Electric vehicle (EV) manufacturers are gearing up to invest over USD 20 billion in South and Southeast Asia (SSEA) to build a robust EV industry in the region, according to a report by S&P Global Ratings.
The report highlights that while the project will be costly and face typical risks associated with international investments, it could ultimately benefit EV makers, especially those from China.
Claire Yuan, S&P Global Ratings credit analyst, said, “By our estimate, rated carmakers will be spending more than US$20 billion building electric vehicle [EV] production in South and Southeast Asia for the next few years. The expansion will likely enhance the business strength of some rated entities.”
Meanwhile, Japanese carmakers, traditionally strong in SSEA's light-vehicle market, may see a decline in market share as EV adoption grows.
However, Japanese companies are expected to retain a strong position for now by relying on internal combustion engines (ICE) and hybrid vehicles, which remain popular due to limited EV charging infrastructure in the region.
Korean carmakers are positioned in between, ramping up production capacity in SSEA and adjusting between EV and hybrid models depending on demand. The investment spread over several years and shared with partners will help manufacturers manage the costs.
While this expansion requires considerable capital, S&P estimates that EV-focused capex in the region will account for less than 15 per cent of the total capex of the rated carmakers in the coming years, helping them grow in the SSEA market without excessive financial strain. (ANI)
