Chinese EV makers race to Southeast Asia for growth amid US trade war

Chinese EV makers race to Southeast Asia for growth amid US trade war

Chinese EV makers race to Southeast Asia for growth amid US trade war

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The European Union followed suit by imposing tariffs of up to 38 per cent from July 4 on three Chinese EV makers: SAIC, Geely, and BYD. The decision came after an anti-competition investigation found that the carmakers had benefited from Beijing’s “unfair subsidisation”, which threatened to undercut the EV manufacturing sector in Europe, where the cheapest locally made vehicles can cost three times the price of Chinese models.Facing narrowing opportunities in Western markets, Chinese carmakers are eyeing promising long-term growth prospects in Southeast Asia, where a burgeoning middle class is revving up to embrace the shift to EVs.“Southeast Asia’s relatively neutral geopolitical stance provides a window of opportunities for companies from China to expand,” Gary Ng, a senior economist at Natixis Corporate and Investment Bank in Hong Kong, told This Week in Asia.China will increase its EV presence from a demand and supply perspectiveGary Ng, Natixis Corporate and Investment Bank’s senior economist“China will increase its EV presence from a demand and supply perspective, meaning more car sales and local production,” Ng said, adding that Indonesia and Thailand, Southeast Asia’s two largest economies, will be Chinese marques’ first likely targets.BYD, Xpeng and Geely are pumping billions of dollars into Indonesia, Thailand and Malaysia, aiming to seize a greater share of their fast-growing markets for sustainable vehicles.EV sales in Southeast Asia are expected to hit between US$80 billion and US$100 billion by 2035, from about US$2 billion in 2021, according to a January report by EY-Parthenon, the strategy consulting arm of Ernst & Young.“Of these, Indonesia is expected to be the region’s largest market by volume, with estimated sales of 4.5 million units [out of 8.5 million total units by 2035],” the report said.Global EV sales jumped 18 per cent in the first quarter of 2024, fuelled by demand in China, the world’s largest EV market. Sales in China are expected to plateau, however, intensifying the urgency among domestic EV makers to focus more on other markets such as Southeast Asia.According to Counterpoint Research, a Hong Kong-based technology research firm, regional EV sales more than doubled in the first quarter, compared with a 7 per cent decline for diesel- and petrol-powered cars.That’s good for Chinese carmakers, because as Counterpoint analyst Abhik Mukherjee noted: “Over 70 per cent of EV sales in the region are from Chinese brands, led by BYD.”BYD vehicles are pictured at the port of Lianyungang in China’s Jiangsu province before being loaded onto a vehicle carrier for export. Photo: China Daily via Reuters‘Inevitable price wars’Amid slowing growth in their home market, Chinese EV heavyweights such as BYD, Neta Auto and Geely Auto have announced major plans to expand their presence in Southeast Asia.At an auto show in Jakarta in May, the carmakers said they were introducing more models that appeal to Indonesian consumers.BYD is set to build a US$1 billion factory in West Java that is scheduled to start operations in 2026. Neta has signed an agreement with local car assembly company Handal Indonesia Motor to produce its EV models for the local market.“People in Indonesia are very interested in cars that are affordable but have sophisticated and innovative technology,” Herman Tri Putra, a sales representative for Neta in Jakarta, told This Week in Asia, saying that demand for EVs in the country was set to grow steadily.Indonesia is planning to ramp up local EV production to around 600,000 units by 2030, as it aims to become a hub for EV and electric battery manufacturing by leveraging its substantial nickel reserves. According to data from the Indonesian Automotive Manufacturers Association, about 17,000 EVs were sold in Indonesia in 2023.High EV prices could prove to be a deterrent to attracting regional consumers, however.
02:03Chinese-made electric vehicles face additional EU import tariffs of up to 38%Chinese-made electric vehicles face additional EU import tariffs of up to 38%When Neta’s newest and most affordable model, the V-II, was unveiled at the Jakarta EV show, it was priced at 200 million Indonesian rupiah (US$12,100), up to 60 times the average monthly salary in Indonesia.In Malaysia, Geely said it was investing over US$10 billion to develop manufacturing facilities with its local affiliate Proton in Tanjung Malim, north of Kuala Lumpur – promising to turn the sleepy university town into Malaysia’s ‘Detroit’.Only higher-priced imported EVs are allowed to be sold in Malaysia due to strict market entry barriers.Around 832,000 cars were registered in Malaysia last year, more than 300,000 of those being low-cost models from domestic carmakers Proton and Perodua. These sold for an average price of 35,000 ringgit (US$7,400), less than a third of the 99,900-ringgit price tag on the cheapest EV, the BYD Dolphin, not including insurance.While cheaper EV models such as the BYD Seagull are available in other Asian markets, EVs costing less than 100,000 ringgit (US$21,200) cannot be sold in Malaysia to protect domestic brands Proton and Perodua.According to Jigar Shah, head of sustainability research at Maybank Investment Banking Group, the prices of EVs have to fall considerably before they become attractive to Malaysian buyers.Chinese carmaker Wuling Motors’ Cloud EV is seen on display at the Indonesia International Motor Show in Surabaya in May. Photo: AFP“The availability of electric cars at US $10,000-US$12,000 on a sustained basis may provide an inflection point,” he said.Despite the much higher prices to buy an EV in Malaysia, some drivers have still been willing to pay the premium.BYD’s Atto 3 model costs 149,800 ringgit (US$31,700) and is currently the most popular EV model in the country, with more than 4,600 units sold since its debut last year.For Malaysians, the key attractions of EVs include the money saved on fuel plus other incentives for buying the vehicles, said Shahrol Halmi, president of MyEVOC, the Malaysian Electric Vehicles Owners Club.“The BYD Atto 3 was priced competitively against similarly sized internal combustion engine vehicles when it was launched in 2023. Consumers are also comforted by BYD’s partnership with local automotive giant Sime Darby,” Shahrol told This Week in Asia.But the Chinese carmakers’ big bet on Southeast Asia would likely result in “inevitable price wars”, said Jiayu Li, senior associate at Global Counsel, a public policy advisory firm in Singapore.Li cited the intense price competition among Chinese motorcycle makers in Southeast Asia in the early 2000s when their Japanese rivals sped past them.Visitors view an MG electric vehicle at the 45th Bangkok International Motor Show in Thailand on March 25. Photo: Reuters“Aggressive price wars among Chinese motorcycle makers soon led to cost-cutting and compromised product quality, allowing Japanese motorcycle makers to regain market share with superior reliability. Japanese brands have maintained over 90 per cent market dominance since,” she said.Prospects for the Southeast Asian market may not be as bright as Chinese EV makers have anticipated, some analysts say.Government incentives might not be enough to entice consumers to switch to EVs. Their buying decisions could also be hampered by concerns about the range constraints of electric vehicles, a recent report by Deloitte found.“High interest rates and elevated sticker prices may be causing consumer interest in EVs to soften in some markets,” Deloitte said.Wang Yangchen, managing director at market intelligence firm Shanghai Metals Market, said every market was important for Chinese EV manufacturers, but emphasised that Southeast Asia in particular holds promising long-term growth prospects for them.“Southeast Asia is a booming market and access to this market does not have boundaries for Chinese companies, so there is a huge potential for growth,” he said.Additional reporting by Reuters

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