After clean tech, electrifying vehicles is the biggest global transition theme. Currently ASEAN lags the developed markets due to lower affordability and smaller scale investments. It could benefit from battery manufacturing, EV exports and shared/micro mobility. Indonesia and Thailand are best placed due to their natural resources and large auto industry. Vietnam and Malaysia could benefit if policy is catalyzed for EV transition. Our Top Picks in the sector: INCO, MDKA, CD, GRAB, AC & GREATEC.
Indonesia best placed, Thai/Vietnam doing well
After clean tech, the biggest global theme is carmakers transitioning to green energy. In this report, we compare ASEAN’s progress in this area, especially development of electric vehicles, vs the global trend. Our key findings are: 1) ASEAN lags developed markets in mobility transition due to lower affordability and smaller scale of investments; 2) rapid and largescale EV adoption is critical for ASEAN to achieve its net zero carbon target because its transportation sector emissions are high; and 3) there is significant opportunity to develop batteries and other EV parts in ASEAN currently from a low base and emerge as a leading exporter. Among ASEAN countries, Indonesia and Thailand are the best placed for development of EV ecosystems due to natural resources and their large auto industry base. Vietnam and Malaysia could benefit if policy is catalyzed to scale up EV transition. Our Top Picks in the sector are INCO, MDKA, CD, GRAB and GREATEC, as they should benefit from transition to EVs over the long term.
EV sales rising rapidly; @ 14.4% of global sales now
Global EV sales are now over 10m vehicles pa from almost nothing in 2017. They have risen substantially due to: a) sharp increase in volume from Tesla, BYD and other leading EV makers; b) subsidies and incentives driving EV sales in the EU and China over internal combustion engine (ICE) vehicles; and c) improving EV adoption in the US. Going forward, the US could be a major driver of EV adoption due to its USD369b Inflation Reduction Act package and the unleashing of significant investment in the battery ecosystem, which will lower both the cost of new purchases and cost of manufacturing. EV adoption in Asia however is still lagging due to high upfront costs. Overall, it appears that the global auto sector is on target to reach 30%-plus electric vehicle sales as a share of total new vehicles sold by 2030. EVs make up 14.4% of global vehicle sales now.
ASEAN lagging but Indonesia could tilt favourably
ASEAN lags the developed economies and China when we compare its EV adoption, investment in charging infrastructure, policy and incentive support and development of local manufacturing systems. However, in recent times, global majors have chosen to develop a battery ecosystem in Indonesia, backed by government policy support. This could catapult Indonesia to become a major adopter of EVs as well as a battery manufacturing and export hub. The Philippines also has nickel mines and could be a battery mineral supplier. Vietnam promises to develop a local EV brand with local conglomerate Vin Group making a big investment. Thailand and Malaysia are established auto manufacturing hubs and are expected to shift their ICE manufacturing towards EV parts ecosystem.
Top Picks: CD, GRAB, GREATEC, INCO and MDKA
The mobility transition investment theme in ASEAN could be played through: a) battery minerals in INDO – INCO and MDKA; b) auto parts suppliers to EVs in MY - GREATEC; c) shared mobility providers in SG – CD and GRAB, AC in PH and d) auto ancillaries in TH – AH, SAT and STANLY. Our TP offer upside of 11-64%. We also profile a few interesting unrated stocks, which closely reflect this theme such as VinFast in VN, GENE, YNS and PMAH in MY, NANO in SG and NFCX and VKTR in INDO.
Read the full report here.