KUALA LUMPUR: Electric vehicle (EV) related sectors will likely brace for headwinds in the near term due to a weak macroeconomic landscape, intensified competition weighing on price coupled with high production costs.
Nevertheless, the medium and long-term drive towards EVs seem inevitable, essential and promising with positive indications of national ambition and regulatory support that can drive accelerated electrification, as seen in other markets including Thailand, India and Indonesia.
"In Malaysia, the EV industry is just gearing up and will depend on an interplay of numerous factors and market dynamics," Affin Hwang Capital said.
"For example, charging infrastructure availability to address potential 'range anxiety' or 'charge rage', renewable energy additions to ensure EVs are charged with clean energy and factors affecting total cost of ownership of EVs to eventually achieve price parity and democratisation for mass adoption," it added.
Robust legally binding commitments such as regulations and standards on both the demand and supply (manufacturing) push have been regarded as catalysts to spur acceleration in EV adoption. These commitments are even being described as effective to risk fueling a global subsidy war.
On the local front, Affin Hwang said more progress and national ambition and incentives seem to be needed towards democratising electric mobility and triggering accelerated adoption.
"However, in view that more subsidy reforms, namely fuel subsidy are likely and potentially more economic incentives to spur the EV ecosystem in Malaysia in 2024, cost parity between ownership of an EV versus an internal combustion engine (ICE) could be expected to narrow, furthering EV adoption."
With passenger vehicle emissions accounting for abouit 15 per cent of all greenhouse gases (GHG) emissions globally, Affin Hwang said it is a crucial sector for the energy transition. At the current emissions trajectory and percentage share of global emissions, the carbon budget for the sector (to stay on a 1.5-degree pathway by 2050) will be reached by 2035.
"The three primary levers of full transition to zero emission vehicles, addition and full use of renewable energy to power the transportation sector, as well as sustainable manufacturing and supply chain including the electrification of cell and pack manufacturing and material extraction and processing) must be tackled simultaneously," it said. Affin Hwang also believes that it is important for Malaysian corporates to boost their environmental, social, and governance (ESG) credentials.
This is as Malaysia stands as a potential beneficiary to trade tensions amidst intensifying competition and as international automakers announce their net zero pathways and aim to reduce emissions throughout the supply chain.
For example, it said eight major automotive groups that collectively accounted for more than 40 per cent of light duty vehicle (LDV) sales in 2022 – BMW Group, Ford, General Motors, Mercedes-Benz, Renault Group, Toyota, Volvo Cars, and VW Group – have joined the Science-Based Targets initiative.
They have committed to setting science-based targets to have a clearly-defined path to reduce emissions in line with the Paris Agreement goals.
There has also been more emphasis on supply chain traceability to assist with product carbon footprint calculations, lifecycle assessment, chemical composition and sourcing composition.