MARKET DATELINE Regional Thematic | August 2021 PP19489/05/2019 (035080)
The Future Is Is ASEAN Ready? EV
Regional Thematic
20 August 2021 Electric Vehicles
The Future Is EV: Is ASEAN Ready?
In this report, we focus on the motor vehicles segment of travel and Analysts the transition to zero-emission vehicles (battery electric vehicles and fuel cell vehicles). Carbon dioxide (CO2) reduction targets should increase the demand for low-carbon electric power. Eddy Do Wey Qing Personal vehicle ownership has emerged as more lasting winner, from +603 9280 8856 the COVID-19 pandemic. Personal vehicles account for 61-82% of all [email protected]
kilometres travelled. The lifecycle assessment (LCA) approach. A shift to CO2 emissions
measurement criteria is based on the entire vehicle lifecycle, from Chatree Srismaicharoen manufacturing, to driving, batteries replacement, and to disassembly. +66 2088 9743 The LCA has concluded that the environmental impact of battery electric [email protected] vehicles is significantly lower than that of a vehicle with an internal combustion engine (ICE). Shekhar Jaiswal Government polices world-wide to drive electric vehicles (EVs) +65 6320 0806 adoption. The policy is shifting towards a low-carbon future through [email protected] measures such as a ban on the sale of ICE cars and the adoption of EV. The trend towards EVs aims to reduce and eventually eliminate emissions from cars and trucks. The transportation sector accounts for Andrey Wijaya 14% of total global greenhouse emissions. The world emits around 50bn +6221 5093 9846 tonnes of greenhouse gases (GHG) each year, as measured in carbon [email protected]
dioxide equivalents (CO2 equivalent). Of the 50bn tonnes, the transportation sector emits 7bn tonnes of GHG. Within the sector itself, cars emit 47% of the total, or 3.3bn tonnes of GHG, and trucks emit 25% or 1.75bn tonnes of GHG – these altogether come up to 5bn tonnes of GHG.
To reduce CO2 emissions: i) Battery EVs (for personal auto vehicles - smaller vehicles on short-distance city driving) and ii) hydrogen - the means by which to reduce commercial vehicles' CO2 emissions (larger vehicles on Contents Page no. long-distance driving). As trucks undergo greater electrification, we expect to see more fuel cell vehicles (FCV) technology in mid-sized and larger How EVs link back the efforts to control GHG 2 trucks, and more EV technology in small trucks and passenger cars. Electric vehicles 9 Cutting commercial vehicles’ CO2 emissions (H2) 13 CO2 reduction targets should increase demand for low-carbon electric Regulatory environment 15 power. Renewable energy (RE) is likely to have an advantage in the Indonesia 15 electrification effort. Environmentalists are focused on electrification as the Malaysia 19 fastest way to decarbonise the energy system. The electrification of Singapore 22 everything — and its accompanying grid enhancements — seems to be the trend. The customers are concerned about RE. Therefore, the electrification Thailand 30 of everything – even if theoretically fuel-neutral – is likely to result in a The EV supply chain 35 greater emphasis on RE. EV vs ICE: What makes up an EV 35 Leading global suppliers of EV components 39 Our eight actionable ideas on the EV theme in our region are shown in The nickel story in Indonesia 39 the table below and more details beginning with page 75. The semiconductor angle 43 The major players 45 The charging infrastructure in ASEAN 46
The “Chicken & Egg” dynamic 46 Indonesia 46 Malaysia 47 Singapore 48 % Upside P/E (x) P/B (x) ROAE (%) Yield (%) Company Name Rating Target Thailand 52 (Downside) Dec-21F Dec-21F Dec-21F Dec-21F EV principals 57 Astra International Buy IDR6,900 37.3 11.4 1.2 10.9 5.6 Volvo 57 ComfortDelGro Buy SGD2.00 23.5 18.4 1.3 7.2 2.7 Tesla 59 Global Power Synergy Buy THB88.00 12.1 27.2 2.1 7.8 2.0 PTT Oil and Retail Business Buy THB34.00 21.4 29.8 3.4 14.4 0.9 Toyota 63 Sime Darby Buy MYR2.70 28.1 12.0 0.9 7.8 5.2 Mercedes Benz 65 ST Engineering Buy SGD4.50 10.0 23.1 5.4 23.6 3.6 ASEAN power grids 67 UMW Neutral MYR2.94 0.9 12.1 0.8 7.0 2.1 Abbreviations used 74 Vale Indonesia Buy IDR6,200 21.6 25.5 1.6 6.6 - Appendix: Details of our actionable ideas 75
Source: Company data, RHB
See important disclosures at the end of this report 1 Market Dateline / PP 19489/05/2019 (035080)
Electric Vehicles Regional Thematic
20 August 2021 How EVs Link Back The Efforts To Control GHG Adoption of net-zero emission targets across many countries The Paris Agreement, adopted in Dec 2015 under the United Nations Framework Convention on Climate Change came into force in Nov 2016 (the Paris Agreement). In the Paris Agreement, countries agreed to keep the increase in the global average temperature to well below 2.0°C above pre-industrial levels, and to pursue efforts to limit the temperature rise further to 1.5°C. With the push to reduce GHG, currently over 100 countries have set net-zero emissions or neutrality targets.
Figure 1: Countries in ASEAN that signed and acceded to the Paris Agreement Percentage of Date of ratification, greenhouse Date of Date of entry acceptance, approval, gases for signature into force or accession ratification Malaysia 0.52% 22 Apr 2016 16 Nov 2016 16 Dec 2016 Thailand 0.64% 22 Apr 2016 21 Sep 2016 4 Nov 2016 Singapore 0.13% 22 Apr 2016 21 Sep 2016 4 Nov 2016 Indonesia 1.49% 22 Apr 2016 31 Oct 2016 30 Nov 2016
Source: List of parties to the Paris Agreement
Carbon pricing. The momentum is growing among countries and businesses to put a price on carbon pollution as a means of bringing down emissions and drive investment towards cleaner options. A price on carbon helps to shift the burden for the damage back to those who are responsible for it, and who can reduce it. Instead of dictating who should reduce emissions where and how, a carbon price gives an economic signal – and polluters decide for themselves whether to discontinue their polluting activity, reduce emissions, or continue polluting and pay for it. In this way, the overall environmental goal is achieved in the most flexible and least-cost way to society. The carbon price also stimulates clean technology and market innovation, fuelling new, low-carbon drivers of economic growth. The LCA approach. A shift to CO2 emissions measurement criteria is based on the entire vehicle lifecycle, from manufacturing, to driving, batteries replacement, and to disassembly. The LCA has concluded that the environmental impact of battery electric vehicles is significantly lower than that of a vehicle with an internal combustion engine (ICE). Government policy to drive EV adoption. The policy is increasingly shifting towards a low-carbon future through measures such as a ban on the sale of ICE cars (more countries are now banning the sale of gasoline or diesel vehicles from 2025) and the adoption of EV. i. In Europe, auto original equipment manufacturers are under pressure to cut CO2 emissions, with a c.20% reduction needed in 2021 vs 2019 levels. In China, the central government increased its target for new-energy vehicles in 2025 from 20% to 25% (vs 4.3% in 2019). Penalties for missing these targets in both regions could be severe: Financial penalties in Europe and the revocation of car manufacturers' licenses in China; ii. Norway plans to eliminate new petrol/diesel vehicle sales by 2025, which is four years from now. Several other countries plan to do the same thing by 2030. Japan plans to do so by 2035. The current ICE cars will still be driven – but one will not be able to buy newly manufactured ones; iii. Many cities plan on restricting the use of petrol and/or diesel vehicles by 2030. The Fit for 55 package: On 15 Jul, both EU and China unveiled sweeping plans to cut GHG emissions. The Fit for 55 package (aimed to reduce emissions by 2030 by 55%, compared to 1990 levels), which transposes into law the Green Deal objectives on Europe's climate neutrality, will cause a massive change – not only for utilities and power generation but also for several other industries. We anticipate huge cost increases, as a result, for both industry and consumers. Fit for 55 introduces a globally unprecedented carbon border adjustment mechanism (CBAM) for pricing imported carbon, it includes: i) Major overhaul of the Emissions Trading System (ETS) to extend carbon pricing to shipping, aviation, transport, and buildings; ii) accelerating the development of the renewable energy sector; iii) banning sales of new fossil-fuel cars after 2035; iv) providing social support for EU citizens affected by the green transition; and v) speeding up the modernisation of the building stock.
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Electric Vehicles Regional Thematic
20 August 2021
EV adoption has gone from a niche idea to mainstream policymaking in recent years, and numerous governments currently have policies in place to incentivise consumers to buy EVs. We expect such efforts to continue, as the visible hand of policymaking (including EV purchase incentives, charging stations, etc) will remain important in the foreseeable future. Battery reuse and recycling will be imperative to enable truly sustainable electric mobility. i. There still remain several hurdles for EV makers. As of Jul 2021, the global chip shortage situation was still severe. For the manufacturers, growth rates are determined by the slowest part in their supply chain. Besides a chip shortage as of mid-2021 there was also a shortage of the cells used to make the large batteries each vehicle needs; ii. Overall, the EV adoption offers huge upside to the battery supply chain. The electrification of transport from cars and trucks, to trains, ships, and planes will drive huge upside to battery makers, fuel cell makers, and associated supply chains. Fuel cells and hydrogen will also play a significant role in longer-range, heavier commercial vehicles such as long-distance heavy goods trucks and buses, as well as in energy storage. While batteries are far more efficient and more competitive for short-term storage, hydrogen can be more economical for long-term seasonal storage. As such, hydrogen is still a key enabler of the electric revolution. RE (wind, solar, hydro or nuclear) is the most cost-effective way to decarbonise the power sector and, by extension, the transport sector – whether through EVs (for cars and SUVs) or green-hydrogen-powered fuel cell trucks (for commercial vehicles). We expect cost decreases to continue, driven by a tenfold increase in the capacity of solar and wind and ongoing technological progress. The successful rollout of EVs will require further investments in charging networks and in the grid infrastructure.
Environmental, Social, and Governance (ESG) Since there will be costs associated with this transition from ICE to EVs and fuel cell- powered vehicles using hydrogen, the elimination of coal and reliance on RE, including the adoption of carbon pricing, ESG is becoming critical for any valuation analysis as an additional factor that has a material impact on share prices. The material ESG issues that impact a firm’s valuation vary by industry. For example, GHG emissions are material for an electric utility company, but not for a financial services firm. Supply chain management is material for an apparel company using low-cost workers in developing countries, but not for a pharmaceutical player.
Figure 2: Blackrock – a fundamental reshaping of finance In Jan 2020, BlackRock – the world’s largest asset manager with USD6.47trn in AUM as of 21 Mar, made an announcement that seemed like a tipping point for ESG. BlackRock’s CEO Larry Fink sent a letter to corporates titled “A Fundamental Reshaping of Finance” in which he highlights how the climate is increasingly seen as a defining factor of long-term prospects. He states “awareness is rapidly changing, and I believe we are on the edge of a fundamental reshaping of finance. The evidence on climate risk is compelling investors to reassess core assumptions about modern finance.” Since finance reshapes itself to consider long-term risk, Mr Fink estimates “in the near future – and sooner than most anticipate – there will be a significant reallocation of capital” since the value of assets will be reassessed. Also “every government, company and shareholder must confront climate change” BlackRock outlined two requests to companies: i. Publish a disclosure in line with industry-specific sustainability accounting standards Board guidelines by year-end, and/or disclose a similar set of data in a way that is relevant to your particular business; ii. Disclose climate-related risks in line with Task Force on Climate-related Financial Disclosures recommendations, including plans for operating under a scenario where the Paris Agreement’s goal of limiting global warming to less than 2°C is fully realised. These disclosures will be reviewed by BlackRock to assess whether companies are properly managing their sustainability risks. If efforts are sufficient, the letter mentions that BlackRock will be increasingly disposed to vote against the management and board of directors.
Source: Blackrock
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Electric Vehicles Regional Thematic
20 August 2021
Global power generation mix (%) In 2000, 20% of the global power generation mix consists of renewable power generation sources (mostly hydro) and by 2020 the percentage grew to c.34 (comprised of wind, solar or hydro). Various estimates point to an at least 80% share by 2050. In the International Energy Agency’s (IEA) scenario, 630GW of solar photovoltaic (PV) and 390GW of wind will need to be added annually by 2030. Solar and wind capacity additions already more than tripled between 2010 and 2020, and are expected to further increase by 2030, as long as governments provide the right support and conditions. Many developing countries are only now starting to scale up to their RE potential. In the IEA’s net-zero scenario, electricity demand is 2.5x today’s levels by 2050. Also, on the agency’s pathway to net-zero emissions by 2050, there is no investment in new coal, oil or gas supply. According to IEA, reaching net-zero emissions will require investments in clean energy and energy infrastructure to triple by 2030. The IEA has also estimated that 14m new jobs will be created from investments in clean energy by 2030, and another 16m from investments in efficient appliances, electric and fuel cell vehicles, and building retrofits and energy-efficient construction. Only about 5m jobs will be lost, mostly in the fossil fuel industry. Governments will need to ensure these workers and their communities receive support, social safety nets, and new investments.
Figure 3: Global power generation mix (%)
2000 2010 2015 2020 2030F 2040F 2050F Oil 7% 6% 4% 2% 1% Gas 20% 18% 18% 18% 18% 17% 3% Coal 35% 35% 35% 33% 21% 16% 3% In 2020, c.24% of the global power Nuclear 18% 18% 14% 13% 13% 10% 10% generation mix was from renewale power Solar 1% 4% 7% 10% 16% 30% generation; this share is expected to rise to above 80% by 2050 Wind 2% 5% 7% 15% 18% 30% Hydro 20% 20% 20% 20% 20% 20% 20% Energy storage solutions 2% 3% 4% TOTAL 100% 100% 100% 100% 100% 100% 100%
Source: Statistical review of world energy by BP, IEA, RHB
As shown in the table above, energy storage solutions are also critical to enable clean power. As the sun does not always shine and the wind does not always blow, energy storage solutions from batteries and other technologies are critical to enabling RE, which in turn is critical to the decarbonisation of power.
