Charg­ing up the EV mar­ket

State sup­port for elec­tric ve­hi­cle pro­duc­tion has grown, but price and charg­ing sta­tions still ham­per de­vel­op­ment. By Piy­achart Maikaew

Bangkok Post - - BUSINESS -

The gov­ern­ment is of­fer­ing full sup­port to elec­tri­cal ve­hi­cle (EV) man­u­fac­tur­ers, in­clud­ing a se­ries of ex­cise tax cuts and pro­mo­tional priv­i­leges that have at­tracted car as­sem­blers to in­vest in the sec­tor as a means to prop up sales of the eco-friendly ve­hi­cles. But there are hic­cups that could po­ten­tially thwart the gov­ern­ment’s EV vi­sion as high pric­ing and job losses come into play.

The gov­ern­ment still has a long way to go to build up EV de­mand, say sev­eral an­a­lysts.

Com­mer­cial EVs are ex­pected to be launched in the Thai mar­ket by 2025, say var­i­ous Ja­panese or­gan­i­sa­tions.

Price is first when it comes to main­stream ac­cep­tance. As with most other mass mar­ket prod­ucts, an af­ford­able price is a pre­con­di­tion for the wide­spread adop­tion of EV.

The gov­ern­ment has an­nounced tax-cut­ting mea­sures, which have the ca­pac­ity to re­duce prices for con­sumers, but in­dus­try in­sid­ers are unim­pressed. In­dus­try of­fi­cials say that EVs will con­sti­tute only 1% of pas­sen­ger cars in Thai­land in the near fu­ture, given their high price tags, ef­fec­tively putting them out of reach for reg­u­lar con­sumers.

Prac­ti­cal­ity comes sec­ond. While reg­u­la­tors re­cently gave the green light to en­ergy firms look­ing to de­velop EV-re­lated fa­cil­i­ties in­clud­ing charg­ing sta­tions, they have not come up with an of­fi­cial es­ti­mate of the num­ber of sta­tions that will be in op­er­a­tion over the next few years, a key point to con­sider for any­one look­ing to buy one of these ecofriendly ve­hi­cles.

And broader pol­icy con­sid­er­a­tions rank third. The ar­rival of full elec­tric ve­hi­cles (FEV) will, in the short term, re­sult in mas­sive lay­offs in lo­cal auto parts pro­duc­ers, which need time and cap­i­tal to ad­just them­selves to pro­duce EV parts. Elec­tric car mo­tors use half a dozen parts, com­pared with hun­dreds of parts for in­ter­nal com­bus­tion en­gines (ICEs). More­over, up to 70% of parts used in EVs dif­fer sig­nif­i­cantly from parts used in oil-fu­elled coun­ter­parts.

TOO EX­PEN­SIVE

EV pro­duc­tion ap­pears to be gain­ing trac­tion as gov­ern­ment sup­port en­ables car­mak­ers to move for­ward with their busi­ness plans in this seg­ment. Pri­vate en­ergy firms can also start de­vel­op­ing charg­ing sta­tions that will help with the com­mer­cial launch of EVs in the near fu­ture.

There are four plat­forms of EV avail­able glob­ally. Hy­brid elec­tric ve­hi­cles (HEVs) and plug-in hy­brid elec­tric ve­hi­cles (PHEVs) were first devel­oped with two sys­tems, elec­tric­ity/petrol and elec­tric­ity/diesel. Bat­tery elec­tric ve­hi­cles (BEVs) were later devel­oped, which are fu­elled purely by elec­tric­ity, with fuel-cell elec­tric ve­hi­cles (FCVs) rep­re­sent­ing the lat­est EV tech­nol­ogy.

HEVs came to the Thai mar­ket for the first time in 2009-10. There have been three HEV mod­els lo­cally as­sem­bled in the coun­try: Toy­ota Camry, Honda Ac­cord and Nis­san X-Trail.

