High-growth opportunities for EV in Southeast Asia and India

For global and regional investors, Indonesia and India represent the next key markets in Asia where the electric vehicle (EV) industry is primed to grow. Over the past decade, China has become Asia’s EV proving ground, achieving global leadership in manufacturing through a combination of government subsidies and vibrant industry activity.

Between 2018 and 2020, three Chinese EV manufacturers in the passenger-vehicle segment – NIO, Li Auto and XPeng Motors – listed on the New York Stock Exchange. Despite the geopolitical tension between the US and China, Li Auto’s US $1.1 billion IPO in July 2020 generated a whopping 60x return for early-stage investors like Future Capital. The world’s investment communities are ready to support the ‘electric dream’ – a transition away from internal combustion engines (ICE).

In the ‘Future of Electric Vehicles Industry’ report, DealStreetAsia and Rigel Capital will explore the contours of Indonesia and India, two huge markets that have taken the critical first steps towards realising the ‘electric dream’, and the tremendous high-growth opportunities these countries present.

Regulatory foresight

The Indonesian government has set a goal for EVs to make up 20% of domestic car production, equal to around 400,000 electric cars, by 2025. It is targeting 13 million electric bikes and 2.2 million electric cars by 2030.

The Presidential Regulation 55/2019 on electric vehicles – passed in August 2019 – has become the roadmap to enable battery-powered EVs to be made and deployed in Indonesia. It articulates the incentives for local manufacturers, with minimum rates of local components, and aims to expand the battery charging infrastructure.

Further promoting EV adoption in the business context, the Indonesian Financial Services Authority (OJK) now requires listed energy companies to present sustainability reports that measure and track their sustainable progress.

An International Renewable Energy Agency report estimates that 20% of all vehicles in Southeast Asia will be electric vehicles by 2025. 

India’s 2030 targets are to electrify 30% of private cars, 70% of commercial vehicles and 80% of two- and three-wheelers by 2030. In absolute numbers, this translates to 80 million EVs on Indian roads.

Towards these goals, India introduced the Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India (FAME India) Scheme in 2015. This provided demand incentives that – in the first phase – supported 278,000 EVs across categories like two-wheelers, passenger vehicles, light commercial vehicles and buses.

By 2019, the Indian government approved an outlay of US$1.45 billion (Rs 10,000 crore) for five years in the second phase to incentivise demand for up to 7,000 electric buses, 500,000 three-wheelers, 55,000 electric cars, and 1 million electric two-wheelers.

Home advantage

Both countries have significant automotive markets, especially in the two-wheeler segment. In 2021, Indonesia and India achieved ICE sales of 5.2 million two-wheelers and 13.5 million two-wheelers respectively.

While the passenger-vehicle industry in the two countries is dominated by foreign OEMs, both India and Indonesia are seeing the first generation of local manufacturers in the electric two-wheeler category. Though the COVID-19 pandemic hit both economies, including their automotive sectors, both countries have also begun to attract foreign investments on the EV front.

Electric two-wheeler manufacturers Volta, GESITS Indonesia, Viar Motor, Smoot and Niu have emerged over the past five years, and new players such as Alva and Electrum are entering the space as well. In India, the electric two-wheeler category has seen the emergence of ventures like Ather Energy, Ola Electric, Revolt and Bounce since 2016.

It also helps tremendously that Indonesia has the largest share of natural resources, such as nickel ore, required for battery production. In September 2021, a consortium of the Hyundai Motor Company, KIA Corporation, Hyundai Mobis, and LG Energy Solutions invested US$1.1 billion (or Rp15.68 trillion) to set up the first electric-vehicle battery factory in Southeast Asia.

Earlier this year, CATL’s subsidiary Brunp entered into a $6 billion joint venture for EV battery integration with Indonesia’s Aneka Tambang (ANTAM) and state-owned enterprise Industri Baterai Indonesia.

India, in contrast, is capitalising on an abundant supply of engineering (hardware & software) talent that is driving EV startups in the country.

It has seen two big-ticket deals in the past year, as TPG Rise Climate infused $1 billion in a Tata Motors’ EV subsidiary in October 2021. Tata Motors is the market leader in the nascent passenger-vehicle (4W) EV sector, with more than 90% share. Similarly, leading SUV manufacturer Mahindra & Mahindra has carved out an EV subsidiary that attracted $250 million from British International Investment in July.

There is also buzz around an ecosystem of nearly 500 EV startups in India. EV startups raised at least $440 million in 2021, according to India’s Commerce and Industry Ministry. India has 1.39 million electric vehicles on its roads, according to official data.

Given the 2030 targets, both conglomerates and startups are looking to realise the electric dream in India and Indonesia. It is core to the businesses and government improving the capability to meet their climate action goals.