Figure 4: Key milestones to IEA’s pathway to net zero
The IEA’s roadmap shows the necessary speed, scale, and support needed to deliver a net-zero power sector
Source: International Energy Agency
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Electric Vehicles Regional Thematic
20 August 2021
Electricity consumption in ASEAN to increase exponentially. According to a study from Princeton University, electrifying nearly all transport and buildings could contribute to doubling or more of the amount of electricity used in the US by 2050. That trend may quite likely catch on across the world. Essentially – according to a report from the Wall Street Journal on 15 May – the electrification of (almost) everything is a theme that makes much sense and seems doable. If we are going to rely more on electricity in ASEAN, there should be more demand for electricity from renewable sources, and also more investments in the grid. The power grids in ASEAN will be tested to see if they can support more capacities. In Europe, power grid operators are exploring the use of hydrogen as a means to store the energy generated by wind and solar, according to a study carried out by the Intelligent Energy Association. For instance Northern Europe has already shown the path, with its successful Nord Pool system. Nord Pool is an efficient “imbalance” market: An auction-based power exchange that interconnects the grids of nine countries and allows the trading of power in order to lower costs and prevent brownouts. For example, when Denmark’s wind output exceeds its electricity demand, it sells excess power to neighbouring countries like Norway. Conversely, when the wind is ebbing, Denmark purchases electricity from Nord Pool. Similar large regional or inter-country transmission wires will be the new pipelines of national and international energy trade. Because weather patterns can be localised and electricity sources diverse – based on differing locations and time zones – more grid connections can spell increased energy security, where additional unaffected utilities can potentially supply more power to a disrupted market. RE is likely to have an advantage in the electrification effort. For one thing, environmentalists are focused on electrification as the fastest way to decarbonise the energy system. The electrification of everything — and its accompanying grid enhancements — seems to be the trend. The customers are concerned about RE. Therefore, the electrification of everything, even if theoretically fuel-neutral, is likely to result in a greater emphasis on RE.
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Electric Vehicles Regional Thematic
20 August 2021
People are travelling more, and increasing their reliance on motor vehicles The data in Figure 5 pertains to the US only (which has adequate highway infrastructure). Nevertheless, we consider it an accurate representation of the trend that is taking effect on a global scale. From walking up to 5km in 1900, Americans are now walking up to c.500m per day per capita. The distance travelled by bicycle and walking was included as a reference. Travel by horse was replaced by that on motor vehicles (we do not have data on travel by rail or ship). Overall, the total daily km per capita travelled increased constantly over the past 120 years, with motor vehicles providing the most km of transportation. The COVID-19 pandemic of 2020 resulted in a decrease in airplane travel. Industry experts have forecasted that business travel will not return to the levels before the pandemic. Also COVID-19 resulted in an increase in the use of private cars, and this trend is expected to continue.
Figure 5: Daily travel per capita in the US (1900-2020)
Overall, every year, distance travelled increases in the US on a per capita basis. We assume this trend applies on a global basis. Motor vehicles (cars and motorbikes) are the most used means of transport, and we expect this trend to remain in place
Source: US Department of Transportation, RHB
While motor vehicles will remain the means of transport most used, industry experts expect the distance per capita travelled by train to equal or even surpass that travelled by air. For instance, the German Government declared railways crucial to its plans to cut carbon emissions from travel by air. As a result, green electricity will be provided for trains or various rapid transit systems within major cities. The main polluters where travel is concerned remain airplanes and motor vehicles. Airplanes will continue to focus on reducing emissions from flights instead of using carbon offsets for climate commitments, experts and environmental campaigners estimated. Also, business travel was reduced during the pandemic, and analysts estimate it will remain low – as face-to-face meetings are increasingly being replaced by online formats. In this report, we focus on the motor vehicle segment of travel and the transition to zero-emission vehicles.
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Electric Vehicles Regional Thematic
20 August 2021
Transportation sector accounts for 14% of global GHG emissions To prevent severe climate change, we need to rapidly reduce global GHG emissions.
The world emits around 50bn tonnes of GHG each year as measured in CO2 equivalent. The chart below shows the breakdown of GHG emissions in 2019. Of the 50bn tonnes, the transportation sector emits 7bn tonnes of GHG. Within the sector itself, cars emit 47% of the total, or 3.3bn tonnes of GHG, and trucks emit 25% or 1.75bn tonnes of GHG – these altogether come up to 5bn tonnes of GHG. The trend towards EV aims to reduce and eventually eliminate these emissions from cars and trucks.
Figure 6: Breakdown of GHG emissions
Transport accounts for 14% of emissions, of which cars and trucks account for 47% and 25%. Power generation accounts for c.25% of total GHG emissions
Source: Climate Watch, RHB
The transition to zero-emission vehicles (ZEVs) We have come a long way. Although we can learn from the past, low-carbon transitions that we face currently have some special attributes separating them from historic examples of transitions among means of transportation. For example, while many (but not all) historical transitions were opportunity-driven, low-carbon transitions are problem-oriented.
Figure 7: Transition from non-farm horses to passenger cars happened over several decades. Currently the transition is towards low- and ZEVs
Source: Climate Watch, RHB
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The personal vehicle accounts for 61-82% of all km travelled The graph below corroborates the fact that personal vehicles account for the highest percentage of distance travelled.
Figure 8: Passenger transport modes by region
The personal vehicle accounts for 61- 82% of all distance travelled: 76% in Europe and 82% in the US vs 61% in China and 62% in Japan
Source: Eurostat, Bureau of Transportation Statistics, National Bureau of Stats of China, MLIT Japan, RHB
Overall motor vehicle production in 2020 i. Cars are defined as motor vehicles with at least four wheels and no more than nine seats (including the driver's seat) that are used to transport passengers; ii. Commercial vehicles include motor vehicles with at least four wheels that are used to transport goods or passengers and weigh more than 3.5 tonnes. Individual figures for light commercial vehicles, buses and coaches, and heavy commercial vehicles have been added up.
Figure 9: Motor vehicle production volume in 2020
China, the world’s biggest manufacturer, produced c.25m motor vehicles in 2020 (19.9m cars and 5.2m commercial vehicles) The US produced 8.8m motor vehicles (1.9m cars and 6.8m commercial vehicles) Japan produced 8.0m motor vehicles. The country manufactured 6.9m passenger cars and c.1.1m commercial (trucks and busses) vehicles
Note: Data as of Mar 2021 Source: Statista, RHB
To reduce GHG, the goal is to reduce or eliminate CO2 emissions from both cars (through EVs) and commercial vehicles (through fuel cell trucks).
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Electric Vehicles Regional Thematic
20 August 2021 Electric Vehicles
In 2020, EVs accounted for about 5% of global car sales at 3.1m units sold. This was forecasted to increase to over 5m units, indicating growth of 66% YoY and accounting for 7% of new car sales worldwide in 2021F. Research firm Canalys forecasts the number to climb in the coming years, with 30m EVs to be sold in 2028F. EVs are also expected to represent nearly half of all passenger cars sold globally by 2030.
The rapid growth of EV sales will continue, as more models are launched and governments set and maintain policies to stimulate production and sales.
There still remain several hurdles for EV makers: i. As of July, the global chip shortage situation was still serious. For the manufacturers, growth rates are determined by the slowest part in their supply chain; ii. There was also a shortage of the cells used to make the large batteries each vehicle needs; iii. Reducing “range anxiety” with increases in performance and charging infrastructure will be vital to entice more buyers to opt for EVs.
The 14 Jul report by the European Commission (EC) which amended the 2019 EU CO2 emission regulation for passenger and light commercial vehicles sets new CO2 emission targets for 5-year periods (eg 2020-2024, 2025-2029, and from 2030 onwards both for newly registered passenger cars and newly registered vans).
Figure 10: EU fleet-wide CO2 targets (% reduction from 2021 starting point)
2025 2030 The 2025 and 2030 targets are defined Passenger Cars 15.0% 37.5% as a percentage reduction from the EU- Vans 15.0% 31.0% fleet wide in 2021
Source: 2021 European Commission (page 60), RHB
All new cars registered as of 2035 will be zero-emissions. To ensure that drivers are able to charge or fuel their vehicles at a reliable network across Europe, the revised Alternative Fuels Infrastructure Regulation will require member states to expand charging capacities in line with zero-emission car sales, and to install charging and fuelling points at regular intervals on major highways: i. Every 60 km for electric charging; ii. Every 150 km for hydrogen refuelling. Measuring emissions/excess emission premium. If the average specific emissions of a manufacturer exceed its specified target in a given year, an excess emission premium will be imposed. The premium is set at EUR95.00 per gram of CO2 per km exceedance for each vehicle in the manufacturer’s fleet of new vehicles registered in that year.
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Electric Vehicles Regional Thematic
20 August 2021
Figure 11: Costs for original equipment manufacturers (OEM)
The costs look reasonable over a 10- year period
Source: 2021 European Commission (page 60), RHB
OEM plans: Information on recent announcements by car manufacturers. For instance, Volkswagen Group intends to have its all-electric vehicles account for over 70% of European sales by 2030.
Figure 12: Announcement of car manufacturers on zero-emission vehicles
This table presents information on recent announcements by car manufacturers, on the basis of publicly available information and sources
Source: 2021 European Commission (page 240), RHB
To define the terminology in this table above: i. Plug-in hybrid electric vehicles (PHEVs) use batteries to power an electric motor and another fuel such as gasoline, to power an ICE. The vehicle typically runs on electric power until the battery is nearly depleted, and then the car automatically switches over to use the ICE; ii. EV and BEV are electric vehicles and battery electric vehicles; iii. Hybrid electric vehicles (HEVs) run on both an ICE and an electric motor that uses energy stored in a battery. Unlike most electric vehicles, however, HEV drivers charge their batteries via regenerative braking; iv. A zero-emissions vehicle or ZEV is a vehicle that never emits exhaust gas from the onboard source of power.
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Electric Vehicles Regional Thematic
20 August 2021
Information on recent announcements by car manufacturers, per data from the 2021 EC document, is as below:
Volvo Cars i. Fully electric by 2030, phasing out any car in its global portfolio with an internal combustion engine, including hybrids; ii. By 2025, 50% of global sales will comprise fully electric cars, and the remainder will consist of hybrids.
Figure 13: Volvo C40 Recharge – a pure electric car
The future of Volvo Cars is electric, and the new Volvo C40 Recharge is the latest manifestation of its commitment to a zero emission future
Source: Volvo cars 2021
Toyota i. To reduce the CO2 emissions from vehicles by 90% by 2050, compared to the levels in 2010. This will help promote the development of next-generation vehicles with low- or zero-carbon emissions: HEV, PHEV, BEV and fuel cell EV (FCEV), making conventionally powered models more fuel-efficient; ii. By 2030, to annually sell more than 5.5m EVs around the world, including more than 1m zero-emission vehicles (battery electric and fuel cell electric vehicles).
Figure 14: Toyota’s EV strategy
Toyota’s strategy includes selling >5.5m EVs, including 1m zero-emission vehicles per year by 2030
Source: Toyota
Daimler i. 2025: Up to 25% of unit sales to be accounted for by all-EVs (depending on the framework conditions); ii. Daimler official website states: “We are convinced that diesel will continue to be a fixed element of the drive-system mix in the future, not least due to their low CO2 emissions. It makes more sense to improve diesel than to ban it, because the biggest lever for reducing consumption and emissions is still the energy-efficient combustion engine. It will remain the backbone of our mobility for many years to come.”
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20 August 2021
Figure 15: The global Mercedes-Benz supply chain is becoming CO2 neutral
Daimler’s milestones on the way to the CO2-neutral vehicle fleet (Ambition 2039)
Source: Daimler
Stellantis (merger of Fiat Chrysler Automobiles and Groupe PSA) i. 70% of the vehicles sold in EU in 2030 to be EVs (including PHEVs); ii. The group has announced that an electrified version (BEV and PHEV) is to be offered for 98% of its models in Europe by 2025. By 2030, there will be at least one battery- electric version for all models.
BMW i. Fully electric models to account for at least 50% of global deliveries by 2030; ii. Mini brand: MINI to become a fully electric brand by the early 2030s; iii. BMW is aiming to have more than 7m EVs on roads by the end of the decade – two- thirds of them being pure-electric models. It will launch five pure-electric vehicles by the end of 2021 and additional models in the coming years, resulting in a portfolio of 25 EV models by the end of 2023.
Volkswagen Group All-electric vehicles are expected to exceed 70% of European sales by 2030. To achieve this, Volkswagen will bring out at least one new BEV model every year (according to its ACCELERATE Strategy). Volkswagen will stop selling cars with combustion engines in Europe by 2035: i. Audi brand: By the middle of the coming decade, Audi is to sell about 1m EVs each year. Starting in 2026, Audi will only launch new all-electric models on the global market, and will phase out the production of the last internal ICE vehicles by 2033; ii. Porsche brand: All electrified by 2030.
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Cutting Commercial Vehicles’ CO2 Emissions Case study: Japan. Japan’s target of having zero GHG emissions on a net basis by 2050 brings it in line with EU targets of being carbon-neutral by the same deadline. Hydrogen can help reduce CO2 emissions from trucks and buses, which account for 39% of the Japanese transportation sector's CO2 emissions. As shown in Figure 9, Japan is the third largest global manufacturer of motor vehicles. In 2020 it produced 8m motor vehicles, of which c.1.1m were commercial vehicles (trucks and buses), equivalent to 13.7% of the value of Japanese automobile sales. However, commercial vehicles account for 45% of Japan's automobile CO2 emissions. This makes them an important target for emissions reductions. Larger trucks could come to use fuel cells in the medium term, if enough hydrogen supply infrastructure is put in place. Mid- and larger-size trucks in Japan run mostly on diesel, given their ample energy needs. Besides their weight, they also encounter more wind resistance due to their size. In addition, they are typically driven over greater distances per day. Accordingly, EVs look unlikely to take over much of the market for mid- and larger-sized trucks. Instead (Figure 16), we estimate that fuel cell vehicles (FCVs) are likely to be the solution taken to reducing CO2 emissions in this segment, as hydrogen fuel offers greater energy density per unit of weight or volume than EV batteries do. On the other hand, the EV technology is probably well suited to many of the small trucks regularly used for such short-distance runs, such as home parcel deliveries and the delivery of merchandise to convenience stores.
Figure 16: Technology employed based on vehicle size and distance travelled
EV technology: For smaller vehicles on short-distance driving FCVs are best suited for larger and heavier vehicles on long-distance driving
Source: Hino Motors, Tesla, Caranddriver.com, RHB
By 2030, Japan aims to have 900 hydrogen stations to service some 800,000 FCVs. Since mid- and larger-sized trucks cover most of their distance on highways and arterials, the required hydrogen fueling infrastructure is not as extensive as it would need to be to serve passenger cars driven by general consumers. There were 137 hydrogen fueling stations in Japan at the end of 2020, and the Japanese Government plans to bring this number up to 320 by 2025, and then on to 900 by 2030. Hydrogen production costs will still need to be brought down to around JPY30 per cu m. Japan’s strategy involves having hydrogen-fueling infrastructure present in most parts of the country, to facilitate the shift away from diesel-powered trucks to those powered by hydrogen fuel cells. Passenger cars in Japan currently release 48% of GHG emitted by the transport sector. The volume of CO2 emitted by passenger cars in Japan has been falling at an annual pace of about 1-2% since 2010, as hybrid vehicles have come to account for a larger share of cars on the road. CO2 emissions are expected to decline at 2-3% YoY between now and 2030, thanks to the further uptake of hybrid vehicles and the popularisation of EVs.