Mercedes-Benz used to as­sem­bly its BlueTec hy­brid tech­nol­ogy en­gines in Thai­land from 2013 be­fore up­grad­ing to the PHEV plat­form from 2016. The au­tomaker now pro­duces four EV mod­els to­tal.

Its Ger­man peer BMW has also lo­calised its PHEV as­sem­bly in Thai­land since 2016.

Yos­s­apong Laoonual, pres­i­dent of the Elec­tric Ve­hi­cle As­so­ci­a­tion of Thai­land, said al­though EVs are be­ing pro­duced at a mass mar­ket level, their price will still be above 1 mil­lion baht, mean­ing only high-end mo­torists can af­ford them.

Mr Yos­s­apong said most mo­torists drive cars pow­ered by en­gines sized around 1,500cc, nor­mally spend­ing 600,000-800,000 baht for their ve­hi­cles.

“It will be hard to have more EV driv­ers in the near fu­ture if buy­ers still think the cost is too high to af­ford,” he said.

The Land Trans­port Depart­ment re­ported the num­ber of reg­is­tered HEVs and PHEVs is 84,236 units as of June, while only 63 units were BEVs. This re­flects the mi­nus­cule pop­u­lar­ity of EVs in Thai­land.

“It’s a task for the Thai gov­ern­ment and car man­u­fac­tur­ers to seek ways to de­velop the lo­cal mar­ket in re­sponse to the trend of elec­tri­fied mo­bil­ity in the global au­to­mo­tive in­dus­try,” said Mr Yos­s­apong.

MORE SUB­SI­DIES NEEDED

He sug­gested the gov­ern­ment nar­row the price gap be­tween petrol-fu­elled cars and EVs to make the lat­ter more af­ford­able.

“The gov­ern­ment should is­sue some sub­sidy to make prices of EVs more at­trac­tive,” said Mr Yos­s­apong, voic­ing a sim­i­lar con­cern as other PHEV users.

Ku­nat Tha­ras­risuthi, a se­nior an­a­lyst at re­search firm LMC Au­to­mo­tive, said it had yet to see any dom­i­nant EV sub­sidy given to Thai buy­ers.

Other gov­ern­ments of­fer ex­ten­sive cash re­bates or tax dis­counts for EV buy­ers, he said.

“Con­sumers in Thai­land have only seen an ex­cise tax re­duc­tion and it is un­cer­tain how at­trac­tive fu­ture EV prices will be,” said Mr Ku­nat. It is hard to fore­cast in­ter­est in EVs should the Thai gov­ern­ment is­sue pro­mo­tional priv­i­leges,” he said.

“It will take two or three years to see how many man­u­fac­tur­ers will join the EV scheme, which mod­els will be launched and how much Thai mo­torists will take to these ve­hi­cles,” said Mr Ku­nat.

The EV price sub­sidy in China starts from 10,000 yuan (50,500 baht) per ve­hi­cle for var­i­ous EV types, ac­cord­ing to LMC’s re­search.

The South Korean gov­ern­ment of­fers a tax break worth 3.1 mil­lion won (90,500 baht) for HEVs and PHEVs and 4.85 mil­lion won for BEVs, with a sub­sidy be­tween 1-14 mil­lion won from the cen­tral gov­ern­ment.

The US used to of­fer a tax credit of US$2,500 to $7,500 (82,700-248,000 baht) for PHEV and BEV buy­ers, based on the size of the bat­tery. Some states also pro­vided add-on tax re­bates.

Ja­pan’s Min­istry of Econ­omy, Trade and In­dus­try (Meti) said its gov­ern­ment in­tro­duced an auto tax re­duc­tion of 20% for HEVs and 75% for PHEVs and BEVs, adding a sub­sidy of 200,000 yen (59,800 baht) to cre­ate more de­mand.

Satoshi Nishino, Meti direc­tor of au­to­mo­tive in­ter­na­tional trade pol­icy, said the big­gest con­cern in driv­ing EV own­er­ship is the higher price tag com­pared with ICE cars, cit­ing a 30% gap for HEVs and dou­ble the price for BEVs in Ja­pan.

