The global engine of new mobility

In this latest edition of Shifting Asia, we focus on Asia’s booming electric vehicle market. Explore why Asia is well positioned to reap the benefits with the global shift to electrification.

At a glance

Asia is the beating heart of the global electric vehicle (EV) industry. It is a manufacturing powerhouse of integral parts, an innovator in automation and battery longevity, a leader in supportive government policy, and home to globally established auto brands and futuristic upstarts. The region, with a population of some 4.5 billion people, is also the largest auto market on the planet.

Asia’s electric vehicle industry is booming. Led by China, we expect EV sales in the region to grow by a 36% CAGR from 2020 to 2030.

Asia’s EV battery makers are especially well positioned to benefit from increasing global demand for EVs.

New-energy vehicles are disrupting the auto industry, and autonomous driving may disrupt the entire mobility landscape:

How big is the Asia new-mobility opportunity?

Asia’s mobility rise is being supported by a healthy combination of a vibrant supply backdrop, hearty vehicle demand and a race to reduce emissions among governments. Accordingly, the region’s EV market is set to swell over the years ahead. In 2030, we estimate China, Japan, India and Indonesia will become a nearly 20-million-unit EV market. At almost 2mn today, this represents a compound annual growth rate of 36%.

China accounts for the vast majority of the group’s forecast EV sales, with the country expected to buy nearly 18mn EVs in 2030 (from 1.8mn today). But the other markets should see rapid, double-digit growth in the years ahead, especially from 2021 to 2024. We expect Indonesia and India to witness a 97% and 59% CAGR respectively, although both are starting at a very low base, and Japan to experience a 45% CAGR.

These numbers are domestic car sales, and don’t factor in global orders for the region’s leading automakers or its supply chain. The battery market, in particular, will be a lucrative segment for Asia’s original equipment manufacturers (OEMs) during this period, in our view. So while domestic EV sales alone offer a sizable opportunity, the global supply chain market may be an even bigger area of growth for the region.

Asia’s EV industry set for take off

The global supply chain for EV manufacturing lies largely in Asia, with many mature companies and startups making batteries, electric motors, power chargers and other components as well as producing raw upstream battery materials. And even as the value chain shifts increasingly toward autonomous driving hardware—for instance, building semiconductors, cameras and sensors—it should remain centered in Asia. Software for self-driving, entertainment, over-the-air connectivity, etc. is another booming area.

Beyond 2025, the market will likely coalesce around autonomous driving. The potential emergence of robo-taxis or shared self-driving vehicles would be a disruptive force for the industry. Features of Asia’s urbanization and demographics, as well as the local success of shared mobility, suggest the region could lead the transformation of traditional mobility models through autonomous car-fleet services. Early-movers with dominant EV market shares or technology giants investing in this area could gain important advantages.

The next phase in the auto evolution

The future of mobility is an exciting area. Although cars look vastly different today than they did a century ago, their designs haven’t changed dramatically—they need fuel to run and a person to steer. The decade ahead promises a starkly different picture, with engines powered by batteries (or another carrier of energy) and navigation handled by computers. In our view, new mobility is shaping up to be a Model T moment for the auto industry.

This revamp of the entire transportation sector offers significant opportunities for auto-related industries, entire economies and investors. With first-mover advantages in several key areas of the supply chain, Asia is set to perform a key role in shaping the mobility transition from determining the mainstream design, features and price points of electric vehicles globally to potentially the brands that win market share.

China – the battery king

China has a very cost effective and comprehensive EV supply chain, covering almost every component in an EV—from the upstream raw materials, midstream battery, powertrain and other components, to the downstream charging equipment and battery recycling initiatives. Cheaper production costs and leading technology in key components, including batteries, are important advantages for Chinese equipment manufacturers and are some key drivers behind China’s rapid EV penetration, in our view.

This has also attracted global OEMs to set up joint ventures in China or shift some production for the local market to China.

Key investment takeaways

Asia’s mobility future is bright. To invest, we advise:

gaining exposure to a blend of new and mature carmakers with a big Asia presence
diversifying among supply chain leaders in battery making and software
carefully considering names based on their current valuations.

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Get it touch with us to read the full report and for further information.

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