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Figure 17: GHG emissions in Japan
In Japan, the transportation sector is currently responsible for 206 tonnes of CO2 emitted, which is equivalent to 18.6% of Japan's total of 1,108 tonnes emitted Within that 206 tonnes, passenger cars (and motorcycles, which emit relatively little CO2) account for 98 tonnes or 47.6%, while trucks and buses account for 80 tonnes or 38.8%. The remaining portions are taken up by ships (5%), aircraft (5%), and rail transport (3.6%)
Source: Climate Watch, RHB
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Electric Vehicles Regional Thematic
20 August 2021 Regulatory Environment The regulatory environment in Indonesia Indonesia’s President has signed a decree to make EVs more competitive than ICE vehicles. The decree provides guidance on fiscal and non-fiscal incentives for EVs. Fiscal incentives may include a reduction in luxury tax, import duties, central & local government taxes, and parking tariffs. The non-fiscal incentives may include access to restricted roads (such as even-odd plate restriction access). In 2025, the Industry Ministry targets that 20% of new 4-wheeler (4W) and 2-wheeler (2W) vehicles will be BEVs, PHEVs, or HEVs. However, to make BEVs more attractive, we think more incentives are needed, as the price gap between BEVs and ICE vehicles is still very wide. The lowest-priced BEV costs around IDR637m, while Indonesia’s purchasing power for 4W currently averages at c.IDR300m. Developments in Indonesia’s EV industry should have a positive impact on the domestic auto industry and overall economy, as it would boost the local auto components industry. However, according to a study by the research institute under the Faculty of Economics and Business, University of Indonesia or LPEM FEB UI, auto producers should keep the price gap between ICE vehicles and EVs at around 7-10% to make EVs more attractive to consumers. This is to achieve the Indonesian Government’s target for EVs to account for 20% of new car sales by 2025. For comparison, the lowest- priced BEV is now at IDR637m, which is more than twice the average purchasing power for 4W vehicles in Indonesia of IDR300m. Therefore, the Indonesian Government needs to implement proper fiscal incentives such as tax reforms and market incentives to make EVs more competitive. In mid-2019, President Joko Widodo signed a decree on a new luxury tax rate for the 4W hybrid segment to create a more competitive landscape for car producers developing EVs in Indonesia. BEVs will continue to be exempted from luxury taxes, given their zero-emission levels. However, no details on incentives were announced relating to the Presidential Decree. Also, the development of regulations following this decree has been slow due to the pandemic, which has shifted the Indonesian Government’s focus. Up to Jun 2021, BEV sales are still slow in Indonesia. However, the sales trend for HEVs and PHEVs (dominated by Toyota and Nissan) is quite promising, at 1,412 units in 1H21 (+27% YoY). BEV sales (dominated by Hyundai) rose to 488 units (+307% YoY). In Jul 2021, President Widodo signed a decree on a new luxury tax rate for the 4W hybrid segment. BEVs will continue to be exempted from luxury taxes, while the tax base was increased for PHEVs and HEVs. The new luxury tax scheme will be effective in Oct 2021.
Figure 18: Government proposition on a PPnBM increase for PHEVs and HEVs Previous Revised Luxury tax rate to EV type Remarks tax base tax base tax base amount BEV 0% 0% 15% Luxury tax remains free For engines with >28 km/litre fuel PHEV 0% 33.33% 15% mileage or 100g CO2 emission per km For 3,000cc gasoline engine with >23 km/litre fuel mileage or The policy was signed by President 100g CO2 emission per km 13.33% 40% 15% for 3,000 cc diesel engine with Widodo on 2 Jul 2021, and will be >26 km/litre fuel mileage or enforced from 16 Oct 2021 100g CO2 emission per km HEV For 3,000cc gasoline engine with 18.4 to 23 km/litre fuel mileage or 100-125g CO2 33.33% 46.66% 15% emission per km For 3,000cc diesel engine with 20-26 km/litre fuel mileage or 100-125g CO2 emission per km
Source: CNBC Indonesia, Tempo, RHB
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20 August 2021
Figure 19: Long-term government plan on higher PPnBM for PHEVs and HEVs The Indonesian Government plans to Electric vehicle type Current rate Phase I Phase II improve BEV sales by increasing the BEV 0% 0% 0% luxury tax rate for hybrid vehicles PHEV 0% 5% 8% (PHEV, HEV, and mild-hybrid) to 2% 6% 10% ensure a fair playing field for the HEV 5% 7% 11% hybrid and BEV industries 8% 8% 12% Phase I will be effective in October, Mild-hybrid 8% 8% 12% while Phase II is targeted to be imposed two years after BEV-related investments (IDR5trn or more) in Indonesia are realised, or after BEV production is started commercially
Source: CNN Indonesia, Liputan 6, RHB
We see challenges in achieving the national target of 600k 4W EV production and c.2m sold units by 2030, in terms of the readiness of supporting facilities for the enhancement of battery materials (first High Pressure Acid Leaching or HPAL smelter in North Maluku; commercial operation in Jun 2021; c.USD1bn investment), and the availability of charging stations (62 units in operation across Java, Bali, and Sulawesi). Toyota has committed IDR28.3trn (USD2bn) for 4W vehicle manufacturing expansion including BEV and hybrid development in Indonesia; Hyundai IDR21.8trn (USD1.5bn); Mitsubishi, IDR11.2trn (USD772m); Honda, IDR5.2trn (USD359m); and Suzuki, IDR1.2trn (USD83m). High selling prices remain the main obstacle for the BEV segment to attract consumers. Indonesia’s purchasing power for 4W currently averages at c.IDR300m.
Figure 20: BEV 4W brands in Indonesia Brands Hyundai Hyundai Lexus BMW Toyota Model Ioniq Kona EV UX 300e i3s C+POD Type Sedan EV 4x2 EV 4x2 EV 4x2 EV 4x2 EV Dimension (L x W x H m) 4.5 x 1.8 x 1.5 4.2 x 1.8 x 1.6 4.5 x 1.8 x 1.5 4.0 x 1.8 x 1.6 2.5 x 1.3 x 1.6 373 km battery-only; 380 km battery-only; 300 km battery-only; 600 km battery-only; 150 km battery-only; Range & battery capacity 38.3 kWh 319 V 39.2 kWh 327 V 54.3 kWh 355 V 42.2 kWh 352 V 9.1 kWh 177 V lithium polymer lithium polymer lithium-ion lithium-ion lithium-ion Output (HP) 136 136 201 184 12.3 Seat capacity 5 5 5 4 2 On-the-road price IDR637-677m IDR675m IDR1.2bn IDR1.3bn c.IDR200m CKD/CBU CBU (South Korea) CBU (South Korea) CBU (Japan) CBU (Germany) CBU (Japan) 1H21 units sold* 205 249 8 2 6
Note: *Based on Gaikindo wholesales data, all variants Source: RHB
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Electric Vehicles Regional Thematic
20 August 2021
Figure 21: HEV and PHEV 4W brands offered in Indonesia Brands Lexus Toyota Toyota Toyota Toyota Model ES 300 All-new Corolla Altis All-new Camry Hybrid Corolla Cross C-HR Hybrid Type Sedan hybrid Sedan hybrid Sedan hybrid 4x2 hybrid 4x2 hybrid Dimension (L x W x H m) 4.9 x 1.8 x 1.5 4.6 x 1.8 x 1.5 4.8 x 1.8 x 1.5 4.4 x 1.8 x 1.6 4.4 x 1.8 x 1.6 4-cylinder gasoline 4-cylinder gasoline 4-cylinder gasoline 4-cylinder gasoline 4-cylinder gasoline engine (2,500 cc) with engine (1,800 cc) engine (2,500 cc) with engine (1,800 cc) with engine (1,800 cc) Engine combination 1.6 kWh 245 v nickel- with 4.2 kWh 650 v 1.6 kWh 245 V nickel- 4.2 kWh 650 V nickel- with 0.7 kWh 207 V metal hydride nickel-metal hydride metal hydride metal hydride nickel-metal hydride Output (HP) 215 @ 5,700 rpm 121 @ 5,200 rpm 178 @ 5,700 rpm 122 @ 5,200 rpm 122 @ 5,200 rpm Torque (Nm) 202 @ 3,600 rpm 142 @ 4,000 rpm 202 @ 4,500 rpm 142 @ 3,600 rpm 142 @ 3,600 rpm Seat capacity 4 4 5 5 5 On-the-road price IDR1.2bn IDR596m IDR849m IDR522m IDR560m CKD/CBU CBU (South Korea) CBU (Thailand) CBU (Thailand) CBU (Thailand) CBU (Thailand) 1H21 units sold* 29 34 79 833 94
Brands Nissan Mitsubishi Model Kicks E-Power Outlander PHEV Type 4x2 hybrid 4x2 PHEV Dimension (L x W x H m) 4.3 x 1.8 x 1.6 4.7 x 1.8 x 1.7 3-cylinder gasoline 4-cylinder gasoline engine (1,198 cc) with engine (2,400 cc) with Engine combination 1.5 kWh 296 V 13.8 kWh 650 v lithium-ion nickel-metal hydride Output (HP) 129 @ 5,800 rpm 126 @ 4,500 rpm Torque (Nm) 260 @ 4,800 rpm 147 @ 4,500 rpm Seat capacity 5 5 On-the-road price IDR471m IDR1.3bn CKD/CBU CBU (Thailand) CBU (Japan) 1H21 units sold* 307 34
Note: *Based on Gaikindo wholesales data, all variants Source: RHB
According to the Industry Ministry, Indonesia’s automotive industry 4.0 roadmap – issued in 2019 – is divided into three stages: i. 2019-2021: Strengthen local production of ICE vehicles to accelerate exports, starting from MPVs and Low-Cost Green Cars or LCGCs; ii. 2019-2025: Initiate local production of 2W electric vehicles and build domestic production capabilities, and export to emerging markets; iii. 2019-2030: Initiate local production of 4W EVs and start exports to emerging markets.
Figure 22: Indonesia’s Automotive 4.0 roadmap
Note: Internal Combustion Engine (ICE) Source: Industrial Ministry, 2019
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Electric Vehicles Regional Thematic
20 August 2021
The Industry Ministry has targets that by 2025, 20% of new 4W and 2W vehicles sold should be EVs. To achieve the sales target, the Finance, Industry, Transportation, and Energy & Mineral Resources Ministries are drafting regulations to support the development of Indonesia’s EV industry. There are two major factors which will determine whether customers purchase EVs: i. Monetary factors: Purchase price, excise tax, operational costs, parking fees; and ii. Non-monetary factors: Driving range, car size and segment, brand, attitudes, charging time, and charging infrastructure.
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Electric Vehicles Regional Thematic
20 August 2021
The regulatory environment in Malaysia
The Malaysia Automotive, Robotics and IoT Institute (MARii) – formally known as the Malaysia Automotive Institute (MAI), is an agency under the purview of the Ministry of International Trade & Industry (MITI). MARii is the focal point, coordinating centre, and think tank that aims to enhance competitiveness of the automotive industry and overall mobility through the adoption of robotics and the Internet of Things (IoT). Building on National Automotive Policy (NAP) 2014’s core objective to make Malaysia the regional automotive hub in energy efficient vehicles (EEV), NAP2020 aims to expand the EEV technology and engineering of the automotive sector to Next Generation Vehicle (NxGV), Mobility as a Service (MaaS) and Industrial Revolution 4.0 (IR4.0) in unison. The NAP defines what exactly constitutes an EEV and will be technology agnostic on how manufacturers overcome fuel efficiency (and emissions) hurdles. Manufacturers of EEVs would be allowed to establish manufacturing facilities, without any restrictions on engine capacity and/or selling price – they would also be offered undefined “customised incentives”. Cars qualifying as EEVs enjoy these incentives, which include R&D grants, soft loans and lower taxes.
Figure 23: Objectives of NAP 2020 The Malaysian Government will continue to pursue the objectives of NAP 2014, namely:
i. Develop a competitive and capable domestic automotive industry; ii. Develop Malaysia as the regional automotive hub in EEV; iii. Increase value-added activities in a sustainable way while continuously developing domestic capabilities; iv. Increase exports of vehicles, automotive components, spare parts and related products in the manufacturing and after-market sector; v. Increase the participation of competitive bumiputera companies in the domestic automotive industry, including in the after-market sector; vi. Enhance the ecosystem of the manufacturing and aftermarket sector of the domestic automotive industry; vii. Safeguard consumer interests by offering safer and better-quality products at competitive prices.
Additional objectives under NAP 2020:
i. Develop the NxGV technology ecosystem to make Malaysia a regional hub for the production of NxGV; ii. Expand the participation of the domestic automotive industry in the sector of MaaS which not only focuses on the development of technology, but also the overall transportation ecosystem; iii. Ensure the domestic automotive industry is better equipped, with the new paradigm in the automotive sector closely related to the development of IR4.0; iv. Ensure the overall ecosystem including consumers, the domestic industry and the Government receive maximum benefits of the spin-off from the overall implementation of NxGV; v. Reduce carbon emissions from vehicles by improving the fuel economy level in Malaysia by 2025 in line with the ASEAN Fuel Economy Roadmap of 5.3Lge/100km (litre of gasoline equivalent per 100km)
Source: Ministry of International Trade & Industry (MITI)
The shortfall of the NAP 2020, in our view, is the absence of specific policies and incentives on EVs. There were references made on incentives to develop green technology which includes EV in policy, but details were lacking. The general focus remains on energy- efficient powertrains, which still includes the traditional ICE vehicle. It is worth noting that, in 2019, 87.6% of the cars sold in Malaysia were classified as EEVs and were eligible for tax incentives. Also, the current EEV standards only looks at claimed fuel consumption vs the vehicle’s kerb weight, rather than carbon dioxide-based emission standards that neighbouring countries are moving towards. This puts Malaysia well behind the curve in electrification ambition, compared to other ASEAN countries.
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20 August 2021
Figure 24: 88% of vehicles sold in Malaysia are EEVs 600,000 100.0% 87.6% 90.0% 500,000 80.0% 70.0% 400,000 56.8% 52.0% 60.0% 300,000 42.8% 50.0% 529,256 32.6% 40.0% 200,000 339,978 30.0% 299,850 14.1% 248,293 20.0% 100,000 217,336 93,975 10.0% - 0.0% 2014 2015 2016 2017 2018 2019
EEV Volume (units % of TIV
Source: MARii
Few EV incentives. Previously, as part of its initiatives to expose and educate the Malaysian public to hybrid and electric vehicles, a removal of import and excise duties for hybrid and EVs was proposed in Budget 2011 for both fully imported (CBU) and locally assembled (CKD) vehicles. This has led to a significant reduction in prices of hybrids and EVs, boosting vehicle sales in the segment. It was reported that hybrid vehicle sales jumped to 8,403 units,15,355 units and 18,967 in 2011-2013, from just 322 units in 2010. After 2014, the tax exemption for CBU hybrid vehicles and EVs was discontinued. It is now only available for such vehicles that are locally assembled. Following this change in the tax rules, sales of CBU hybrids such as the Toyota Prius were discontinued by the local distributor, as the consequent rise in selling price would have made the vehicle uncompetitive from a price standpoint. That said, the customised tax incentives continue to benefit CKD PHEVs/EVs, which results in a significant reduction in sticker prices for these premium cars, and the sales of cars like the BMW 330e M Sport benefited tremendously. According to carsifu.my, the 330e M Sport would be priced MYR130,000 higher in the absence of EEV incentives. As it is, the 330e M Sport is priced at a more accessible MYR249,849. Imparity in road tax calculation. The road tax for ICE vehicles is calculated based on engine capacity measured in cubic centimetres (cc). For EVs, the road tax is measured based on power output (measured in kW). When comparing the road tax for ICE vehicles and EVs, we note that both of them have steeper road tax beyond 125kW or 2,000cc. However, the different methodologies for road tax computation is a potential disincentive to consumer interest in EVs. For example, a MINI Cooper SE (EV) delivers 184hp, which is similar to the 2.0-litre BMW 320i (ICE), but incurs close to double the road tax at MYR724.00 vs MYR379.00 for the BMW.
