Recent news reports of the top three selling battery electric vehicles (BEVs) in Thailand over H1, 2023 being manufactured by BYD, Hozon, and Tesla, the building of a battery plant for EVs by Hyundai Mobis in Indonesia, and the launch of Tesla operations in Malaysia by the end of the year should come as no surprise. It marks an emerging shift in the ASEAN passenger vehicle market (PV) that is being defined by the growing presence of foreign automakers and a government-backed shift to EVs.

Automotive markets in the ASEAN region—Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam—will continue to grow robustly in 2023. Rising GDP growth, improving road infrastructure, and higher consumer demand, paralleled by low vehicle ownership, particularly in Vietnam and the Philippines, will bolster passenger vehicle (PV) sales. Meanwhile, in the commercial vehicle segment, the appeal of pickups will persist. Accordingly, Frost & Sullivan estimates collective sales of PVs and pickups to increase steadily from 3.2 million units in 2022 to an estimated 3.3 million in 2023, led by the major automotive markets of Indonesia, Malaysia, the Philippines, Thailand, and Vietnam.

Simultaneously, competition is intensifying as Chinese vehicle manufacturers enter the fray. For instance, BYD is slated to begin electric vehicle (EV) production in Thailand in 2024. Together with fellow Chinese OEM, Great Wall Motor, it is shaking up the Thai market with competitive offerings. South Korean companies are also having a disruptive impact reflected in the Hyundai-LG Energy Solution battery plant venture in Indonesia.

Although ICE sales still dominate, the shift towards EVs is gaining momentum. The market for electromobility is still nascent with adoption rates in the initial stages likely to be tempered by inadequate supporting infrastructure, slow battery development, and chip shortages.

To learn more, please access ASEAN Automotive Outlook, 2023 and China Automotive Outlook, 2023 or contact sathyanarayanak@frost.com for information on a private briefing.

Our Perspective

Competition both among vehicle manufacturers and between countries to grab a share of the expanding ASEAN automotive market is set to escalate. Government support will spotlight Thailand as a strong magnet for foreign investors, trailed by Indonesia, with automotive market sizes poised to expand rapidly in both countries.

Similarly, targeted policy and financial impetus from their governments will boost foreign direct investment in EV markets across Malaysia, the Philippines, and Vietnam. Thailand and Indonesia will continue to lead from the front, reinforcing their position as EV production hubs in the region while attracting higher FDI over the next 3-5 years. As the EV ecosystem develops, foreign OEMs will move to capture market share with cost-effective offerings. Simultaneously, new revenue opportunities will explode across the EV value chain even as stakeholders experiment with innovative business models.

During the early stages of transition from ICEs to EVs, the preference will be for hybrids which, unlike full EVs, are more competitively priced and address concerns related to range anxiety and limited charging infrastructure.

Future Outlook

One of the key challenges that participants will encounter is delayed deliveries linked to ongoing supply chain disruptions. For instance, persistent chip shortages are likely to temporarily slow down vehicle production levels and, by extension, sales growth.  The Malaysian government pushed new vehicle registrations to March 2023 due to shortages in vehicle inventory and sales tax exemptions in 2022.

On a more positive note, growth will accelerate in major automotive markets like Vietnam and the Philippines. Capital investments in assembly plants by both foreign and domestic automotive manufacturers bolstered by governmental support will underpin a projected 7.5% growth rate in 2023. Growth rates in the Philippine market will be even higher at an estimated 10.6% in 2023, based on strong government support, new model launches, and low rates of vehicle ownership.

The move towards electromobility will strengthen. Governments will encourage more sustainable transport alternatives with a raft of financial incentives/subsidies and policy support. Markets which offer a range of battery EV (BEV) subsides like Indonesia, Thailand, and Vietnam will register significant EV sales growth. At the same time, preferential tax deduction schemes will underpin an expansion in EV production hubs as well as production capacity from leading automotive manufacturers in the ASEAN region.

Competitive disruption linked to foreign automotive manufacturers will be evident across major markets like Indonesia, Malaysia, and Thailand as the process of transitioning to alternative powertrain solutions picks up pace. For instance, a slew of foreign companies—LG in the battery space, Hyundai and Tesla for vehicle manufacture, and BASF for nickel processing, among others—have inked agreements to establish plant operations in Indonesia.  Leading Chinese OEMs, such as Great Wall and BYD, are also seeking to play a major role in emerging EV markets in Indonesia, Malaysia, and Thailand.

Among other factors, the high cost of EVs has dampened uptake by price conscious ASEAN consumers. Governments have been offering favorable fiscal incentives aimed at substantially reducing EV purchase costs and motivating uptake. However, more comprehensive support – both fiscal and non-fiscal – is required across the entire EV ecosystem to accelerate market growth.  This could range from higher investments in EV utilities to regulatory policies supporting charging infrastructure and battery plant capacity expansion.

With inputs from Amrita Shetty, Senior Manager, Communications & Content – Mobility

About Chan Ming Lih

Chan Ming Lih is an Industry Principal with Frost & Sullivan's Mobility Practice. She has about a decade of strategic research and consulting experience in automotive market development, which includes sales and marketing, brand management, supply chain channel, and new business development. Her industry expertise covers a broad range of segments such as PVs, CVs, EVs, Off-highway vehicles and accessories, Powertrain solutions, and strategic online selling platform analysis, among others.

Chan Ming Lih

Chan Ming Lih is an Industry Principal with Frost & Sullivan's Mobility Practice. She has about a decade of strategic research and consulting experience in automotive market development, which includes sales and marketing, brand management, supply chain channel, and new business development. Her industry expertise covers a broad range of segments such as PVs, CVs, EVs, Off-highway vehicles and accessories, Powertrain solutions, and strategic online selling platform analysis, among others.

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