The sale of battery electric vehicles (BEVs) has been seeing exponential growth globally over the last decade, evident from the fact that BEVs accounted for 70% of electric vehicle stock in 2023. Additionally, it has been reported that leading automotive brands around the world are set to increase their BEV delivery and sales targets within the next five years.
Zooming in on Southeast Asia, EV market growth, favorable trade policies, as well as increased tariffs imposed in Europe and the US are driving BEV makers—especially those from China—to redirect their focus here as a potential bright spot for growth.
However, despite the influx of investment and interest in the passenger car market, demand for BEVs in Southeast Asia remains subdued. According to Deloitte’s “2024 Global Automotive Consumer Study,” which surveyed nearly 6,000 consumers in Southeast Asia,, gasoline or diesel vehicles are still largely preferred over all types of EVs, including BEVs.
Given this backdrop, coupled with the fast-paced changes and volatility in technology and economic trends, it’s essential to examine consumer preferences in closer detail, to gain insight into how manufacturers can stay attuned to the needs and wants of Southeast Asian consumers.
Vehicle electrification: Practical barriers remain
While BEVs have the potential for improved environmental sustainability and fuel savings compared to internal combustion engine (ICE) vehicles, several practical challenges diminish their appeal and hold consumers back from choosing them. For instance, while original equipment manufacturers (OEMs) have been cutting prices and governments have been offering incentives, the elevated sticker prices of BEVs keep them out of reach for a significant number of potential buyers.
Furthermore, there is uncertainty surrounding the total cost of BEV ownership and resale value, as the software capabilities of BEVs may become outdated by the time they are resold. Already costlier than conventional ICE vehicles at the time of purchase, this could be a sticking point for price-sensitive customers in Southeast Asia.
Other obstacles include the availability of charging infrastructure, the time it takes to charge a BEV, and range anxiety. Different charging standards in some countries may also cause compatibility issues for BEV drivers.
Charging infrastructure, in particular, presents a conundrum, as many Southeast Asia geographies have a lower BEV-to-charging station ratio compared to other regions like Europe.
Nevertheless, countries in Southeast Asia are actively encouraging the adoption of BEVs. For instance, the Singapore government provides support for drivers to transition to BEVs through rebates and aims to install at least 12,000 EV chargers in about 2,000 public housing carparks by 2025. As of end-May this year, there were about 3,550 publicly accessible charging points in Singapore. Even so, drivers in Singapore could be deterred from owning BEVs, since the cost of maintaining one is higher than that of other cars.
In Vietnam, the development of renewable energy sources for use in charging station systems can contribute to energy security and boost BEV adoption in urban areas. However, it will take years to build a robust network of third-party charging stations in the country, partly due to Vietnam’s relatively small electric car market.
Impact to environment: A delicate balance
Sustainability is a key consideration in BEV discussions. Deloitte’s report found that environmental concern is one of the top three reasons for consumers to choose a BEV as their next vehicle. Generally, EVs generate lower levels of greenhouse gas emissions than gasoline cars, even after accounting for the electricity used to power them.
Southeast Asian governments recognize the environmental benefits of EVs over ICE vehicles and have set ambitious national targets for vehicle electrification and emissions reduction across the region. These targets are in tandem with wider national plans to incorporate renewable sources in their energy mix. Notably, the region’s largest economy, Indonesia, has made the transition to EVs a central part of its industry master plan. It is expected to commence electric car production later this year, with the goal of manufacturing 600,000 EVs by 2030.
Similar trends can be observed across the rest of Southeast Asia. In Thailand, the government is aiming to sell only zero-emission vehicles in the country by 2035 and in Malaysia, the “National Energy Transition Roadmap (NETR)” launched in June 2023 has set the country on a path to net zero emissions by 2050. As part of the NETR, Malaysia is making a strong push toward transport electrification and attracting foreign direct investment in the EV value chain.
Even so, the sustainability story is not so clear cut. Consumers are skeptical about the environmental impact of using BEVs: 62–89% of Southeast Asian consumers surveyed by Deloitte expressed concern about the end-to-end environmental impact of EV batteries. For example, nickel, a raw material used in EV battery production, may be extracted using processes that generate corrosive emissions. Additionally, while battery recycling offers possibilities to recover valuable materials at their end of life, the current efficiency of recycling processes and scale of the battery recycling industry limit its effectiveness.
To address consumer concerns about sustainability, BEV makers need to be transparent about emissions across the entire value chain and regularly provide relevant disclosures. Significant investment, whether public or private, is needed to advance BEV sustainability.
Future vehicle intentions: Prioritizing quality and connectivity
The automotive industry is also witnessing trends like low brand loyalty and a desire for diverse features. Deloitte’s report states that the majority of consumers across Southeast Asia, except Indonesia, intend to switch vehicle brands for their next purchase. Product quality tops the list of considerations in Indonesia, Malaysia, Thailand, and Vietnam, while vehicle performance and price are paramount for consumers in the Philippines and Singapore respectively.
Technology features and a desire to try something new are the top two reasons spurring Southeast Asian consumers to switch vehicle brands. Those interested in connected vehicles show a relatively high level of interest in features that offer updates on maintenance, road safety, and traffic congestion. Most consumers in the region, except for Singapore, expressed a willingness to pay extra for such technologies.
In terms of data management for connected vehicles, consumers across Southeast Asia generally trust car manufacturers the most, except in Singapore, where consumers trust government agencies more. All these point to an opportunity for automakers to cater to growing demand for tech-enabled features that can enhance the driving experience in emerging Southeast Asian markets..
Vehicle subscriptions: An increasingly appealing option for younger consumers
The rise of vehicle subscriptions is another trend to watch. With economic uncertainties causing concern for financial stability, younger consumers are showing interest in ceding vehicle ownership in favor of subscription models that afford them more flexibility to change car models.
However, concerns about vehicle availability, total ownership cost, and higher monthly fees may limit the long-term appeal of vehicle subscriptions unless costs can be brought down substantially.
Consumer-centric innovation required to stay ahead in Southeast Asia’s BEV market
Against the backdrop of technological disruption and geopolitical uncertainty, automotive companies need to keep a close watch on evolving consumer trends and identify breakthrough opportunities. To address the practical concerns of Southeast Asian consumers, automotive companies may need to highlight the tangible benefits of their vehicles or consider innovative approaches like affordable vehicle subscriptions.
Financing the electrification transition in Southeast Asia is complex and requires a collaborative effort. While consumers may bear some costs via increased taxes, automakers and energy suppliers must also invest in the necessary infrastructure to meet the growing demand for BEVs.
As the BEV market in the region becomes more competitive, automotive players will need to think out of the box to deliver seamless driving experiences. This includes balancing price, sustainability, and consumer expectations to stand out in a crowded market and drive future growth.
About the author: This article is authored by Lee Seong Jin, automotive sector leader at Deloitte Southeast Asia. Lee leads the strategy, operations, and business development of Deloitte’s automotive practice in the region. With more than 22 years of experience in management consulting, his areas of expertise include business growth, strategy, innovation, and digital transformation.