With strong government support and increasing purchasing power, Southeast Asia has emerged as a hotly contested arena for Chinese and South Korean automakers, vying to dominate the electric vehicle (EV) industry.
Since the beginning of this year, Chinese companies, which include not only automakers but also battery suppliers, have intensified their efforts in Southeast Asia, particularly in Thailand and Indonesia. These two major regional auto manufacturing hubs have become focal points of interest for Chinese companies seeking to expand their presence in the area.
Timeline of recent investments:
- In March, BYD reportedly set its sights on building an electric bus assembly plant and, eventually, a battery manufacturing factory in Indonesia. In the meantime, the company has commenced construction of a new factory in Thailand, projected to be finalized in 2024, with an impressive annual capacity of 150,000 electric cars.
- In April, a Thai official revealed that Changan Auto has committed to investing $285 million in a facility in Thailand.
- On May 6, Hozon Auto, the parent company of the EV brand Neta, disclosed plans to initiate the construction of a manufacturing facility in Thailand. This upcoming facility is anticipated to possess an annual production capacity of 20,000 vehicles.
- On May 11, GEM Co. Ltd., a Guangzhou-based battery and material recycler, announced a $500 million joint investment to build a nickel project in Indonesia, with the target of producing 20,000 tons of nickel intermediate products for the new energy sector annually.
- On May 13, SAIC Motor started building a factory in Thailand for its sub-brand MG. The planned manufacturing facility, set to sprawl over an area exceeding 437.5 rai (equivalent to around 173 acres), will accommodate battery production, parts fabrication, and MG's EV assembly line.
The accelerated deployment of Chinese firms in Southeast Asia is not only driven by the growing demand in the EV market but also by the determined efforts of their South Korean counterparts to catch-up.
Hyundai has surpassed Chinese automaker Wuling to become the top player in Indonesia's electric car market, capturing a 55% market share in February, according to the Korea Economic Daily. By comparison, the South Korean automaker delivered 1,829 units of its electric SUV IONIQ 5 last year, well behind Wuling Air EV's 8,053 units.
The IONIQ 5 was launched in Indonesia last April with a starting price of 748 million rupiahs ($50,186), three times that of runner-up Wuling and twice the average selling price in Indonesia.
Back in 2017, Wuling opened its first overseas production site in Indonesia with an investment of $700 million. This was well before Hyundai, which only started full production at its new plant in Indonesia in March 2022.
It's evident that Hyundai is playing catch-up aggressively. From January to April this year, Hyundai and Wuling sold about 1,700 and 1,000 EVs in Indonesia, respectively, according to Nikkei. Driven by the surge in demand, the company recently decided to increase production of its IONIQ 5 at the local plant to 1,000 units per month.
Hyundai has announced its plans to intensify marketing efforts in Thailand this year to drive sales of its EVs in the country. While the South Korean automaker currently lacks an EV assembly plant in Thailand, it strategically relies on its Indonesian factory to cater to the burgeoning demand and service the wider region.
The battle between EV battery suppliers heats up as well.
As aforementioned, GEM, China's largest battery recycler, has unveiled its intentions to build nickel intermediate products in Indonesia for the new energy sector, while SAIC has started to build a factory in Thailand, including battery production for the MG brand.
Indonesia stands as one of the foremost global producers of nickel, a key raw material for EV batteries. Thailand also boasts significant lithium reserves, another crucial raw material in the realm of EV batteries.
South Korean battery suppliers have also recognized the value of these resources. In June 2022, LG Energy Solutions (LGES) broke ground on a nickel processing plant in Indonesia. This venture is part of the LGES’s substantial $9.8 billion investment in the country aimed at manufacturing EV batteries. Prior to this, in September 2021, LGES and Hyundai began construction of a $1.1 billion factory in Bekasi, West Java, which will also produce EV batteries.
There are multiple reasons why South Korea and China are eyeing establishing battery-related supply chains in the emerging market: As global demand for EVs continues to rise, it is increasingly vital to have more raw materials under control; a more comprehensive local supply chain will help automakers gain more strength in the face of increasing competition; local governments offer incentives including tax breaks, land concessions, and financial assistance to attract battery manufacturers to the region, as well as cheaper labor costs.
Over the years, South Korean companies have established a strong presence in the field of nickel, manganese, and cobalt (NCM) batteries. However, as the market landscape evolves and priorities shift, there is a notable transition towards lithium iron phosphate (LFP) batteries. These LFP batteries offer several advantages, including lower cost, a longer lifespan, improved safety, enhanced ecological sustainability, and reduced risks of fire or explosion compared to NCM batteries. Consequently, Chinese battery manufacturers are beginning to dominate EV battery production globally.
LG Energy Solution, Samsung SDI, and SK On's combined share in the global EV battery market declined from 30.2% in 2021 to 23.7% in 2022, according to a February report by market research firm SNE Research, while at the same time, the market share of EV batteries supplied by Chinese manufacturers rose robustly.
But the ground is likely to keep shifting. South Korea's trade ministry last year identified batteries as one of the country's three strategic industries, along with semiconductors and artificial intelligence. LGES, Samsung SDI, and SK On are ramping up the development and production of LFP batteries.
The South Korean automotive sector shares certain parallels with its Chinese counterpart, particularly in aspects like supply chain and manufacturing capabilities. For instance, China is renowned for its world-class battery providers like CATL and Gotion High-Tech, as well as well-established automakers such as BYD, Wuling, and GMW, alongside emerging startups like Hozon. On the other hand, South Korea, while trailing China in EV battery market share, boasts a strong presence in automobile manufacturing, anchored by its two flagship brands, Hyundai and Kia.
Even though Chinese brands may not have achieved the same level of recognition as their counterparts in the traditional vehicle market, they possess significant potential for growth. "In the EV segment, consumers can easily jump over old brand walls and are willing to try new options," said Pitaya Tanadamrongsak, managing director of EV Primus, the Thai distributor of China's second-largest automaker, DFSK (Dongfeng).