Other fac­tors lim­it­ing EV own­er­ship are the short driv­ing range of the ve­hi­cle be­cause of the bat­tery and the need to de­velop charg­ing in­fra­struc­ture.

“Gen­er­at­ing new EV de­mand and de­vel­op­ing charg­ing in­fra­struc­ture should be done in par­al­lel,” he said. “Thai­land’s long-term plan is to in­stall 690 charg­ing sta­tions to be avail­able by 2036, which I think is mod­est.”

AD­JUST­ING TO CHANGE

Thanks to sev­eral Board of In­vest­ment (BoI) in­cen­tives, most of the Thai auto parts pro­duc­ers agreed they need time to ad­just to HEV man­u­fac­tur­ing be­fore com­pletely chang­ing to pro­duce pure EV.

This is a ma­jor ad­just­ment for auto parts work­ers as EVs re­quire very few auto parts com­pared with ICE ve­hi­cles.

Achana Lim­paitoon, pres­i­dent of the Thai Auto Parts Man­u­fac­tur­ers As­so­ci­a­tion (Tapma), said af­ter the as­so­ci­a­tion sees the BoI’s pro­mo­tional priv­i­leges for EVs, most auto parts mak­ers can han­dle any trans­for­ma­tion from ICE ve­hi­cles be­cause the gov­ern­ment is pro­vid­ing time for the switch and sup­port­ing HEVs at the ini­tial stage.

“HEVs are a good start­ing point for Thai auto parts mak­ers be­cause these ve­hi­cles are a com­bi­na­tion of en­gines and elec­tric­ity. Fur­ther de­vel­op­ment to PHEVs and BEVs re­quires new knowl­edge and lo­cal parts mak­ers will need to study the tech­nol­ogy,” she said.

Mrs Achana said the lo­cal parts sup­ply chain was devel­oped along with Thai­land’s au­to­mo­tive in­dus­try for al­most six decades. Lo­cal parts sup­pli­ers pro­duce more than 80% of parts for pas­sen­ger cars and pickup trucks made in Thai­land.

How­ever, she said Thai auto parts pro­duc­ers can ad­just to match EV pro­duc­tion with gov­ern­ment sup­port, par­tic­u­larly BoI in­cen­tives to en­cour­age pro­duc­tion of HEV parts in the first stage.

There are 800 Tier 1 parts firms and 1,700 firms for both Tier 2 and Tier 3, serv­ing 18 car­mak­ers in Thai­land. These auto parts com­pa­nies em­ploy more than 700,000 work­ers, said Mrs Achana.

The sup­ply chain com­bines to pro­duce a to­tal au­to­mo­tive out­put of 2.85 mil­lion ve­hi­cles a year in Thai­land.

Ad­vanced EV tech­nol­ogy will af­fect the auto parts sec­tor in the long run, par­tic­u­larly Tier 2 and Tier 3 com­pa­nies that make en­gines, moulds, ex­haust pipes, trans­mis­sions and brakes, she said.

EVs only have 18 parts per unit, but ICE cars typ­i­cally have more than 2,000 parts, said Mrs Achana.

The smaller num­ber of parts could mean a cut in the labour force, lead­ing Thai auto parts mak­ers to switch to pro­duc­ing parts for other sec­tors such as med­i­cal equip­ment and air­craft.

“Auto parts mak­ers have to be pre­pared for ad­vanced tech­nol­ogy, and Tapma is ad­vis­ing our mem­bers to con­sider sup­ply­ing parts to other po­ten­tial busi­nesses,” she said.

SOMCHAI POOMLARD

Chil­dren en­joy an EV model. EVs are ex­pected to be com­mer­cially launched by 2025. How­ever, in­dus­try of­fi­cials say their price will make them un­af­ford­able for most, mak­ing up only 1% of the mar­ket in the near fu­ture.

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