Figure 25: Road tax rate for EV steepens at >125kW Figure 26: while that for ICEV steepens at >2,000cc
7000
6000
5000
4000
3000
Road Tax (MYR) 2000
1000
0 0 500 1000 1500 2000 2500 3000 3500 4000 4500 CC
Source: RHB Source: RHB
A more defined EV policy in the pipeline. While the Malaysian Government has not outlined plans to push its EV agenda for the country, we believe a new EV policy could bring updates to the EV regulatory framework that is currently pending high-level government approvals. Our previous conversation with the Malaysian Green Technology & Climate
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20 August 2021
Change Centre (MGTC) revealed that the soon-to-be-launched Low Carbon Mobility Blueprint will be the first policy initiative that focuses on the transportation sector in Malaysia. The goal is to have clearer and more transparent policies and targets in the transportation space – especially land transportation, which is lacking at the current juncture. The four key focus areas of the blueprint include: i) Reduction of GHG emissions by improving energy efficiency, ii) the use of electric-type vehicles, iii) alternative energy or fuel, and iv) the modal shift in transportation.
The current state of Malaysia’s EV market In our opinion, the following are the key factors working against the adoption of such vehicles in Malaysia: EV models do not address the popular segment. The cheapest PHEV/BEV model officially sold in Malaysia at the time of writing is the Nissan Leaf, which retails for MYR181,263 (Sales & Services Tax (SST) exempted). This is considered one of the cheapest EV cars available globally. However, this falls in the high-price bracket for Malaysian consumers – ie unaffordable for the majority of potential car buyers, despite a lower tax rate of 10% applied to EVs (only battery-electric BEV) sold in Malaysia vs the normal rate is 60-105%. Local automotive news portal wapcar.my estimated that there are slightly under 500 EVs in Malaysia.
Figure 27: PHEV/BEV models currently sold in Malaysia Figure 28: Less than 500 BEVs on Malaysian road
Model OTR price (West Malaysia) Model Units BEV Nissan Leaf approx. 100 Nissan Leaf MYR 181,263 Porsche Taycan est. 80 MINI Cooper SE 3 Door MYR 213,460.73 Renault Zoe 56 Porsche Taycan MYR 584,561 – MYR1,151,779 Renault Twizy 42 PHEV MINI Electric 34 BMW 330e MYR 249,848.95 BMW i3s 23 BMW 530e MYR 317,533.95 Mitsubishi i-MiEV approx. 15 BMW X5 xDrive45e M Sport MYR 418,813.85 Renault Fluence Z.E. 2 BMW 740Le xDrive MYR 544,352.87 Hyundai Kona Electric 1 BMW 740Le xDrive M Sport MYR 566,803.05 Tesla (all models) est. 125 Mercedes-Benz S560e MYR 646,625.61 Total est. 480
Volvo XC40 MYR 241,997.04 Volvo XC60 MYR 324,656.45 Volvo XC90 MYR 393,743.26 Volvo S60 Recharge MYR 282,540.00 Volvo S90 Recharge MYR 339,314.56
Source: various, RHB Source: wapcar.my, RHB
Education required to shift mindsets. The shift away from the traditional ICE vehicle, which consumers are already used to, seeds concerns that could potentially inhibit EV adoption. The three key factors impeding the adoption of EVs are: i) Availability, ii) range anxiety, and iii) cost of acquisition. Based on a survey done by the MGTC, the local confidence level and willingness to shift to the EV platform is still low. Many car buyers remain concerned over the maintenance costs for hybrids/EVs and/or the cost of a replacement battery, given that the expected lifespan of cars in Malaysia tends to be longer than in developed countries. These concerns have seen the residual value of hybrid vehicles sold in recent years lag behind conventional alternatives. Lack of charging infrastructure. The rarity of charging facilities in Malaysia and the long duration of time needed to fully charge up a drained battery is a major impediment to raise the adoption rates for EVs and PHEVs. Based on MGTC data, a rapid charger would require at least one hour to fully charge a hybrid/EV car battery, compared to a typical refuelling time of no more than ten minutes at a gas station for a conventional car. EV/PHEV owners would also need to have recharge facilities at home, which may not necessarily be available to apartment dwellers. Government’s reliance on automotive tax revenue. Automotive duties are an important revenue source for the Malaysian Government. According to MITI, the automotive industry contributed an estimated 4.3% of Malaysia’s GDP in 2019. As such, we believe there is an inherent conflict with policies to incentivise the adoption of EVs and hybrids to attract foreign direct investments or FDIs into the automotive industry to turn Malaysia into a regional hub for EEV production. The greater the incentives given and/or the higher the take-up rate for these vehicles, the higher the opportunity cost for the Malaysian Government from duty revenue forgone.
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20 August 2021
The regulatory environment in Singapore
Singapore aims to reduce carbon emissions by switching from ICE vehicles to EVs. The country aims to phase out ICE vehicles and have all vehicles run on cleaner energy by 2040. To facilitate this transition, all new car registrations will have to be cleaner-energy models from 2030 and, hence, new pure ICE cars will be phased out. Cleaner-energy models include electric, hybrid, or hydrogen fuel cell cars. Singapore will also stop new diesel car registrations from 2025. An EV emits half the amount of CO2 as compared to a similar vehicle powered by ICE. If all of Singapore’s light vehicles run on electricity, the country will reduce carbon emissions by 1.5-2.0m tonnes, or about 4% of total national emissions. Under the Singapore Green Plan 2030, the Singaporean Government has put in place a comprehensive EV Roadmap to ramp up EV adoption efforts. With the advancements in EV technologies, it is expected that the cost of buying an EV and ICE vehicle will be similar by the mid-2020s. And, as prices of EVs become more attractive, the accessibility of charging infrastructure will be vital for encouraging EV adoption. In the EV Roadmap, Singapore has set a target of 60,000 EV charging points by 2030. The Singaporean Government will work with the private sector to achieve a target of 40,000 charging points in public carparks and 20,000 charging points in private premises. To reduce the carbon footprint of public transportation, the Land Transport Authority (LTA) is committed to having a 100% cleaner energy bus fleet by 2040. Hence, moving forward, the LTA will only purchase cleaner energy buses. In line with this vision, the regulator has bought 60 electric buses, which have been progressively deployed since 2020 and will be fully deployed by end 2021. With these 60 electric buses, the CO2 tailpipe emissions from buses will decrease by approximately 7,840 tonnes annually. This is equal to the annual CO2 emissions of 1,700 passenger cars.
Singapore’s EV journey so far 2009: The Energy Market Authority or EMA and the LTA announced the setting up of an EV task force involving eight government agencies to assess nationwide costs, benefits, and feasibility of EV adoption in Singapore. 2011: The task force launched on EV testbed in 2011, putting Singapore among the first cities in the world to test such vehicles at the systems level. The testbed started with three outdoor and two indoor charging stations, as well as nine EVs. 2012: Singapore Power launched its EV technology development initiative to study the impact of EV charging on the electricity grid. Three electric Renault Kangoos were added to its fleet to facilitate testing. The task force expanded its EV testbed to involve 25 EVs on the road and 20 charging stations 2014: The task force announced plans to trial an EV car-sharing programme. The programme intended to introduce up to 1,000 EVs with supporting charging infrastructure. The trial would study whether a 1-way car-sharing model, in which users pick up cars at one location and return them at another, can be viable in Singapore. Of 13 companies that submitted the proposals for the trial, BlueSG, an electric car-sharing firm, was shortlisted to participate in the trial. 2016: Singapore sees its first Tesla when a used Model S was imported from Hong Kong. The import attracted a SGD15,000 carbon surcharge. The LTA said it had to account for the car’s CO2 emissions, which amounted to 222g per km, during the electricity generation process. The regulator later said that it was re-examining the case, adding that it was working with Tesla engineers to see if the Model S, which qualifies for tax breaks in most countries, was tested correctly in the first place. 2017: HDT Singapore rolled out Singapore’s first fleet of electric taxis, running BYD EVs as taxis. BlueSG also launched its nationwide car-sharing programme. The task force planned to roll out 2,000 charging points nationwide, including at Housing & Development Board (HDB) estates, which would lay the foundation for the national EV charging network.
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20 August 2021
Figure 29: Cars from the BlueSG electric car-sharing service Figure 30: HDT Singapore’s electric taxis
Source: The Business Times Source: Channel News Asia
2018: In May 2018, local transport group ComfortDelGro (CD) added 200 new Hyundai Ioniq hybrids to its fleet. In the same month, Tesla CEO Elon Musk criticised the Singapore Government of being unsupportive of EVs. Grab Holdings announced plans to electrify its fleet, as it announced the progressive roll out of 200 EVs in partnership with SP Group starting early 2019. 2019: Tesla CEO Musk claimed that Singapore “has been unwelcome” to his company. In response, then Environment & Water Resources Minister Masagos Zulkifli said Singapore was “interested in proper solutions that will address climate problems”, not a “lifestyle”. In Jan 2019, SP Group rolled out its first wave of 38 EV charging points, comprising of 19 50kW direct current (DC) chargers, which are able to fully power up a vehicle in 30 minutes, as well as 19 43kW alternating current (AC) chargers. In Oct 2020, Hyundai Motor unveiled plans to invest SGD400m and set up an EV manufacturing plant at Bulim Avenue in Jurong, which is slated to go operational by 2022. The plan is expected to produce 30,000 vehicles every year by 2025. CD expanded its trial of EVs with two Hyundai Kona electric taxis. 2020: In his budget speech, Deputy Prime Minister Heng Swee Keat called EVs the most promising of cleaner vehicle technology. He also announced that Singapore was “placing a significant bet on EVs and leaning policy in that direction”. The aim: Build 28,000 charging points by 2030 and to phase out all ICE vehicles by 2040. The prolonged debilitating impact of the COVID-19 pandemic led HDT Singapore to shut its taxi business in late 2020. 2021: The Singaporean Government launched the inter-ministerial Singapore Green Plan 2030, which stated a more ambitious goal to build 60,000 EV charging points and a requirement for all newly registered cars to be of cleaner energy models by 2030. Budget 2021 set aside SGD30m over the next five years for EV-related initiatives, including measures to improve charging provisions at private premises. SMRT Corp (SMRT) announced plans to roll out its first fleet of electric taxis in August, a move that spearheads its ambition to have a fully electric fleet by 2026. CD partnered French energy giant Engie to jointly bid for a pilot tender called for by the Urban Redevelopment Authority or URA and LTA for EV charging points that cover the installation and operation of more than 600 EV charging points at over 200 public carparks nationwide. The installation of these charging stations are slated for completion by 3Q22.
Encouraging the adoption of EVs National Electric Vehicle Centre (NEVC). In line with Singapore’s vision for all vehicles to run on cleaner energy by 2040, the NEVC was set up to spearhead the drive to promote wider EV adoption. This included accelerating the deployment of a nationwide EV charging infrastructure, building EV regulations and standards, and cultivating a robust EV ecosystem in Singapore. NEVC works closely with relevant government agencies and industry stakeholders to equip Singapore’s workforce with new capabilities and anchor new EV- related activities. This facilitates the safe and innovative development of new EV-related technologies in the country. To encourage EV adoption in Singapore, LTA focusses on three areas: i. Vehicle taxes and incentives; ii. Regulations and standards; iii. EV charger deployment.
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Vehicle taxes and incentives. Singapore will provide incentives for electric car buyers until their pre-tax costs are on a par with that for combustion engine cars – experts reckon this will happen by 2025. For now, the country aims to make it more attractive to own and use electric cars through incentives and rebates such as the EV Early Adoption Incentive or EEAI and Vehicular Emissions Scheme or VES to narrow the upfront cost gap with ICE cars. In view of the improvements in vehicular efficiency, the LTA also implemented a downward revision in road tax for electric cars from 1 Jan 2021. Reduction of road taxes: While the road tax for electric cars had already been lowered in January – by as much as 40% – the larger mass-market electric models still incur more road taxes than their petrol equivalents. To address this, road taxes for mass-market electric cars in the 90-230kW power band will be lowered to be on a par with that of similar models driven by ICEs from 2022. The LTA will also merge the current electric car road tax bands of the 30-90kW and 90-230kW vehicles, and subject them to the current formula of the lower band.
Figure 31: Revised road tax schedules for EVs and hybrids
Source: Land Transport Authority (LTA)
EEAI: From 1 Jan 2021 to 31 Dec 2023, newly registered electric cars and taxis will receive a 45% rebate off the Additional Registration Fee (ARF), capped at SGD20,000. To further lower the upfront cost of owning an electric car, from 1 Jan 2022 to 31 Dec 2023, the Singaporean Government will remove the minimum payment of SGD5,000 in ARF and better enable mass-market electric cars to benefit from the full rebate. This EEAI will lower the upfront cost of an electric vehicle by an average of 11% and narrow the upfront cost gap between electric and ICE cars. VES: From 1 Jan 2021 to 31 Dec 2022, the rebates for vehicles in both Bands A1 and A2 will be increased by SGD5,000 for cars and SGD7,500 for taxis. A car in Band A1 will enjoy a SGD25,000 rebate while a car in Band A2 will enjoy a SGD15,000 rebate. Commercial vehicles emissions scheme or CVES: Commercial vehicles are categorised into three bands, resulting in a SGD10,000 surcharge for the most polluting vehicles to a SGD30,000 incentive for the least-polluting of vehicles. This encourages buyers to choose commercial vehicle models that have lower emissions across the identified pollutant categories, effective from 1 Apr 2021 to 31 Mar 2023. Enhanced early turnover scheme (ETS): From 1 Apr 2021, existing Euro 4 Cat C diesel vehicles will also be eligible for the ETS incentive. This increases the number of commercial vehicles eligible for the ETS incentive to encourage the turnover to cleaner alternatives. To encourage the turnover to cleaner alternatives, owners of heavy goods vehicles (HGVs) can enjoy the highest incentives if they turn over their existing Cat C diesel vehicles to an HGV that has zero tailpipe emissions.
