Chinese new energy vehicle technology rapidly integrating into ASEAN
Published: Sep 15, 2023 01:15 AM
Cars ready for export in Yantai, East China's Shandong Province Photo: VCG

Cars ready for export in Yantai, East China's Shandong Province File Photo: VCG

Electric vehicles have become an important area of cooperation between China and ASEAN under the framework of the Belt and Road Initiative (BRI).

At the ASEAN Summit held in Jakarta, Indonesia earlier this month, China vowed to support the ASEAN Plus Three Leaders' Statement on Developing an Electric Vehicle Ecosystem. China also expressed hope for enhanced practical cooperation with all parties to sharpen the region's overall competitive edge in electric vehicles. The partnership is expected to pave the way for ASEAN to become part of the global electric vehicle (EV) battery supply chain.

In recent years, the cooperation mode between China and ASEAN in the field of EVs has been transitioning from exporting complete vehicles to capacity cooperation. Several Chinese car companies have achieved localized production in the ASEAN region through direct investment in factories or mergers.

According to industry statistics, Chinese EV sales account for 75 percent of the Southeast Asian electric vehicle market, significantly ahead of competitors from other countries and regions.

Chinese carmakers see potential

"The competitive advantages of Chinese new energy vehicle (NEV) manufacturers in Thailand are partly a result of their excellent technology and consistent innovation. Because they were the first to realize the potential offered by Thailand's EV policy, they are enjoying an early-mover advantage in the Thai and regional markets," Narit Therdsteerasukdi, secretary general of the Thailand Board of Investment (BOI), told the Global Times. He noted that China was Thailand's main source of foreign investment applications in 2022 as well as in the first six months of 2023, mostly due to investment in EVs and electronics.

Thailand is the largest electric vehicle market in Southeast Asia and also a major automobile manufacturing center in ASEAN. It has a relatively complete automobile manufacturing industry chain, which has made Thailand the first stop for many Chinese electric vehicle companies to enter ASEAN.

In August 2022, BYD announced its entry into the Thai passenger car market and signed land acquisition and factory construction agreements with WHA Weihua Group Volkswagen the following month.

BYD is planning to invest in and build its first overseas passenger car factory in Thailand. In addition to BYD, Chinese automobile manufacturer Great Wall Motor inaugurated its second full-production manufacturing unit outside China in Rayong Province, Thailand, in June 2021.

In March this year, Hozon Auto announced it would set up an ecological smart factory in Thailand. The factory will begin production in 2024 with a capacity of 100,000 cars per year in the first phase, doubling to 200,000 in the second phase.

Chinese EV companies, including Chang'an Automobile and GAC Aion, are considering investing in Thailand as part of their international expansion plans, Narit said.

In addition to the Thai market, Malaysia and Indonesia are also important bases for Chinese car companies to expand their business, and Chinese automobile manufacturer Geely Global is one of the earliest players.

In 2017, Geely announced the acquisition of a 49.9 percent stake in Malaysian automaker Proton and took full control of its management. Proton, established in 1983, was once the pride of Malaysia. The brand fell on hard times after the Asian Financial Crisis and struggled until Geely was selected as its new strategic partner in 2017.

Proton previously saw a continuous decline in market share, but it has once again become one of the most common car brands on the streets of Kuala Lumpur.

In March Proton's long awaited mild-hybrid electric vehicle (MHEV) model, the Proton X90, was unveiled, officially embarking on the path of new energy transformation. At the launch ceremony for the model, Malaysian Prime Minister Anwar Ibrahim expressed his hope that Geely and Proton would strengthen their research and development cooperation to help Malaysia's automotive industry transition toward new energy.

As the largest single market in Southeast Asia, Indonesia holds a special position in the development of new energy vehicles in ASEAN and has attracted many Chinese EV companies. SAIC-GM-Wuling Automobile Indonesia has invested $1 billion to build a 60-hectare automotive industrial park in West Java Province, Indonesia, creating a production base for the Indonesian and Southeast Asian markets.

Opportunities in regional competition, cooperation

Countries such as Thailand, Malaysia and Indonesia are now striving to become new regional manufacturing centers. Whether it is competition or cooperation within the region, it provides great opportunities for Chinese EV companies to expand into the ASEAN market.

For a long while, ASEAN countries have been introducing new policies for green industries, and accelerating electrified development in the automotive sector. The core of these policies is to attract companies with technology, experience and capital to invest in the EV industry chain in their countries.

In Thailand, the government has approved a budget of 3 billion baht ($84 million) for the 2022 fiscal year and 40 billion baht for fiscal years 2023 to 2025 to support the development of the EV industry. In Malaysia, the government has introduced a series of tax incentives for vehicle imports and locally assembled pure EVs since January 1, 2022. Indonesia has also provided corporate income tax breaks for investors in the EV industry and allocated funds in the budget to provide subsidies for buyers of EVs.

In a recent fieldtrip, the Global Times found that with the concept of low-carbon, sustainable development deeply rooted in people's hearts, as well as the introduction of new energy support policies and measures, the penetration rate of new energy vehicles in the region has continued to increase, breaking the pattern of traditional fuel vehicles occupying most of the market share in Southeast Asia. And this trend will become more obvious with the acceleration of the electrification process.

According to a report released by international consulting firm KPMG, the market size for new energy vehicles in Southeast Asia will grow from 38,000 in 2020 to 1 million in 2030.

As a market with huge potential demand and strong desire for development, ASEAN is increasingly compatible with China's demands. Chief Financial Officer of Proton Wang Huaibing told the Global Times that more Chinese EV industry chains are actively "going global." Fierce competition in the domestic market has prompted companies to seek new growth points, but Chinese companies are also sufficiently competent to "go global," with the ASEAN region becoming the first stop for many companies.

Exploring new symbiotic paths

According to the China Association of Automobile Manufacturers, it is predicted that China's automobile exports will exceed 4 million vehicles by 2023, with new energy vehicles exceeding 1 million units. In the first eight months of this year, Russia, ASEAN, and the European Union were the main export destinations for Chinese electric vehicles. With the future landing of production capacity in Southeast Asia, Chinese automakers will not only provide various types of automotive products, but also deeply integrate into the local market through localized production, becoming an important part of the supply chain for electric vehicles in developing countries.

Analysts believe that Chinese car companies have rich experience and mature technology in the field of EVs, and they also have advantages in the industrial chain, which enables them to provide high-quality and competitively priced electric vehicle products for the ASEAN market. At the same time, strengthening localization strategies not only better meets the needs of the local market but also helps to reduce production costs and improve product competitiveness.

From exports to deep integration, Chinese car companies are also exploring a new path of symbiosis with the local market. This path involves not only investment, production and sales, but also working together with the local market to achieve a leap in the global value chain.

Wang told the Global Times that Geely is currently working with its partners to promote the construction of the "Tanjung Malim Automotive High Technology Valley (AHTV)" project in Malaysia. The AHTV will comprise a high-tech global R&D centre, a manufacturing hub, support services for the automotive ecosystem, and a research-oriented university.

Automotive industry analyst Zhang Xiang told the Global Times that the EV industry in Southeast Asia is currently not mature, as it lacks economies of scale, upstream and downstream technologies, and related talent. Projects like the AHTV will not only help to improve the local industry level and build an industrial ecosystem, but will also integrate the advantages of China and the local market to create greater market value.