An electric vehicle being charged at a charging station at Siam Square in Bangkok, Thailand. South-East Asian nations offer more tax breaks, subsidies and investment in charging stations to boost electric vehicle (EV) sector. — Bloomberg
KUALA LUMPUR: For self-confessed tech geek and adrenaline junkie Farhan Abdul Rahim, becoming one of the first Malaysians to own an electric car in 2020 was a no-brainer – but he didn’t simply stop there.
Last June, Farhan embarked on a three-day journey around the Malay peninsula in his Tesla – covering about 1,700km (1,050 miles) – seeking to prove that electric vehicles (EVs) can operate beyond cities and in rural parts of the South-East Asian nation.
However, as a manager at state oil company PETRONAS and someone who helped the firm start considering establishing EV charging stations during coronavirus lockdowns in 2021, Farhan was acutely aware of the challenges facing such a journey.
“It’s the first time I’d done this (trip) with an EV,” said the 46-year-old who spent weeks planning what EV charging options he would have before setting off on the trip.
Farhan said he first became interested in EVs in 2017 after attending a conference for work that had a stand promoting the vehicles and featured a Tesla on display.
“(The trip) was about busting the myth and helping the EV community, who say you cannot go to the eastern part of Malaysia with an EV,” he said in an interview, referring to an often-cited lack of charging infrastructure that is seen as an obstacle to the sector’s growth in Malaysia.
Electric vehicle production and sales are surging globally, with the sector seen as key in the drive to curb climate change by cutting emissions from petrol and diesel fuel, reduce oil imports and fuel subsidies, and support investment in renewable energy sources.
More climate-conscious drivers around the world are going green, with EV and hybrid vehicles accounting for 18% of global sales of four-wheeled vehicles last year, according to Rahul Gupta, an associate partner at McKinsey & Company in Singapore.
But that uptake was mostly in the United States, Europe and China, with the latter two markets at about 20% and 25% of sales respectively, he said.
In South Asia, EVs accounted for less than 2% of sales in 2022, he explained.
A dearth of charging infrastructure outside urban centres, a lack of tax incentives and subsidies for both automakers and buyers, and slow progress on developing affordable EVs among South-East Asia’s main manufacturers have held back the region, analysts said.
But governments appear keen to pick up the pace, offering growing incentives to auto and battery makers, tax breaks for buyers, and setting ambitious targets as they seek to position themselves as EV manufacturing hubs for the region.
For Farhan, a trip that was initially about demonstrating the capabilities of EVs in Malaysia had unexpected benefits.
“I could actually appreciate the landscape and scenery on the journey,” said Farhan, who travelled with his wife and two children, recalling how the family enjoyed views of vast mountain ranges, lush rainforests and pristine beaches.
Luxury item?
Two and three-wheelers – from motorbikes to tuk-tuks – account for about 80% of vehicles running in South-East Asia, according to Benedict Eijbergen, transport practice manager for East Asia and the Pacific at the World Bank.
This means the EV transition in the region will differ greatly from that in China, Europe and the United States, where EV growth is fuelled by the electrification of cars, he said.
The uptake of two-wheeled EVs has been higher in the region than electric cars, accounting for about 8% of all vehicle sales in market leader Vietnam in 2020, Eijbergen added.
However, McKinsey & Company’s Gupta said the higher cost of buying an EV compared to an internal-combustion engine (ICE) vehicle prevented many drivers from making the switch.
To address this, governments must introduce subsidies at the point of purchase to help buyers and provide incentives or tax breaks for carmakers to reduce production costs, Gupta said.
Last year, Thailand approved a package of incentives including tax cuts and subsidies to promote EVs, while earlier this month Indonesia said it was looking at slashing value-added tax on electric car sales to 1% from 11%.
More charging infrastructure and greater availability and choice of EVs would also help increase the appetite for these vehicles in the region, as would governments setting timelines for banning petrol and diesel vehicles, Gupta added.
While many South-East Asian nations have ambitious net-zero plans – which include support for EVs purchases, rebates and charging infrastructure – implementation is widely uneven, said Gregory Poling, director of the South-East Asia Program at the US-based Center for Strategic and International Studies (CSIS).
As in many parts of the world, the lack of charging stations outside cities is a problem, with expansion in countries such as Indonesia – an archipelago of thousands of islands – likely to be a challenge, he added.
“EVs are still a luxury item for the most part in South-East Asia, as they are globally,” Poling said.
Climate not a concern
Greater take-up of EVs in South-East Asian nations would help meet international climate goals and assist them in attracting companies looking to invest in nations joining the global decarbonisation push, Poling said.
In coming years, Poling predicted, South-East Asian countries will try to position themselves as regional EV manufacturing hubs. Ample nickel reserves in Indonesia and the Philippines could play a role in making the needed batteries.
However, curbing climate change is unlikely to be the driving factor for EV growth in most of the region.
“Most of these countries, understandably, still believe rightly that they didn’t make this problem,” said Poling.
“The West made this problem, so why should they have to crimp economic growth – if that’s what it takes – in the name of switching over to green electricity generation and EVs?”
Abhilash Gupta, an automotive analyst at research firm Counterpoint, noted that production of EV batteries is unlikely to be carbon neutral, and ramped up mining and manufacturing could carry environmental and human risks.
“(South-East Asian) nations are rushing to attract more multinational corporations and, therefore, are not adequately focusing on sustainable practices in the mining and production cycle,” he said.
Indonesia has in the last three years signed at least a dozen deals, worth more than US$15bil (RM66.53bil), for battery and EV production in the country, while President Joko Widodo has sought to convince Tesla CEO Elon Musk to invest.
‘Chicken and egg situation’
For Malaysia’s Farhan, working at Kuala Lumpur’s iconic Petronas Twin Towers gives him access to underground parking and about 50 charging points – the largest single concentration of EV charging stations in the region, he says.
But switching to EVs is more difficult for the general public, especially when many condominiums refuse to install charging points or even allow home owners to do so at their own cost, he said.
Many auto dealers are also not trained well enough to promote EVs or offer basic advice for potential EV owners, he added.
However, Farhan believes greater tax incentives from the government are helping. Malaysia has import duty and excise tax exemptions for EVs and the new government is expected to announce more financial incentives in its 2023 budget today.
Farhan, a member of the Malaysian Electric Vehicle Owners Club, said there now are about 2,400 registered EVs in the country, up from around 240 in early 2021.
He urged the government to set aggressive EV targets and establish a single body to lead the country's EV charge – but acknowledged that the overall picture was complex.
“It’s a sensitive thing because Malaysia is a net producer of oil,” he said. “It’s a chicken and egg situation.”
“(But) I’m not going to buy petrol. It’s going to be electric vehicles from now on,” he added. – Thomson Reuters Foundation