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Figure 32: Encouraging the adoption of EVs
Note: *Capped at SGD20,000 Source: Land Transport Authority, Straits Times
Regulations and standards There is no specific, comprehensive legislation governing EVs in Singapore. The legislation applicable to such vehicles exist in a myriad of subsidiary legislation under the Road Traffic Act (Chapter 276). This subsidiary legislation includes the: i. Road Traffic (Vehicular Emissions) Tax Rules 2017 that governs the calculation of vehicular emissions tax for taxable vehicles (including EVs); ii. Road Traffic (Motor Vehicles, Quota System) Rules, which govern the issuance of certificates of entitlement for vehicles (including EVs); iii. Road Traffic (Motor Vehicles, Registration and Licensing) Rules, which cover licensing fees and rebates for EVs; iv. Road Traffic (Motor Vehicle, Construction, and Use) Rules – this governs the construction and installation of electrical apparatus and circuits in an EV. Technical Reference 25 (TR25) is the set of technical standards and safety precautions that govern EV charging systems in Singapore. This is administered by the EMA. In order to ensure that the development of charging infrastructure is in sync with the Singaporean Government’s EV development plan, the regulatory role of the EV charging systems was legally transferred from the EMA to LTA through a new law passed in Parliament in May. Under the new law, the LTA will lead efforts to review the technical standards and safety precautions related to EVs. It will also set EV charging standards moving forward. Licensed electrical workers will install fixed chargers in compliance with these standards. In partnership with industry players and academic experts, the LTA is leading a comprehensive review of TR25, which is expected to be completed by the end of the year. While the review is ongoing, the authority plans to set up regulatory sandboxes for commercial players to test and introduce innovative and unique EV charging solutions.
EV charger deployment With Singapore’s target of 60,000 charging points by 2030, the Singaporean Government expects there will be a ratio of about five EVs per charging point. Slow charging will likely be the most common way of charging, with charging taking place near homes overnight and at offices while vehicles are parked during working hours. In addition to providing convenience, slow chargers will also place a lower burden on the electricity infrastructure as compared to fast chargers.
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Singapore plans to still explore the scope for fast chargers and install them where feasible. There will also be opportunities to upgrade the existing grid infrastructure to provide fast- charging points at suitable locations. Currently, EV charging operators such as Shell Eastern Petroleum, Greenlots, and SP Group are already providing fast-charging services nationwide in places such as petrol stations, shopping malls, office buildings, and industrial estates. More details on Singapore’s EV charging infrastructure are discussed further in this report.
Banks are stepping in to support EV adoption In January, OCBC Bank partnered with Charge+ to provide digital payment solutions for the latter’s charging points, as well as to look into the financing for the Charge+ charging infrastructure. In February, DBS unveiled Singapore’s first green car loan, offering preferential loan rates to all customers purchasing new and used EVs.
Singapore’s EV Road Map Adoption of EVs in public transport – buses. Singapore has been trialling electric buses since 2016. Go-Ahead Singapore trialled the country’s first fully electric bus from Nov 2016 to May 2017. The BYD K9 bus was produced by the latter, an established Chinese EV manufacturer. The trial was intended to assess the suitability of electric buses for public transport. In Mar 2017, the Singapore Government announced that the LTA would be calling for tenders to purchase 50 hybrid and 60 electric buses in 2017. The contract was put up by the LTA in Dec 2017 and awarded to three different tenderers in Oct 2018.
Figure 33: 2018 contract winners to provide electric buses Tenderer Provision Total price (SGDm) BYD Singapore Pte Ltd 20 single-deck buses 17.2 ST Engineering Land Systems 20 single-deck buses 15.1 10 single-deck and 10 double-deck Yutong-NARI Consortium 18.2 buses: Source: landtransportguru.net
Figure 34: Electric buses on Singapore roads
Source: landtransportguru.net
Singapore plans to eventually ditch public buses that run solely on diesel. In 2020, Senior Minister of State for Transport Janil Puthucheary said the Singaporean Government will buy either electric or hybrid buses from now on, adding that this was in line with its goal to have its fleet of public buses – numbering around 5,400 currently – run on cleaner energy by 2040. The hybrid buses are likely to be diesel-electric models, as these are currently the most widely available. Both will cost more than conventional buses. As of Dec 2020, Singapore has deployed 50 diesel-electric and 50 electric buses on its roads.
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Adoption of EV in public transport – taxis. SMRT added more than 600 Toyota Prius hybrid taxis to its fleet in 2013, becoming the largest hybrid taxi operator in Singapore at the time. Its taxi fleet became fully hybrid in 2020. Early this year, SMRT announced plans to change its entire taxi fleet to EVs within five years, with the first batch of 300 arriving in Singapore progressively from 2H21. It has also placed an order for 300 China-made MG 5 station wagons. The MG ZS EV crossover was launched early last year. The MG 5 has a declared range of 400km, and its battery takes about 40 minutes to charge from zero to 80% full from a 100kW DC fast charger. In 2016, CD rolled out its first hybrid Toyota Prius taxis on the road. In 2017, it rolled out its first Ioniq petrol-electric hybrid taxi. In 2018, the company put two fully electric Ioniq taxis on trial. These were the first of its kind in Singapore to fully charge in just under 30 minutes. A fully charged electric Ioniq taxi travels more than 200km, but the cost of charging it fully is only a third of the cost of diesel for the same distance. CD expanded its trial of EVs with two Kona electric taxis in 2019. Each fully electric taxi comes with a 64kWh lithium polymer battery and is able to travel up to c.350km when fully charged. The company also ventured into EV charging in 2018 after launching its maiden DC fast-charging station in partnership with Greenlots. The Terra 54 CJG charging station offers a 43kW Type 2 AC charger and 50kW Combo 2 DC faster charger, allowing two EVs to charge at the same time.
Figure 35: CD’s electric Ioniq taxi Figure 36: Artist’s impression of the MG 5 electric taxi in SMRT colours
Source: Business Times Source: Straits Times
HDT Singapore rolled out Singapore’s first fleet of electric taxis, running BYD EVs. However, the prolonged debilitating impact of the COVID-19 pandemic led the company to shutter its taxi business in late 2020. Before it shut its electric taxi operations, HDT Singapore operated about 100 vehicles. In 2019, ride-hailing services provider Grab bought 200 Kona electric cars, making it one of the largest EV fleet owners in Singapore. The Kona charges to 80% in 30 minutes with a high-powered DC charging point. However, it takes about 7-9 hours to fully charge the Kona with an AC charging point. The car has a driving range of 482km. Grab's move into EVs was part of a collaboration with SP Group, which was first announced in Aug 2018. According to the company, 31% of its vehicles available for ride-hailing services in Singapore in 2021 were electric or hybrid vehicles. Indonesian ride-hailing and payments giant Gojek has also announced plans to make every car and motorcycle on its platform into an EV by 2030.
Adoption of EVs in the commercial space. The adoption of EVs amongst goods & commercial vehicle operators is fairly limited. As at end 2020, there were only 97 electrically powered goods & commercial vehicles on Singapore's roads – a tiny fraction of the 140,783 total. Light goods vehicles (LGVs) are the most common commercial vehicle type in Singapore, making up 65% of the commercial vehicles population. The low EV adoption is largely due to the limited availability of vehicles and lack of an adequate charging infrastructure. As of early 2021, only two electric LGVs – the Kangoo ZE Electric and BYD T3 Electric – and one heavy commercial vehicle (the BYD T9R) were available in the country.
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In July, an EV charging hub for trucks was launched in Tuas by Sembcorp Industries and will be open for public use by industrial vehicles by next year. This follows its deployment of a fleet of electric trucks to collect waste and recyclables in the Clementi-Bukit Merah and City-Punggol sectors. The Tuas hub will serve as a central charging station for the trucks are managed by SembWaste, the company’s waste management arm. The hub is partially powered by solar energy and can charge up to 18 industrial EVs at one go via 4-hour fast-charging cycles. A total of 24 electric trucks will be deployed over the coming months. These trucks make up about 20% of SembWaste's operational fleet for the two sectors.
Figure 37: SembWaste refuse collection electric truck
Source: Straits Times
Plans to build EVs in Singapore South Korean carmaker Hyundai is building a SGD400m R&D centre in Singapore, which will house the city state's first EV manufacturing facility. The latter may produce up to 30,000 vehicles per year by 2025. Construction of the entire project is expected to be completed by the end of 2022. Singapore has no auto manufacturing capacity, having given up on car assembly decades ago when production technologies changed and car assembly on a small scale became no longer economically viable. However, automotive activities are becoming viable again in Singapore, as EVs have a different supply chain, fewer mechanical parts, and more electronics – this plays to the country's strengths. The centre will also explore new business concepts such as batteries as a service, which allows drivers to buy an EV without owning its battery and so lowering the starting price of such cars. Drivers will instead pay a monthly fee to use the batteries.
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Figure 38: Artist’s impression of Hyundai-planned EV manufacturing plant in Singapore
Source: todayonline.com
Figure 39: Annual vehicle population in Singapore split by fuel type 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Cars - hybrid/EV 3,307 3,788 4,687 5,026 5,792 6,503 10,234 21,293 28,140 37,330 43,632 Cars - others 591,878 599,935 612,883 616,319 610,817 595,808 591,023 590,963 587,312 593,266 590,410 Total 595,185 603,723 617,570 621,345 616,609 602,311 601,257 612,256 615,452 630,596 634,042 Hybrid/EV (% of total) 0.56 0.63 0.76 0.81 0.94 1.08 1.70 3.48 4.57 5.92 6.88
Taxis - hybrid/EV 30 56 125 662 1,608 1,889 2,492 4,159 5,439 8,759 9,149 Taxis - others 26,043 26,995 28,085 27,033 27,128 26,370 25,042 18,981 15,142 9,783 6,529 Total 26,073 27,051 28,210 27,695 28,736 28,259 27,534 23,140 20,581 18,542 15,678 Hybrid/EV (% of total) 0.12 0.21 0.44 2.39 5.60 6.68 9.05 17.97 26.43 47.24 58.36
Motorcycles - hybrid/EV 7 8 8 6 4 2 2 2 2 2 1 Motorcycles - others 147,275 145,672 143,278 144,301 144,400 143,277 142,437 141,302 136,840 140,396 140,781 Total 147,282 145,680 143,286 144,307 144,404 143,279 142,439 141,304 136,842 140,398 140,782 Hybrid/EV (% of total) 0.00 0.01 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Goods & other vehicles - hybrid/EV 1 2 4 5 6 8 26 39 47 79 105 Goods & other vehicles - others 143,612 145,156 145,042 144,197 144,501 143,964 143,940 142,818 141,361 140,885 140,678 Total 143,613 145,158 145,046 144,202 144,507 143,972 143,966 142,857 141,408 140,964 140,783 Hybrid/EV (% of total) 0.00 0.00 0.00 0.00 0.00 0.01 0.02 0.03 0.03 0.06 0.07
Buses - hybrid/EV 2 3 3 3 3 4 4 5 27 60 100 Buses - others 15,934 16,649 16,765 17,062 17,106 17,736 18,334 18,809 18,920 19,266 18,812 Total 15,936 16,652 16,768 17,065 17,109 17,740 18,338 18,814 18,947 19,326 18,912 Hybrid/EV (% of total) 0.01 0.02 0.02 0.02 0.02 0.02 0.02 0.03 0.14 0.31 0.53 Source: LTA
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The regulatory environment in Thailand The new promotions package, which replaces the first EV one that expired in FY18, covers a comprehensive range of EVs, namely passenger cars, buses, trucks, motorcycles, tricycles, and ships. Incentive schemes for these different types of electric vehicles can be summarised as follows: i. Four wheelers. Qualified projects with a total investment package worth >THB5bn will be granted a 3-year tax holidays for PHEVs. For BEVs, an 8-year corporate income tax exemption period will be offered and is extendable in case of R&D investments. As for qualified projects with total investments worth < THB5bn, 3-year tax holidays will be granted on PHEVs and BEVs, but the tax holiday period for BEVs can be extended if the project meets certain requirements, eg production starting commencement by FY22, additional parts production, minimum production of 10,000 units within three years, and R&D investments; ii. Motorcycle, three wheelers, buses, and trucks. Qualified projects will be granted a 3-year corporate income tax exemption; this is extendable if additional requirements are met, eg starting production within FY22, battery production starting from the module process, producing highly important parts (ex: traction motors), and investing in R&D; iii. Electric-powered ship production projects – vessels with less than 500 gross tonnage will be eligible for eight years of corporate income tax exemptions; iv. Critical parts for EVs. The Thailand Board of Investment or BOI has also approved the adding of four more types of EV parts in its list of critical parts: a) High voltage harnesses, b) reduction gears, c) battery cooling systems, and d) regenerative braking systems. These four categories will all receive eight years of corporate tax exemptions; v. EV battery production. BOI also approved additional incentives for the production of both battery modules and cells for the local market by granting a 90% reduction in import duties for two years for raw or essential materials not available locally; vi. Charging station services has been promoted with a corporate income tax exemption for a period of five years. The requirement is for quick charging systems and at least 40 chargers per station. Figure 40: Snapshot of promotional privileges for EV production (BEV, PHEV, and HEV)
Source: Board of Investment (BOI)
Figure 41: Snapshot for battery electric motorcycles Figure 42: Snapshot for battery electric tricycles (Tuk Tuk)
Source: BOI Source: BOI
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Figure 43: Snapshot for battery electric buses and trucks Figure 44: Snapshot for EV parts and components
Source: BOI Source: BOI
Figure 45: Snapshot of incentives for charging stations
Source: BOI
Warm welcome to well-known automaker brands
Amid the rising adoption of cleaner cars globally, BOI has already approved 24 projects to produce EVs. These include HEVs, PHEVs, and BEVs with a combined capacity of over 500,000 units pa. The approved projects include Mitsubishi Motors (Thailand)’s THB5.48bn investment to upgrade the company’s existing car production line at Laem Chabang Industrial Estate to allow the annual production of 39,000 vehicles – this consists of 9,500 BEVs and 29,500 HEVs. In Jun 2020, BOI also approved Sammitr Group’s THB5.5bn investment for the production of 30,000 BEVs in Phetchaburi. Both projects will cater to domestic market demand and exports – mainly to ASEAN. Other approved projects include: i. BMW (production of PHEVs and partnership with the Dräxlmaier Group for the production of high-voltage batteries and battery modules); ii. FOMM (Asia) (FOMM) having started manufacturing compact BEVs at a plant in Chonburi; iii. Nissan Motor (Thailand) (Nissan Thailand) having invested in hybrid car production in Thailand – it has also received approval for a new BEV production project. In addition, five HEV, six PHEV, and 13 BEV projects have been approved since BOI first rolled out a comprehensive set of incentives covering all major aspects of the EV supply chain. The board has also approved 10 battery production projects with a total capacity of 500,000 units per year, as well as two charging station production projects, which will make more than 4,400 outlets annually. So far, seven of those projects have started commercial operations: i. Nissan Thailand, Honda Thailand, and Toyota Motor Thailand for HEVs; ii. Mercedes Benz and BMW for PHEVs; iii. Newcomers FOMM and Takano Auto Thailand for BEVs.
