaborations, feel free to reach out to her through c.e.manossoh@gmail.com.

References

ADB. (2023, March 16). Jumpstarting the EV Market in the Philippines. SEADS. https://seads.adb.org/solutions/jumpstarting-ev-market-philippines

ASEAN. (2023). ASEAN LEADERS’ DECLARATION ON DEVELOPING REGIONAL ELECTRIC VEHICLE ECOSYSTEM. https://asean.org/wp-content/uploads/2023/05/07-ASEAN-Leaders-Declaration-on-Developing-Regional-EV-Ecosystem_adopted.pdf

Frost & Sullivan. (2018). THE FUTURE OF ELECTRIC VEHICLES IN SOUTH EAST ASIA T H A I L A N D. https://www-asia.nissan-cdn.net/content/dam/Nissan/th/news/purchasedecisionresearch/Nissan_whitepaper_TH.pdf

Hashim, H., & Safrina, R. (2022, June 10). Charging Infrastructure to Accelerate ASEAN’s Electric Vehicle Deployment. ASEAN Centre for Energy. https://aseanenergy.org/charging-infrastructure-to-accelerate-aseans-electric-vehicle-deployment/

Ministry of Foreign Affairs of Indonesia. (2023, April 29). Asean Leaders To Discuss Key Regional Issues At The 42nd Asean Summit In Labuan Bajo | Portal Kementerian Luar Negeri Republik Indonesia. Kemlu.go.id. https://kemlu.go.id/portal/en/read/4652/berita/asean-leaders-to-discuss-key-regional-issues-at-the-42nd-asean-summit-in-labuan-bajo

Schröder, M., & Iwasaki, F. (2021). Current Situation of Electric Vehicles in ASEAN (pp. 1–32). ERIA. https://www.eria.org/uploads/media/Research-Project-Report/2021-03-Promotion-Electromobility-ASEAN/5_ch.1-Current-Situation-Electric-Vehicle-ASEAN-2611.pdf

Tech Collective. (2022, June 17). Top 5 up and coming Southeast Asia e-vehicle players. Tech Collective. https://techcollectivesea.com/2022/06/17/southeast-asia-e-vehicle/

Winters, M. (2021, December 29). Here’s whether it’s actually cheaper to switch to an electric vehicle or not — and how the costs break down. CNBC; CNBC. https://www.cnbc.com/2021/12/29/electric-vehicles-are-becoming-more-affordable-amid-spiking-gas-prices.html

World Bank. (2022, November 17). Electric Vehicles: An Economic and Environmental Win for Developing Countries. World Bank. https://www.worldbank.org/en/news/feature/2022/11/17/electric-vehicles-an-economic-and-environmental-win-for-developing-countries