Industrial dependencies and sovereignty in Electric Vehicle production : issues for South-East Asia

Abstract:

The energy transition has now become a global imperative in response to the climate emergency, with the electrification of mobility - particularly in the automotive industry - playing a central role in reducing CO2 emissions and improving air quality. Many countries now seek to play a key role in the production of components essential to vehicle electrification, both to adapt their own fleets and to develop industries in response to growing global demand. Today, China is the leading nation in the global automotive industry, producing the most electric vehicles (EV), hosting some of the largest producers of electric vehicles and key components. The investments in technology and human resources made by the government and companies over the past decade have positioned China as the leader in the EV supply chain, from extraction to production. In this context, South-East Asian countries, with an established history as manufacturing hubs for lead firms from the Global North, China, or Japan, and significant pollution problems from widespread use of combustion-powered vehicles, are at the forefront of this transition. These countries thus offer a valuable context to study the challenges and stakes of shifting towards electric mobility.

This study seeks to answer the following research question: what are the implications of specialisation in the production of electric vehicles and their components for industrial dependency and regional hierarchies in South-East Asia, particularly in the context of supply chain security and industrial sovereignty? It aims to explore how the global energy transition, driven largely by the North, is creating new industrial opportunities for countries in the South, such as those in South-East Asia. At the same time, the study examines how these countries are attempting to move beyond their traditional roles as peripheral actors by levering regional automotive specialisations in both South-East Asia and East Asia, positioning themselves as key players in the evolving electric vehicle industry.

This study examines, from a comparative perspective, the forms of integration of three selected countries, namely Indonesia, Malaysia and Thailand, into the global value chains (GVCs) for electric vehicles. We draw on official documents (statistics, national plans, promotional materials, and reports from private companies) and interviews conducted in Thailand between January and March 2024. These interviews included public and private stakeholders: researchers, sales and communications representatives in dealerships and assembly plants, government representatives, and members of chambers of commerce. We pay attention to the state strategies through analysing government policies and initiatives to position these countries as a regional hub for the electric automotive industry. We also examine the strategies of firms through a study of five automotive suppliers chosen for their geographical origins (Thailand, China, Germany, Japan) and production approaches. The analysis also includes trade data classified according to the United Nations (UN) Comtrade HS (Harmonised System) codes, covering raw materials (nickel, lithium, graphite, cobalt), components (batteries and their cells), automotive parts (electric motors, static electrical converter, battery management system), and finished products (hybrid and electric cars). This allows us to highlight three different dimensions that explain the differentiated integration of the countries in GVCs : 1) government policies supporting the automotive sector; 2) the spatial organisation of their production system; 3) local and international cooperation and competition relations. 

The results of this study highlight a strategic complementarity between model diversification (Thailand) and electric specialisation (Indonesia and Malaysia), while also underlining common challenges. In Thailand, for example, several types of electric cars are produced (hybrid, rechargeable hybrid, 100% electric), thanks to a multitude of national and international players, a solid base of local suppliers built up since the 1960s, and an advantageous location that has made the country a land-based logistics hub, but one that is also expanding towards maritime logistics with the rapidly growing port of Laem Chabang. Carmakers' production choices have made Thai and regional society reluctant to transition to these vehicles, due to reasons such as vehicle cost, purchase subsidies, consumer mistrust, and a lack of recharging infrastructure. Indonesia and Malaysia have announced their intention to produce 100% electric cars, drawing on their specific strengths: Malaysia's highly developed electronics industry and strategic position at the heart of international shipping flows, and Indonesia's extraction of key raw materials for lithium batteries.

In all three countries, value capture and R&D strategies are being implemented to boost innovation and local engagement. These strategies are reflected locally through skills transfers, technology transfers, foreign direct investment (FDI), and joint ventures. However, common challenges persist, including dependence on East Asian countries (China, Japan, and South Korea), which limits the development of a 100% local supply chain. These challenges include a lack of skilled labour, limited investment in R&D, dependence on FDI, and a lack of initiative from local actors.

This article has several practical and theoretical implications. From a practical standpoint, the results emphasise the importance of strengthening local production and innovation capacities in South-East Asian countries to meet the challenges of the energy transition and secure supply chains. Public policies must support this dynamic, particularly in terms of workforce training, investment in research and development, and the construction of appropriate infrastructures. Theoretically, the study contributes to understanding the mechanisms of industrial specialisation and regional hierarchy in the context of the global energy transition, shedding light on strategies for integrating electric vehicles into global value chains. It also explores how developing countries can position themselves to capitalise on this new industrial dynamic while minimising their dependence on the economic powers of East Asia, including China and Japan.