Fitch Solutions: M’sia stands a chance to be an EV battery supplier

DESPITE being labelled as a laggard in the Southeast Asian region electric vehicle (EV) sphere, prospect abounds for Malaysia in the downstream sector of the EV industry’s battery supply chain.

According to Fitch Solutions Country Risk & Industry Research, Indonesia is expected to dominate the upstream and midstream sectors of the battery supply chain with Thailand and “to a lesser degree” Malaysia to play a key role in the downstream sector.

“Malaysia will be another source of battery cell demand going forward as the latest iteration of the National Automotive Policy (NAP), introduced in February 2021, will stimulate investments into EV production in the country going forward,” the research house pointed out in a note on global EV battery supply chain.

“(However), limited scope for incentives offered to automakers in Malaysia when compared to Thailand will cap demand for battery cells.”

On the hindsight, Fitch Solutions expects automakers such as Volvo Car Manufacturing Malaysia Sdn Bhd to offer some upside on the EV output moving forward, thus raising demand for Indonesian-made battery cells.

“The automaker, a wholly owned subsidiary of Volvo Cars, would most likely begin the assembly of EVs in Malaysia in line with its parent’s planned phase out of internal combustion engine models by 2025,” projected the research house.

“The country’s largest automaker by sales volumes, Perodua, has hinted at pivoting towards EV production in the country.”

Thus, while there is limited scope for Indonesian-made battery cells to receive sufficient demand in Malaysia and Thailand, Fitch Solutions expects Indonesian battery production operations to offer export opportunities beyond the SEA region.

Earlier, the research house noted that battery cells manufactured in Indonesia could find a vibrant market in Thailand going forward on the back of the country requiring 30% of total vehicles produced in the country to be EVs by 2030.

Thailand has attracted major automakers through generous vehicle production-focused incentives such as corporate tax breaks to entice automakers to begin EV production.

“Importantly, the Thai government has extended the incentive programme to EV component manufacturers with the aim of establishing an EV supply chain locally,” Fitch Solutions pointed out.

“We expect existing automakers in the country such as BMW and Mercedes Benz to enter into supply contracts with Indonesia-based manufacturers for the supply of battery cells.”

Battery cells are assembled into battery packs which would ultimately be installed into EVs. – March 31, 2021


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