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Long-term vision for Thailand’s EV industry
The National Electric Vehicle Policy Committee or EV Board has issued guidelines for the promotion of EVs under a “30/30 policy”, which has set a goal to produce ZEVs by 2030. We believe the goal of achieving at least 30% ZEVs with regards to total automotive production by FY30 is another mechanism that will lead Thailand into a low-carbon society going forward. From the meeting of the EV Board in May, we gather that the production and use of EVs has been set – this is the start of the cooperation between all sectors and other related industries to achieve the 30/30 goal. The meeting assigned a sub-committee to adopt various guidelines to study the details and feasibility of various promotion measures. The measures are divided into three phases: i. Phase 1: FY21-22. Initiate the promoting of the use of electric motorcycles and supporting infrastructure nationwide; ii. Phase 2: FY23-25. Develop the EV industry. Thailand has set the target to produce 225,000 passenger car and pick-up truck EVs, 360,000 e-motorcycles, and 18,000 e- buses and e-trucks by 2025. Also, battery production must also be expanded to reach economies of scale; iii. Phase 3: FY26-30. Drive plans and measures to achieve concrete results to achieve the 30/30 policy, which has a goal of producing 725,000 EVs in the passenger car and pick-up truck categories. The e-motorcycle category must also hit the target of 675,000 units, accounting for 30% of the total production in FY30. This phase also includes battery production to meet domestic production levels.
A more challenging vision under consideration
There has been an attempt by the House of Representatives’ sub-committee on EVs to foster more rapid EV evolution in Thailand. Based on the fact that the global trend is switching away from ICE vehicles to EVs, there may be the possibility that Thailand will be unable to cope with the EV disruption if the kingdom still has a policy of electrified vehicles or xEV of 30% at 2030. In a summary of a study undertaken by this sub-committee, the importance of EVs domestically needs to be accelerated. Major takeaways: i. Global EV disruptions have occurred rapidly and consistently. Disruptions are noticeable in the form of battery prices and performances, new model releases, and new EVs with lower prices and better performance. There have also been upcoming bans on the sale of new ICE vehicles in major countries and cities around the world, as well as the future trend of ZEVs and Autonomous Connected Electric & Shared Vehicles or ACES; ii. Vision and policies shared by four ASEAN countries – Malaysia, Vietnam, Singapore, and Indonesia – to build a solid base for the EV industry within their respective countries, as well as becoming an EV hub for the region; iii. If Thailand cannot follow closely this global trend, the country’s automotive industry may collapse. A similar fate, according the report, will also be faced by other related industries such as energy. This sub-committee realised the necessity of presenting an early warning notice to the Thai Government and private sector – they need to adapt to the EV disruption situation and implement the following suggestions. The Thai Government: i. Needs to clarify its EV policies and establish a regulation that all of new vehicles registered in the kingdom must be ZEVs by 2035 or New ZEV 100% @ 2035 – which should be the most appropriate for Thailand. ii. Should expedite urgent action by offering guidelines for it and other relevant government agencies to implement nine key measures. These nine measures are: i. Set and announce environmental targets and a clear-cut industry master plans, as well as effective action plans; ii. Revise and amend relevant laws, regulations, rules, and standards; iii. Support financial and non-financial incentives; iv. Support pilot projects to promote EVs in the country; v. Support R&D – this includes technology transfers to entrepreneurs; See important disclosures at the end of this report 32 Market Dateline / PP 19489/05/2019 (035080)
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vi. Develop an infrastructure for testing and research; vii. Support infrastructure development – especially electric charging and battery swapping stations; viii. Personnel development to support the goal of developing the domestic EV industry; ix. Public relations, education, and knowledge sharing about EVs to the public. In order to transform this vision into concrete action, it is necessary to formulate important strategies and goals. Therefore, the House of Representatives’ committee on energy wants to propose three goals (see Figure 46). Figure 46: Phases of industry evolution proposed by the sub-committee on EVs Period Strategy Goal Thailand to be No. 1 destination for foreign direct investment in EV among ASEAN Build up the market and develop Five years (FY25) member states. the country’s EV industry. All vehicles procured by the Thai Government and its agencies to be ZEVs. Thailand to be the No. 1 EV manufacturer in ASEAN. 10 years (FY30) To be a leader in ASEAN. All vehicles procured by the Thai Government and its agencies to be ZEVs. Initiate the ultra-low emission zones pilot project. Thailand to be a world-class manufacturer of EVs and EV parts. To be a world-class EV ZEVs to be only vehicles to be registered in the country. 15 years (FY35) manufacturer. Expanding the ultra-low-emission zones pilot projects into major cities while expanding the areas of the pilot project.
Source: House of Representatives
In order to upgrade the capabilities of industries and entrepreneurs in the country under the new environmental policies, and determine the appropriate supportive measures and promotional privileges, it is necessary to understand the key strengths and weaknesses of various automotive operators in Thailand. Such entrepreneurs can be divided into six major groups: i. Importers of ZEVs from the ASEAN-China Free Trade Agreement (FTA). This group has a major advantage in terms of low costs, given the 0% import tax under the ASEAN-China FTA. These include: i) JVs with Thai companies (eg MG Sales (Thailand) and CP Foton Sales) and ii) sole importers of ZEVs into Thailand without any JV structure. Thai entrepreneurs will be at a disadvantage in terms of price competition; ii. Existing large entrepreneurs in Thailand desiring to extend the life cycles of ICE vehicles under their current production lines in Thailand, as well as those receiving government support to prolong the ICE trend within the vehicles industry. This will result in delays in developing modern automotive technologies, production, and distribution of ZEVs domestically; iii. New players from Thailand’s small entrepreneurs. The majority comprises automotive parts manufacturers and start-ups with limited innovations. As this group is largely dependent on original equipment manufacturer or OEM orders from branded automakers, none of them own proprietary innovative technologies and R&D knowledge. These include Sakun C Innovation, Cherdchai, Electric Vehicles (Thailand), and Panus Assembly. In the event these small operators cannot create an eco-system and competitiveness, there will be no broad-based economic impact; iv. New players from Thailand’s large-scale entrepreneurs require abundant investment and sufficient demand to make their projects feasible. These players include Energy Absolute and FOMM. In the case of government policy changes and leapfrog advancements in modern automotive technology, this may cause delays in product development. There is also the risk that other countries such as Vietnam can create first-mover advantage by developing high-value products and commercialising them. In such a scenario, Thailand will lose its market position in terms of high-value products to neighbouring countries; v. New foreign players entering Thailand. Great Wall Motors (Thailand) (Great Wall) is the outstanding example in this group. Great Wall is planning to invest in a comprehensive manufacturing vehicle portfolio, ranging from ICE and HEV to PHEV and ZEV. It is also looking to develop autonomous-driving vehicle technology, establish a regional R&D centre, and localise the production of auto parts in Thailand; vi. Importers of ZEVs from the ASEAN FTA. As same as the first group, this grouping also has a major advantage in terms of low costs, as there is an import tax rate of 0% from the ASEAN FTA. The clear examples: i) EV producers in Vietnam such as VinFast and ii) foreign multinational corporations investing in Vietnam and exporting their products to Thailand.
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While Thai entrepreneurs have limitations in capabilities, foreign entrepreneurs may not be confident enough to invest in Thailand due to their concerns over cost effectiveness. Driving the rapid expansion of this industry here cannot rely solely on market mechanisms – clear policies from government agencies for development and promotion must be a pre-requisite. According to Figure 47, the Thai Government had to gather information from several parties to get a clearer picture of the existing situation within Thailand’s EV industry.
Figure 47: Major EV players’ obstacles to be resolved by future government policies Party name Major obstacle Proposal for promotion Infrastructure should be planned systematically and start in the The Thai Government's policies and goals are unclear; public sector. therefore, the private sector is reluctant to make a Electricity tariffs should be clearly stated. decision. Developing new R&D and advanced testing centres should be Energy Absolute Government sector operations should have clear steps; prioritised and implemented to global standards. therefore, the private sector can formulate an action plan. EV must be widely adopted in public transportation and the Thai Government’s commuting services. The Thai Government’s workflow is not integrated. Investment promotions should be a on a long-term basis. Boosting industry demand should provide incentives to both entrepreneurs and consumers. The Thai Government's policies and goals are unclear Charging stations should be distributed nationwide. and a roadmap is required. The easing of regulations for local content production will encourage Mercedes Benz (Thailand) The implementation of EV plan is not linked by relevant long-term investments. agencies. The Thai Government's EV policies should be accelerated. The policy is not updated and impractical. Reduce competition among players within the country and promote Thailand as an ASEAN production hub. The demand for EVs is at risk as EV prices are higher There should be support from the Thai Government for both demand than ICE cars and there are fewer options for EV. and supply. Toyota Motor (Thailand) Infrastructure developments, such as charging stations, Tax promotions should play a key role in supporting local content have not yet covered and confidence levels among end production. users remain low. The EV market is uncertain, as the price of EVs is higher than ICE vehicles. Incentives for promoting demand should be in place. The Thai Government must promote the adoption of EVs. Nissan Motor (Thailand) The Thai Government’s budget for the procurement of Production regulations should be relaxed to promote domestic EVs cannot be carried out. production. Local content production is still at a disadvantage when compared to imports. Integration among departments related to the EV Government sectors must cooperate with all sectors. Timeframe for Great Wall Motor industry is inconsistent and disconnected. the Thai Government’s policies should be clear cut. A funding programme should be provided to charging station The number of charging stations is too low when operators. compared to the number of EV users. Infrastructure should be developed to support EVs. MG Sale (Thailand) The registration progress for charging stations is slow The adoption of EVs must be promoted among government and limited. agencies. Rule & regulations and electricity tariffs are unclear. End users and entrepreneurs’ personnel must be well educated on all aspects of the EV industry. Funding sources for Thai entrepreneurs’ working capital must be made available. Insufficient levels of production and R&D. R&D support via BOI’s competitiveness fund. High cost of R&D and no funding sources. Mechanism to support technology know-how for local entrepreneurs Sakun C Innovation No support for technology transfers. and also support Thai entrepreneurs’ technology development. Local players’ EV prices are higher than the price of EV Support for local content. imports. Sourcing a new fleet of Bangkok Mass Transit Authority’s electric bus project with Thai entrepreneurs’ EV products. On the supply side, EVs currently have high production costs and no economies of scale. Also, there is no Support open software and hardware for Thai entrepreneurs. Tatung (Thailand) common platform for Thai entrepreneurs. The Thai Government should implement marketing communication On the demand side, there should be specific zoning for initiatives to create awareness among consumers. EVs and various incentives for consumers. Policies are needed to: Determine the optimal proportion of EVs; Support the local content used in EVs; Find solutions to cope with EV import. Thai Autoparts In case of EV adoption, 816 auto part manufacturers will be Manufacturers Association affected. Entrepreneur development is needed to: Support R&D for entrepreneurs; Develop modernised automotive testing centres; Upgrade production capabilities of entrepreneurs; Develop EV personnel.
Source: House of Representatives
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20 August 2021 The EV Supply Chain EV vs ICE: What makes up an EV Structurally less complicated. There are several types of powertrains in the market, but generally one could see an ICE vehicle as a plumbing process with its fuel, and on the other end of the spectrum, a BEV/FCEV as a wiring process with an electric motor, which gets its power from the electricity in rechargeable batteries. In between these are HEVs including PHEVs, which are designed to optimise the use of the combustion engine in interplay with a smaller, low-range, high voltage electric powertrain. In a nutshell, there are fewer moving parts in a BEV – no clutch, gearbox, multispeed transmission, or exhaust pipe.
Figure 48: Difference between ICE vehicles and BEV
Source: BCG analysis
Batteries instead of fuel tanks. EVs as a power train solution are not complicated in itself – the key to its commercial debut has always been the cost of its batteries and it represents the central component of the BEV powertrain. Batteries constitute a major cost item in BEVs, and their cost has decreased significantly, thanks to technology advancements, production process optimisation, and economies of scale. Data from BloombergNEF showed that the cost in USD per kWh terms of a lithium-ion battery pack (LIB) has fallen by 89% to USD137.00 per kWh on average since 2010, and to USD100.00 per kWh for best-in-class units. At the same time, battery cell energy densities have almost tripled.
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Figure 49: Price of a LIB pack declined 89%... Figure 50: …while that of battery cell densities almost tripled
Battery pack price (real 2020 USD/kWh) Cell energy density (Wh/kg) 350 1191 300
924 250
200 726 668 592 150
100 384 295 50 221 181 157 137 0 2006 2008 2010 2012 2014 2016 2018 2020 2022
LCO LMO LMO/LNO NCA NCA+ NMC (111) NMC (622) NMC (811) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: BloombergNEF Note: Cathode chemistry: LCO – Lithium Cobalt Oxide, LMO – Lithium Manganese Oxide, LMO/LNO - Lithium Nickel Oxide/Lithium Manganese Oxide, NCA – Lithium Nickel Cobalt Aluminium Oxide, NCM –Nickel Cobalt Manganese Oxide Source: BloombergNEF
Chemistry of the battery pack. The four key ingredients required to build LIB are generalised as: i. Anode materials; ii. Cathode materials; iii. Separator materials; iv. Electrolyte solutions. Major LIB technologies are based on the cathode material: nickel-cobalt-aluminium (NCA), nickel-cobalt-manganese (NCM), or lithium iron phosphate (LFP). The LFP was one of the earliest Li-ion technologies to be commercialised, primarily due to its durability and safety. However, it has been gradually phased out of EV batteries because of its low energy density (30% lower), and replaced by nickel-based batteries – NCM. NCM is commonly used in most BEVs, while the NCA was exclusively developed by Tesla. Various versions of the NCM have been introduced, based on the different chemistry proportions of each cathode material. LFP batteries do, however, cost less and use no cobalt, but are also shorter in range.
According to iea.org, NCM continues to be the dominant chemistry for LIB, with around a 71% sales share. NCA accounts for most of the rest. LFP battery chemistry has regained sales share, but this portion still under 4% of the electric car market.
Figure 51: Basic layout of EV battery Figure 52: EV structure cost: Battery takes the biggest chunk
Source: Samsung SDI Source: World Electric Vehicle Journal (MDPI), RHB Note: ICEV stands for internal combustion engine vehicles
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Figure 53: P&L breakdown of EV cell manufacturing Figure 54: Cost split of EV cell material
Source: Roland Berger, RHB Source: Roland Berger, RHB
Cobalt is by far the most expensive element in a LIB. Over the decade, companies have sought to increase the share of nickel to both increase energy density, and to cut costs by reducing the cobalt content. Both NCA and NCM remain the popular choices, due to their higher energy density – which plays a significant role in determining the driving range on a single charge. Tesla has significantly reduced cobalt content per battery pack while increasing nickel content, which is less than half the price of cobalt, and still maintaining superior thermal stability.
