A former Indonesian minister of tourism once called Thailand and Indonesia ‘sparring partners’. This can be applied not only to tourism but also other sectors, especially automotive manufacturing. The shift towards electric vehicles (EVs) has changed the competition between the two countries in this sector. Both countries have enthusiastically welcomed full-battery EVs more than other types like hybrids.
Several major automotive brands, including Toyota, Nissan and Honda, have operated manufacturing plants across Southeast Asia for several decades. But in the EV sector, new players are emerging from the South Korean Hyundai Group and the Chinese SAIC-GM Group. Both have invested in Indonesia, while Thailand has instead managed to attract EV manufacturing from Europe.
Both countries are pushing for more investment in EV manufacturing. To achieve their investment targets, they have implemented a set of policies focused on attracting investments and stimulating demand for EVs in their domestic markets.
While Indonesia has both a larger population and higher domestic automotive sales, the transition to EVs has been limited by a lack of supportive infrastructure and a lower per capita incomes than Thailand. Indonesia does have one prominent advantage — an abundance of nickel ore. This is attractive in the early stages of EV development as this natural resource can be sold to battery manufacturers. For example, LG Chem is investing heavily in Indonesia to accommodate the increasing demand for Hyundai’s EVs.
Thailand has a smaller domestic market but larger overseas export markets thanks in part to its higher number of free trade agreements. Thailand also started establishing EV migration earlier than Indonesia, giving them a head start in building a better EV ecosystem.
Both countries aim to attract more investment, but the supply side of investment is limited. There are few companies with a high enough level of capital to meet the burgeoning interest in EV investment. This interest has emerged particularly in Europe, where there has been a spike in the demand for electrification.
Rather than competing to become the sole producer of EVs in the region, Indonesia and Thailand should consider cooperation — whether through a bilateral agreement or by utilising ASEAN.
Comments