Battery electric vehicle (BEV) sales have seen exponential growth globally over the past decade, as evidenced by BEVs accounting for 70% of EV inventory in 2023. It has also been reported that leading automotive brands across the globe are set to increase their BEV delivery and sales targets over the next five years.

Looking at Southeast Asia, the growth of the electric vehicle market, favorable trade policies, as well as higher tariffs imposed in Europe and the US are prompting electric vehicle manufacturers, especially those in China, to refocus on the region as a potential growth point.

However, despite the influx of investment and interest in the passenger car market, demand for electric vehicles in Southeast Asia remains subdued. According to Deloitte’s 2024 Global Automotive Consumer Study, which surveyed almost 6,000 consumers in Southeast Asia, petrol or diesel vehicles are still largely preferred over all types of electric vehicles, including EVs.

Given these conditions, as well as the rapid pace of change and volatile technological and economic trends, it is important to take a closer look at consumer preferences to learn how manufacturers can adapt to the needs and desires of Southeast Asian consumers.

Vehicle Electrification: Practical Barriers Still Exist

Although BEVs have the potential to improve environmental sustainability and fuel economy compared to internal combustion engine (ICE) vehicles, several practical challenges reduce their attractiveness and deter consumers from choosing them. For example, while original equipment manufacturers (OEMs) lower prices and governments offer incentives, the high sticker prices of BEVs put them out of reach for a significant number of potential buyers.

In addition, there is uncertainty about the total cost of BEV ownership and resale value, as BEV software capabilities may become outdated by the time they are resold. Already more expensive 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, BEV charging times, and range concerns. Different charging standards in some countries can also cause compliance issues for BEV drivers.

Charging infrastructure is particularly difficult to address, as in many regions of Southeast Asia the number of electric vehicles per charging station is lower compared to other regions, such as Europe.

However, Southeast Asian countries are actively encouraging the adoption of electric vehicles. For example, the Singapore government is providing support to drivers to switch to electric vehicles through rebates and aims to install at least 12,000 EV chargers in about 2,000 car parks at public buildings by 2025. As of the end of May this year, there were about 3,550 publicly accessible charging points in Singapore. Still, drivers in Singapore may be discouraged from owning electric vehicles because they are more expensive to maintain than other cars.

In Vietnam, developing renewable energy sources for use in charging station systems could contribute to energy security and increase BEV adoption in urban areas. However, building a solid network of third-party charging stations in the country will take years, in part because of Vietnam’s relatively small electric vehicle market.

Environmental Impact: A Delicate Balance

Sustainability is a key factor in discussions about electric vehicles. A Deloitte report found that environmental concerns are one of the top three reasons consumers choose electric vehicles as their next vehicle. Overall, electric vehicles produce lower greenhouse gas emissions than gasoline cars, even after factoring in the electricity used to power them.

Southeast Asian governments are recognizing the environmental benefits of electric vehicles over internal combustion engines and have set ambitious national targets for vehicle electrification and emissions reductions across the region. These goals are aligned with broader national plans to integrate renewable energy sources into the energy mix. Interestingly, the region’s largest economy, Indonesia, has made the transition to electric vehicles a central part of its industry plan. Electric car production is expected to begin this year, with a goal of producing 600,000 electric vehicles by 2030.

Similar trends can be seen across Southeast Asia. In Thailand, the government aims to sell only zero-emission vehicles domestically by 2035, and in Malaysia, the National Energy Transition Roadmap (NETR) launched in June 2023 set the country on a path to net-zero emissions by 2050. Under NETR, Malaysia is taking decisive steps to electrify transport and attracting foreign direct investment in the EV value chain.

Still, the sustainability story isn’t as clear-cut. Consumers are skeptical about the environmental impact of EV use: 62% to 89% of Southeast Asian consumers surveyed by Deloitte expressed concerns about the overall environmental impact of EV batteries. For example, nickel, a raw material used in EV batteries, can be mined using processes that generate corrosive emissions. Furthermore, while battery recycling offers opportunities to recover valuable materials at the end of their life, the current efficiency of the recycling processes and the scale of the battery recycling industry limit its effectiveness.

To address consumer concerns about sustainability, EV manufacturers must be transparent about emissions throughout the value chain and regularly share relevant information. Significant public and private investments are needed to promote the sustainability of EVs.

Future Vehicle Plans: Prioritizing Quality and Connectivity

The automotive industry is also witnessing trends such as low brand loyalty and a desire for a variety of features. The Deloitte report finds that most consumers in Southeast Asia, except Indonesia, intend to change vehicle brands the next time they buy a vehicle. Product quality is at the top of the list of considerations in Indonesia, Malaysia, Thailand and Vietnam, while vehicle efficiency and price are the most important for consumers in the Philippines and Singapore, respectively.

Technology features and the desire to try something new are two of the main reasons why Southeast Asian consumers are switching vehicle brands. Those interested in connected vehicles have shown relatively high interest in features that provide updates on maintenance, road safety and traffic jams. Most consumers in the region, with the exception of Singapore, have expressed a willingness to pay more for such technologies.

When it comes to managing data for connected vehicles, consumers in Southeast Asia generally trust automakers the most, with the exception of Singapore, where consumers trust government agencies more. All of these factors point to an opportunity for automakers to meet the growing demand for technology features that can improve the driving experience in emerging Southeast Asian markets.

Vehicle Subscriptions: An Increasingly Attractive Option for Younger Consumers

The rise of vehicle subscriptions is another trend worth watching. With economic uncertainty causing concerns about financial stability, younger consumers are showing interest in giving up vehicle ownership in favor of subscription models that give them more flexibility in changing car models.

However, concerns about vehicle availability, total cost of ownership and higher monthly payments may limit the long-term attractiveness of vehicle subscriptions unless costs can be significantly reduced.

Customer-centric innovation is essential to stay ahead of the electric vehicle market in Southeast Asia

In the face of technological disruption and geopolitical uncertainty, automotive companies must closely monitor evolving consumer trends and identify disruptive opportunities. To address the practical concerns of Southeast Asian consumers, automotive companies may need to emphasize the tangible benefits of their vehicles or consider innovative approaches such as affordable vehicle subscriptions.

Financing the transition to electrification in Southeast Asia is complex and requires a joint effort. While consumers may bear some costs in the form of higher taxes, automakers and energy suppliers must also invest in the necessary infrastructure to meet the growing demand for electric vehicles.

As the region’s electric vehicle market becomes increasingly competitive, automotive players will need to think outside the box to deliver a seamless driving experience. This includes balancing price, sustainability and consumer expectations to stand out in a crowded market and drive future growth.

About the author: This article was written by Lee Seong Jin, Automotive Sector Leader at Deloitte Southeast Asia. Lee leads strategy, operations and business development for Deloitte’s Automotive Practice in the region. With over 22 years of experience in management consulting, his areas of expertise include business development, strategy, innovation and digital transformation.