Figure 55: The price of cobalt at USD52,500 per tonne Figure 56: The price of nickel is at USD19,800 per tonne
Source: LME, as at 30 Jul 2021 Source: LME, as at 30 Jul 2021
The higher the nickel content, the higher the energy density, and as nickel replaces cobalt, the cost is also reduced.
Figure 57: NCM & NCA adaptation for EV batteries Figure 58: NCA vs NCM strength comparison
Source: Bloomberg, RHB Source: pushevs.com, RHB
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20 August 2021
From an engineering perspective, the automotive manufacturer (original equipment manufacturers) for BEVs prioritises energy density above all other aspects, as it defines the range per charge that a vehicle can drive. Second is the cost of the battery, as the BEV must be affordable for the general consumer. Li-ion nickel-based technologies are in accordance to both these criteria.
Figure 59: Characteristics of EV batteries; Li-Ion leads with largest specific energy and energy density
Criteria Pb-PbO2 Ni-Cd Ni-MH Zn-Br2 Na-NiCL Na-S Li-Ion Working temperature (C) -25 to 45 0-50 0-50 20-40 300-350 300-350 -20 to 60 Specific energy (Wh/kg) 30-60 60-80 60-120 75-140 160 130 100-275 Energy density (Wh/L) 60-100 60-150 100-300 60-70 110-120 120-130 200-735 Specific Power (W/kg) 75-100 120-150 250-1,000 80-100 150-200 150-290 350-3,000 Cell voltage (V) 2.1 1.35 1.35 1.79 2.58 2.08 3.6 Cycle durability 500-800 2,000 500 >2,000 1,500-2,000 2,500-4,500 400-3,000
Source: Smart Cities (MDPI), RHB
Figure 60: Various versions of NCM/NCA battery Figure 61: Nickel content in battery types
Source: metalbulletin.com, RHB Source: CSA Global, RHB
Regardless of the amount of lithium in the battery system, the cathode material does not change. The highest energy density will still use a high nickel cathode (gradually replacing cobalt as its supply is more limited), and only the electrolyte and anode are different. In the past, it has been difficult to push down the amount of cobalt in NCM batteries. However, there is a floor to every cost cutting effort, and a shift away from cobalt and nickel is the key catalyst for breaching the USD100/kWh mark. The general direction is still to cut reliance on expensive metals like cobalt and nickel. Just recently, the largest Chinese battery manufacturer – Contemporary Amperex Technology (CATL) has unveiled the world’s first sodium-ion battery, with energy density of over 160Wh/kg – highest amongst LFP chemistry, ability to quick charge to 80% in 15 min and material cost could be lower by 30-40% than LIB, according to various Chinese media reports. In summary, dependency on nickel has remained high due to development of NCM. The use of iron as the cathode alternative source is still limited. Tesla, meanwhile, has signed more cooperation agreements with nickel suppliers. Further research on alternative materials for anodes (using sodium (Na) instead of lithium) could increase the effectivity of the EV battery as well.
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Electric Vehicles Regional Thematic
20 August 2021 Leading Global Suppliers Of EV Components
The nickel story in Indonesia To meet growing demand for EV battery, nickel needs to be transformed into a high-purity chemical product called nickel sulphate (NiSO4) which can only be produced from suitable feedstock (Class I and intermediate nickel products). Nickel deposits (fifth most common element on earth) are present in two forms, sulfidic and lateritic. Sulfidic deposits are considered rare (available in Northern hemisphere countries such as Canada and Russia), accounting for less than 30% of global reserves, while lateritic deposits account for the rest. Lateritic deposits are further classified into saprolite ore (1.5-3% nickel content) and limonite ore (<1.4% nickel content). In the case of EV battery, Class I nickel mostly comes from sulfidic deposits, making the increase in supply of nickel sulphate quite challenging – due to the limited natural resource. Today, the stainless steel industry takes up c.70% of global nickel usage, but the rapid development of EV batteries (currently c.5% of global nickel demand) will make the segment one of the biggest users of nickel in the years ahead.
Figure 62: Proportion of nickel demand Figure 63: Global nickel reserves (by country)
Source: S&P Global, RHB Source: US Geological Survey, RHB
In Indonesia, most nickel deposits are lateritic, commonly used in the stainless steel industry. Class II nickel include NPI (Nickel Pig Iron, 8-12% nickel content), FeNi (ferronickel, 20-40% nickel content) and Matte (c.77%). The enhancement process mostly utilises saprolite ore as the feedstock, while lamonites are often stockpiled (or untapped) due to its low nickel content and low price value. Indonesia’s nickel industry is concentrated in the country’s eastern portion – mainly in Sulawesi, as well as some parts of Maluku and Papua. There are currently >295 operating companies with mining licenses or IUPs, with three more under exploration, with a total mining area of over 600,000ha.
Figure 64: Indonesia’s nickel deposits Figure 65: Indonesia’s nickel reserves (by province)
Source: Science Direct, RHB Source: IOP, RHB
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20 August 2021
On the downstream level, the majority of the country’s nickel smelters use the Rotary Kiln Electric Furnace process (RKEF; pyro-metallurgical process which heats up to 1,500-1,600 Celsius), for the smelting of saprolite ores. For limonites that contain lower nickel-grade, High Pressure Acid Leach (HPAL; utilises elevated temperatures of c.255 Celsius, elevated pressures between 50 bar, and sulfuric acid) is required to extract the nickel. Previously, the industry was still highly focused on the upstream business (ore sales), and hence, the nickel ore export ban (since early-FY20) was imposed to encourage miners to produce more value-added products after smelting the ore. Despite being deemed as the most feasible alternative for processing limonite, there are some issues with HPAL method: i) Chances of lower pure material produced compared to using Class I nickel, adding to costs for further purification, ii) expensive initial investment, but lower maintenance cost compared to RKEF in the long run. Another alternative is from Tsingshan (according to its statement in Mar 2021), which has discovered a way to convert the excess portion of NPI (outside the need for stainless steel) into battery grade matte – the company has targeted a production volume of 1.1m tonnes in 2023. However, the economic viability of the process is still in question, given that the current price level of NPI is still at premium compared to nickel sulphate. Note that Indonesia’s saprolite nickel ore reserves currently stand at c.25% of the country’s total nickel reserves. This means there is an abundance of untapped limonite ore that can be monetised in the future through upcoming HPAL smelters. One of the enhancement products from limonite ore is mixed hydroxide precipitate (MHP), as the precursor for nickel sulphate and cobalt sulphate (CoSO4), which can be used as cathode in NCM/NCA battery. In summary, we conservatively see that it will take Indonesia 3-4 years to fully realize the projects – assuming no delays in the HPAL construction, with the pandemic being the downside risk.
Figure 66: Nickel product tree and availability in Indonesia
Source: Ministry of Industry, RHB
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20 August 2021
Figure 67: Past HPAL projects summary Projects Country Operator Capex (USDm) Unit capex (USD/kt Ni) Successes in both capex and opex Coral Bay Philippines Sumitomo Metal Mining (SMM) 500 21 Moa Bay Cuba Sherritt International (Sherritt) 451 12 Halmahera Indonesia Halmahera Persada Lygend 684 18
Failure in capex, success in opex China Metallurgical Construction Group Corp Ramu Papua New Guinea 2,100 64 (MCC) Taganito Philippines SMM 1,300 36 Ambatovy Madagascar Sherritt 5,500 92
Failure both in capex and opex Goro New Caledonia Vale 6,200 103 Ravensthorpe Australia First Quantum Minerals 2,480 69 Murrin Murrin Australia Glencore 1,485 29
Shutdown & overhaul Gordes Turkey Meta Nikel Kobalt 360 36 Bulong Australia Wingstar 160 16 Cawse Australia Wingstar 234 26 Average 44
Source: Energy & Mineral Resources Ministry
Figure 68: HPAL projects in Indonesia; only Halmahera is operational No. Business Capacity input (tonnes) Capacity output (tonnes) Capex (USDm) Unit capex 1 Halmahera Persada Lygend* 5,213,847 35,574 684 18.0 2 Adhikara Cipta Mulia 2,401,920 30,600 36 1.2 3 Smelter Nikel Indonesia 2,401,920 30,600 36 1.2 4 Vale Indonesia n/a 40,000 2,100 53.0 5 Huayue 11,000,000 60,000 1,280 21.0 6 QMB 5,000,000 50,000 998 20.0 Average 19.1
Note: *in operations since 24 Jun 2021 Source: Energy & Mineral Resources Ministry
Two notable large projects/agreements in relation to the progress in EV battery development: Indonesia Battery Corporation (IBC). This project involves the state-owned enterprise (SOE) mining holding firm MIND ID through Antam, Pertamina (state-owned oil company), and Perusahaan Listrik Negara (PLN). Under this project, Aneka Tambang (ANTM IJ, BUY, TP: IDR4,000) will provide the raw material, Pertamina is to develop the battery precursors, and PLN takes charge of the downstream element. Total investment is estimated at USD13- 17bn (c.IDR180trn), to be earmarked at 25-30% for smelters (both RKEF & HPAL), 25%- 35% for battery cells, 15% for downstream projects (precursor production), including charging stations, recycling projects for end-of-life (EOL) batteries, and energy storage systems (ESS). IBC estimates that Indonesia’s battery needs will reach c.29 GWh by 2035, with c.70% contributed by 4W EV sales (target of 300-600k units). Hyundai Motor Group (HMG) with LG Energy Solution, at end-Jul 2021 announced a partnership to secure a stable supply of battery cells for EV production – via an MoU with the Indonesian government – to form a JV to manufacture battery cells in the country. HMG said each company will own a 50% stake (USD1.1bn investment) in the JV and the Indonesian Government has agreed to offer various incentives and rewards to support the stable operation of the plant. The plant (c.10 GWh capacity pa; c.150,000 EV units) will be built in Karawang (c.65km to Jakarta) at c.330,000 sqm of land and is scheduled to begin construction in 4Q21, and to be completed in 1H23. Mass production of NCMA (nickel, cobalt, manganese, aluminium) li-ion battery cells will commence in 1H24.
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20 August 2021
Figure 69: IBC roadmap and target
Source: IBC, RHB
Figure 70: End-to-end value chain for Indonesia’s battery industry
Source: Ministry of Industry, RHB
Figure 71: Indonesia’s EV parts roadmap
Components 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030
Battery Pack Assembly Battery Pack (Assembly)
Battery Cell Production Li-Ion and nickel metal hydride (NiMH) cylinder type cell Prismatic & Pouch type
Battery Management BMS (assembly) Passive BMS, 90% BMS efficiency Active BMS, >95% BMS efficiency System (BMS)
HPAL Smelter (MHP / MSP) Battery Material Nickel Sulfate/Cobalt Sulfate Cathode & Anode material
EOL recycling Recycling of secondary batteries (NiMH & Li-ion)
Non-permanent magnet base efficiency 85% Electric Motor > 94% efficiency motor Permanent magnet base efficiency 93%
>95% inverter efficiency (Ultra low Ron SiC, low parasitic >96% inverter efficiency (high Converter / Inverter impedance, high power density) frequency HFET)
Charging System AC level 1 & level 2 charger DC Fast charger/ultra-fast charger
General Passenger Piloting taxi & ride CKD IKD IKD and part by part Vehicle hailing
Bus & Trucks Piloting TransJakarta IKD IKD and part by part
Private passenger Import CBU CKD IKD IKD and part by part vehicle
Motorcycles CKD & Import CKD Part by part
Source: Ministry of Industry, RHB
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20 August 2021
The semiconductor angle The semiconductor content per vehicle continues to grow in tandem with the advancement of technology and the electrification level, and this is expected to accelerate with the paradigm shift from hybrid to full EV in the next five years. Other than the battery pack which is a significant and essential component of a full EV, there are other power electronics parts such as inverters, converters, power devices, chargers and etc. These new applications in the EV ecosystem will spike demand for modules with various power levels and reliability requirements. This, in turn, should lead to an extensive range of power modules – with introduction of new materials, silicon and packaging with different technical properties.
Figure 72: Main technology trends in EV and HEV
Source: Yole Developpement
Figure 73: Power electronics in EV
Source: Power Electronics and Electrical Power Research Laboratory (PEEPRL)
Silicon-based power switching transistors such as insulated-gate bipolar transistors (IGBTs) and metal-oxide semiconductor field effect transistor (MOSFET) modules are used in many different types of power applications, especially in the automotive and transportation sector. They are a critical component in achieving desired energy efficiency and battery range as they distribute and convert the DC from the electric vehicle battery to AC, driving the vehicle propulsion system. Generally, MOSFETs work well for lower voltages and power, while IGBTs are often adapted to higher voltages and power.
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20 August 2021
Wide-bandgap components: silicon carbide (SiC) and gallium nitride (GaN). The introduction of SiC and GaN materials has led to smaller, faster and more reliable devices with higher efficiency than the traditional silicon components, enabling more powerful semiconductor applications to be produced. All these are made possible given the properties of these materials, which have higher switching speeds – at ~10x the rate of silicon and with lower resistance – which results in less energy loss. Also, these can withstand voltages 5-10 times higher than silicon can, enabling high-power applications to utilise more semiconductor technology, or that a device of the same voltage difference can get nearly ten times smaller. We often find GaN in small, high-frequency products while SiC is preferred in larger power products, given its power capabilities and higher thermal conductivity. Current manufacturing processes are the limiting factor for both GaN and SiC, as these processes are either more expensive, less accurate, or more energy-intensive than the widely adopted silicon manufacturing processes. Nevertheless, the increase in cost can be compensated by the significantly higher efficiency rate, allowing for battery savings on the advantages a particular technology delivers. We can expect the cost to lower significantly when the technology becomes more matured when larger volumes are produced, with the transition to 8-inch wafers and increased penetration of higher voltage devices. Over the last couple of years, the usage of SiC has been gaining traction in the EV/HEV industry, especially after it was used in the main inverter of Tesla’s Model 3. Wider adoption of SiC in the main inverter has become a common goal for the leading original equipment manufacturers, with players like Daimler and Hyundai moving towards using this. Silicon carbide may be a more effective product in the short term – as it is easier to manufacture larger, more uniform wafers of SiC than GaN, but the value proposition may change in a few year, when further technological advancements are made.
Figure 74: Wide-bandgap semiconductors
Source: Infineon
Market forecasts. According to Yole Development, the PHEV and BEV markets are expected 2020-2026 CAGRs of 37.3% and 44%. The main power inverter market is expected to reach USD19.5bn by 2026, or 67% of the total EV/HEV converter market, with a CAGR of 26.9%. Meanwhile, the total power semiconductor market is expected to triple from 2020 to 2026, driven by a major technology battle between IGBT and SiC modules.
