EVs in India and South-east Asia could be US$1.3 trillion market by 2030: report
As demand for vehicles rises with increasing incomes in these regions, there is much potential in supporting decarbonisation needs of transport and mobility sectors
THE electric vehicle (EV) market in India and South-east Asia could potentially be a US$1.3 trillion investment opportunity by 2030, according to a report released on Friday (Sep 20) by Singapore state investor Temasek and private equity firm LeapFrog Investments.
Out of this US$1.3 trillion, about US$365 billion will be needed to meet the EV demands in South-east Asia, while close to US$900 billion will be required in India.
The amount of capital needed to support the decarbonisation needs of the transport and mobility sectors by 2030 in these emerging markets outstrips other sectors.
The report estimated that the demands of the built environment sector and energy transition will require US$1.2 trillion and US$400 billion, respectively, while the food sector will need US$500 billion.
While Asia currently accounts for 42 per cent of the world’s greenhouse gas emissions, the mobility sector makes up only around 10 per cent of the overall emissions mix.
This is much lower than in developed markets such as Europe, where emissions from vehicles are around 25 per cent of the region’s total emissions. In the United States, the percentage is higher, at 30 per cent.
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However, with incomes rapidly rising in emerging markets in Asia, it is estimated that more consumers, even among the low-income, would be purchasing a vehicle.
In India’s last financial year ending March 2024, over 28 million vehicles were bought, 12.5 per cent more than the previous year.
As for Indonesia, over six million motorbikes were sold last year, representing a growth of 19.4 per cent.
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“These trends are likely to continue, with evidence suggesting low-income consumers have highly elastic demand for mobility as their incomes improve,” read the report. Accelerating the EV transition in emerging Asia is therefore crucial to prevent the region from going down the same route as Europe and the US.
“Whether these consumers choose an EV over an internal combustion engine (ICE) vehicle largely comes down to cost. In recent years, a range of enabling activities, from scaled-up manufacturing, to innovative finance, EV-specific insurance products, government subsidies and improved charging infrastructure, have seen Asia’s electric vehicle demand surge across all categories,” stated the report.
And costs would gradually come down if private-sector financiers inject capital to fund and scale critical parts of the EV ecosystem. These include affordable vehicle segments such as electric scooters, three-wheeler taxis, and light commercial vehicles, which have already attracted significant global capital, and will require further support for decades to come.
Funding critical enabling infrastructure, such as battery-swopping stations and charging networks, are also other ways to financially support the sector’s transition. Vehicle-leasing and lending companies, auto-insurance providers and new vehicle-subscription models are also potential opportunities.
Based on the trajectory of current policies in India and South-east Asia relating to EV adoption, the level of emissions by 2050 would be reduced by only around 45 per cent, compared with a scenario where there is no advancement in EV technology. This, however, is not enough for the sector to meet the goals of the Paris Agreement, which is to limit global warming to 1.5 degrees Celsius.
The report stated that, beyond benefits to the climate, investing into the EV market in emerging Asia would also make commercial sense.
For one, the technological solutions to decarbonise mobility at scale already exist, unlike in sectors such as agriculture and the built environment.
The upfront cost of EVs across all segments has plummeted with improvement in technology and the scaling up of manufacturing capacity.
“Breaking down the components of these cost savings, or “green discounts”, for EVs provides compelling evidence of the increasing advantage of these vehicles over incumbent ICE competitors. Key constraints to adoption like upfront capital costs, range anxiety and related infrastructure penetration issues, are being rapidly addressed across all segments,” noted the report.
In addition to technological improvements, subsidies and other government support have also helped propel EV adoption, with programmes in the Philippines, Indonesia, Thailand, and India boosting demand.
The high cost of fossil fuels has also supported this trend, with electricity prices remaining relatively stable in many emerging markets even as petrol and diesel prices spike due to global conflict and currency fluctuations linked to rising global interest rates.
In fact, EV adoption has accelerated dramatically in recent years, and currently stands at a critical inflection point. In India, two- and three-wheeler EVs have already reached price tipping points under a total-cost-of-ownership model due to lower running costs, maintenance charges and subsidies.
Falling prices and improved enabling infrastructure suggest decades of rapid growth for EV sales in India, and the development of a broader EV ecosystem as complementary products such as insurance and credit adapt to the unique properties of EVs.
“As governments around the world see the economic benefits of investing in grid-connected renewables over the cost of providing ongoing fossil fuel subsidies, the electric-mobility revolution is likely to gain further momentum,” added the report.
It also noted that investors have multiple points of entering the EV market in India and South-east Asia, which is unlike wealthier nations that went on the decarbonisation pathway with EV passenger cars. These could include fleets of smaller, low-cost, last-mile vehicles that could convey commuters between public-transport points and private residences, or subscription models for commercial vehicles.
“Emerging markets are following a different path that not only opens doors to vehicle ownership for low-income families, but may well help pioneer new categories of EVs that play a role in the future mobility mix of developing markets as well,” it added.
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