Electric vehicles (EVs) have increasingly made their presence felt within ASEAN; in particular, investment in EV production is growing fast in Thailand and Indonesia. Currently, Thailand has an edge over Indonesia in terms of EV manufacturing, thanks to its complete auto-parts supply chain and higher production capacity which leads to economies of scale. However, these advantages may disappear if Indonesia becomes a production base of Li-ion batteries for battery electric vehicles (BEVs).
As Indonesia is the world's largest source of nickel with a quarter of the global market share， investors from China, South Korea, Japan and the United States expressed their interest in investing in the production of lithium-ion batteries in Indonesia, which would put Thailand at a disadvantage. At present, battery manufacturers in Thailand have to import battery cells for assembling, and domestic Ni-MH battery factories can only supply to some hybrid vehicle manufacturers.
In addition, the number of consumers who can afford automobiles in Indonesia is greater than that of Thailand, reflected by the statistics that there are 1,874,000 adults with assets of more than 100,000 U.S. dollars in Indonesia, compared with 1,267,000 counterparts in Thailand. Therefore, Indonesia has become the country with the highest domestic automobile sales in ASEAN, with an average annual sales volume of over 1 million vehicles, while its automobile production capacity has continued to grow year by year.
For this reason, KResearch is of the view that Thailand must accelerate its efforts to adjust its strategies in order to cement its strengths and prevent investment from being diverted away from Thailand to Indonesia over the next five years. Two important strategies that should be considered are: 1) Building additional auto-parts supply chains for EVs. Although Thailand is unable to produce battery cells，the country may attract investment for electric motors, electronic control parts and other battery assembling parts which accounted for 25 percent of the cost of production of BEV vehicles; 2) Building export opportunities for BEVs, because the Thai BEV market is smaller than Indonesia's. This could be achieved by expediting the signing of a free trade agreement with the European Union and joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) to explore foreign markets, as well as reducing export costs through infrastructure investment to increase the speed of the transportation of vehicles to the Middle Eastern, African and European markets.
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