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Electric Vehicles Regional Thematic
20 August 2021
The major players The EV supply chain is very dynamic, and will continue to be impacted by the growth in demand and new technology trends among the traditional leading semiconductor manufacturers such as Infineon Technologies, STMicroelectronics, Hitachi, Mitsubishi Electric and ON Semiconductor. There are many newcomers at the module level or power manufacturers or the original equipment manufacturers themselves (Tesla, NIO, Rivian, Rimac, Xpeng, and Hozon) are pouring heavy capex into their own battery design and manufacturing initiatives, in order to gain the first-mover advantage and control their own supply chains. In fact, many of the players have started mass production of SiC dies/devices – these include (but are not limited to) Infineon Technologies, Cree (Wolfspeed) and STMicroelectronics. This trend is expected to ramp up exponentially in the next few years. Domestically, semiconductor players that are directly involved in the supply chain of EV- related products would be the outsourced semiconductor assembly and test players – particular Malaysian Pacific Industries (MPI MK, BUY, TP: MYR45.12) and Unisem (UNI MK, BUY, TP: MYR10.02) as both have exposure to automotive power management via integrated circuits packaging. China seems to be the biggest consumer market for EVs, and is likely to accelerate the adoption of EVs – thereby creating huge market growth opportunities for associated power electronics. That said, we believe the technologies for EVs and its related components will continue to evolve rapidly in the next few years, which poses new opportunities and threats to the all the players involved in semiconductor and packaging materials at the same time – as changes and innovations would affect product design, technicalities, efficiency and reliability. Ultimately, the fittest among all in terms of technology breakthrough, cost effectiveness and product differentiation would prevail.
Figure 75: Power electronics landscape – key players
Source: Yole Developpement
Figure 76: China is driving the future of EV/HEV and associated power electronics
Source: Yole Developpement
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Electric Vehicles Regional Thematic
20 August 2021 The Charging Infrastructure In ASEAN There are three main types of charging stations: Level 1, Level 2, and DC fast chargers (DCFC). Level 1 charging stations are the slowest and use a 120V AC outlet, which supplies an average power output pf 2kW per hour (around 4-8km of EV range per hour of charging). These are usually the basic home charging packs; Level 2 uses a 240V AC outlet, supplying 7.2kW and up to 22kW capacity. These are used by EV owners who want faster charging and some public charging stations where vehicles are expected to be parked for a few hours; DCFCs are 480V DC with charging capacity ranging from 50kW and ultra-rapid chargers with up to 350kW capacity. These are mainly used for on-the-go charging where users are expected to stay for a shorter time, like along a highway or for community charging in metro areas. The “Chicken & Egg” dynamic Which comes first, the EV or the charger? The dilemma on whether to make investments on charging infrastructure without certainty in EV deployment and charging infrastructure demand has always been the question on investors’ minds. It is a chicken-or-egg problem – demand for EVs will remain low, if range anxiety issues persist (due to the lack of charging infrastructure), and the rollout of charging infrastructure would be hard to ramp up when utilisation rates are low and the demand for EVs is lacklustre. An uncertain or underdeveloped policy landscape for EVs in the country may make matters worse. While most charging of EVs is done at home and at the workplace, having convenient and affordable publicly accessible chargers will help EV adoption scale up. Alternative Fuels Infrastructure Directive (AFID), the key policy regulating the deployment of public electric vehicle supply equipment in the EU, recommended that member states aim for one public charger per 10 EVs, implying a ratio of 0.1 in 2020. Capex for charging infrastructure is not exactly cheap. A recent report by McKinsey estimated that an EV charger can cost as little as USD400.00 for home charging points, USD2,400 for public AC Level 2 charging points, and more than USD30,000 for lower-end Level 3 charging points. This translates to an investment of approximately USD110-180bn for the next 10 years, in order to meet global demand for EV charging infrastructure, both in public and private spaces. On the other hand, Forbes reported a higher figure, with hardware and installation costing as much as USD4,500 for Level 1 port, USD20,000 per Level 2 port, and USD90,000 per DCFC.
Figure 77: Ratio of public chargers per EV stock by country
Source: IEA
Indonesia We think the Indonesian Government needs to provide more incentives for EV sales, especially for manufacturing facilities and charging stations. This would help attract private companies to build EV charging stations for the public – the availability of charging stations
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Electric Vehicles Regional Thematic
20 August 2021 is very low, at only 62 units in 37 locations at the moment. PLN estimates that Indonesia will need more than 31,000 new charging stations by 2030, involving a total investment of IDR55trn (USD3.8bn), over the next 10 years. Over a third of the stations will be in Jakarta, while the rest are needed in cities as far east as Makassar, South Sulawesi. Apart from being placed at gas stations, the charging stations will be built at shopping malls, markets, and apartment complexes, among other sites with large parking lots. PLN is looking to provide incentives for the setting up of EV public charging stations. The incentives include lower installation costs, a power supply guarantee, and relaxation in the minimum usage requirements during the first two months of operations. PLN estimates that the current cost to charge an EV in Indonesia ranges at IDR1,644.5-2,466.7 per kWh at the public charging stations. In 2021, PLN – together with Pertamina and Jasa Marga ((JSMR IJ, BUY, TP: IDR5,300) – will build 65 EV charging stations for the public, across 14 cities in Indonesia. So far, there are 32 EV charging stations built by PLN. It is also working with Jasa Marga to build charging stations at toll road rest areas. PLN is also providing a 30% discount for vehicle owners who charge their batteries at home, between 22.00 and 5.00 (Western Indonesia Time). PLN has also launched the Charge.IN application to make it easier for EV owners to locate charging stations. This year, private companies Medco Energi and Royal Dutch Shell also opened EV charging stations in Jakarta. However, expansion of these private companies is still slow. We see that these companies are still testing the waters of the local EV charging station market. Malaysia Malaysia is estimated to have approximately 500 public alternate current (AC) chargers, of which 320 charging stations are provided by ChargEV throughout Malaysia. These public charging points are Level 2 AC chargers, with capacities ranging 7.2--22kW – approximately 63% consist of higher-capacity chargers. We note that current PHEVs that utilise AC charging are limited by the onboard chargers (OBC), with the majority spotting a max charging capacity of 3.7kW, so the charging time is indifferent when using a higher-power charger. BEV, on the other hand, currently uses OBC at the higher end of 22kW. In the meantime, there are only a handful of DC chargers available publicly. Currently, EV owners could pay an annual subscription fee of MYR240.00 to enjoy the 320 charging stations nationwide for free.
Figure 78: PHEV & BEV cars officially sold in Malaysia Figure 79: IEC standard adopted for AC charging stations Make Model Type Charging Inlet BMW 330e PHEV Type 2 BMW 530e PHEV Type 2 BMW X5 PHEV Type 2 BMW 740Le PHEV Type 2 BMW i8 PHEV Type 2 Mercedes C350e PHEV Type 2 Mercedes E350e PHEV Type 2 Mercedes S560e PHEV Type 2 Volvo XC90 PHEV Type 2 Volvo XC60 PHEV Type 2 Volvo S90 PHEV Type 2 MINI Countryman PHEV PHEV Type 2 Nissan LEAF Gen 1 BEV Type 1 Nissan LEAF Gen 2 (2019) BEV Type 1 Mitsubishi iMiev BEV Type 1 Renault ZOE BEV Type 2 Tesla Type 2 Model S, X or 3 BEV Type 2 BMW i3 BEV Type 2 Mercedes EQC BEV Type 2 Type 1, aka Japanese or J-plug Type 2, commonly used in Continental cars
Porsche Taycan BEV Type 2
Source: ChargEV Source: ChargEV
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20 August 2021
Chicken and egg problem. MGTC will be championing the rollout of public chargers by installing the first units, followed by a charger-to-EV ratio – the rollout of EVs will help bring charging numbers up. The purpose of taking the first step is to provide the groundwork that will instil confidence in the direction of electrification of transport for both consumers and car manufacturers, and eventually, drive the adoption of EV. Towards this end, paultan.org reported that Malaysia is targeting to install 7,000 AC charging points and 500 DC charging points nationwide through government funding, beginning with 2,000 AC charging points and 200 DC charging points by the end of 2021. The broader goal is to reach 125,000 charging points (both private and public) by 2030. MGTC also looks to collaborate with private building owners to enable public-private partnership and co-financing. Acknowledging that most EV charging takes place either at homes or workplaces, MGTC is working on a framework which hopefully increases the number of home chargers. However, this is likely to be on a voluntary basis. For workplace charging, tax allowances could be a tool to incentivise employers to provide charging facilities. Also, new commercial and residential projects may have to include provisions for charging infrastructure before building approvals are issued.
Singapore Singapore’s plans to build an EV charging infrastructure. When it comes to the EV industry, Singapore actually sits in a very unique position — while the market is too small, it greatly benefits from being a small country. One of the major drawbacks of EVs are their relatively short range and scarcity of charging points. This, however, is relative. Given that the average range of a fully charged EV is about 250km, the average driver in Singapore can drive for more than four days – based on a national average of 55 km per day – between charges. Plans for a national EV charger network. At the 2021 Committee of Supply debates, the Singaporean Government announced plans to double the country’s 2030 EV charging points target to 60,000 from 28,000. The revised target comprises 40,000 EV charging points in public carparks and 20,000 EV charging points at private premises. Assuming one- third of Singapore’s cars are EVs by 2030, this will translate into an EV-to-charging-point ratio of about 5:1. The key to unlocking more charging facilities in Singapore is to not insist on high-powered or “fast” charging but to accept that – for most users – “slow” or “overnight” charging will work just as well. Installing fast chargers would require a major upgrading of almost all the power substations and grid infrastructure all over the country. It would also be costly, time consuming, stall the development and expansion of charging infrastructure, and severely impede the adoption of EVs. In the US, Europe, and Japan, EV users predominantly use slow charging, with fast charging – defined as 22kW and above – estimated to account for 10-20% of charging demand. Charging points will be shared – with different drivers charging on different days and at different times – especially in public car parks. This will minimise the need for significant electrical infrastructure upgrades. Carparks in new developments. Singapore plans to monitor EV adoption, and consider making it mandatory for new property developments to cater for sufficient electrical capacity to support EV charging at such development’s carparks. This includes upcoming HDB towns, commercial buildings, and new private residences such as condominiums. All new HDB carparks will cater for sufficient electrical capacity to support EV slow charging of 15% of their car park lots and install a minimum number of chargers at such lots. Existing public carparks. Singapore plans to have eight EV-ready towns by 2025, as it plans to implement charging points in phases nationwide for public housing estates. The estates that have been identified to become EV-ready are Ang Mo Kio, Bedok, Choa Chu Kang, Jurong West, Punggol, Queenstown, Sembawang, and Tengah. In these towns, every HDB carpark will be fitted with charging points. By the 2030s, Singapore plans to make every HDB town an EV-ready one.
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20 August 2021
Figure 80: An illustration of the first eight EV-ready towns
Source: LTA
The Singaporean Government recognises the importance the private sector will play in developing the EV charging infrastructure, especially in the deployment efforts of public carparks – this includes the installation and operation of chargers, as well as necessary electrical infrastructure upgrades. The LTA has concluded a Request for Information or RFI to seek the industry’s views on designing a commercially sustainable market model for an EV charging infrastructure that supports public carparks. Existing private carparks. The regulators recognise that installing chargers can be a challenge for non-landed private residences such as condominiums and private apartments, as residents who own EVs are likely to be in the minority. To facilitate charger installation, an EV Common Charger Grant (ECCG) has been introduced to kick-start the installation of a shared charging infrastructure. The ECCG and eligibility criteria. In July, the LTA launched the ECCG to encourage the installation of shared EV chargers in non-landed private residences (NLPRs) such as condominiums and private apartments (with the exception of landed properties), shop houses, hotels, hostels, serviced apartments, and workers’ dormitories. The ECCG will co- fund installation costs of 2,000 EV chargers at NLPRs as an early adoption incentive. As NLPRs form a significant proportion of residences in Singapore, improving charger provisions and access is an important step towards improving the coverage of the national EV charging network. Owners of the chargers – whether an EV charging operator or the owners of the NLPR (eg the management corporation of a strata-titled development) – can apply for ECCG to cover three upfront cost components of charger installations: i) Charging system (eg charger equipment), ii) licensed electrical worker fees, and iii) cabling and installation costs (subject to a SGD1,000 cap). The ECCG will co-fund 50% of the above cost components, subject to an overall cap of SGD4,000 per charger. In addition, to facilitate energy planning and more efficient electricity consumption, only the installation of chargers with smart charging functions – that allow them to monitor and react to energy consumption information through adjustments to the charging rate – will be co- funded. The ECCG will only fund the installation of chargers for up to 1% of residential parking lots within each NLPR. Applications for the ECCG was opened on 29 Jul and any submissions will be assessed on a first-come, first-served basis. The ECCG will be available until 31 Dec 2023, or until 2,000 chargers have been supported by co-funding, whichever is earlier. Launch of tender to jumpstart expansion of a public carpark charging network. In 2020, the URA and LTA announced the launch of Singapore’s pilot tender for EV charging points at public carparks. The pilot tender covers the installation and operation of more than 600 EV charging points at over 200 public carparks across the country in a wide range of accessible areas, eg public housing estates, industrial estates, public parks, and community centres. Successful tenderers will be required to install charging stations at their allotted carparks by 3Q22. The successful bidder will also have to carry out enforcement actions against non-
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20 August 2021
EVs parked in the designated charging lots, as well as EVs that occupy the lots but are not charging. Data and insights obtained from this pilot tender will help to shape the design and phasing of future tenders, which will be issued in batches over the coming years. The tender attracted 19 bidders. Among those which submitted bids for the tender were familiar names like transport group CD, oil giant Shell Eastern Petroleum, utility group SP Mobility, and government-linked ST Engineering. Tender prices were based on a concession fee per kWh of energy payable to the authorities, and ranged mostly from 3 cents by Tron Energy Technology to 80 cents from Accesstech Engineering. CD, which teamed up with French energy group Engie, made a bid of 62 cents per kWh. Current EV charging infrastructure in Singapore. Type 2 AC and Combo 2 DC chargers are the two National Public Charging Standards under TR25. All public charging stations must provide chargers according to at least one of the two national standards, with an option to provide CHAdeMO, ie the optional public charging standard. As of Dec 2020, there are over 1,800 public electric vehicle supply equipment (EVSE) offered by major EV charging service providers in Singapore, ie BlueSG, Greenlots/Shell Eastern Petroleum, Charge+, and SP Group. These EVSEs can be found in a variety of places, such as HDB car parks, petrol stations, shopping malls, office towers, and other buildings. Public EVSEs are either pay-per-use or free-to-use. Several locations are even going over and beyond for EV owners by offering complimentary EV charging services that do not require payment for usage.
Figure 81: Current and future EV charging stations in Singapore Network Type of charging and rated power Pricing Number of stations BlueSG AC 3.7kW Subscription with time-based pricing 1,515*** Greenlots (part of Shell) AC 3.7kW / AC 7.4kW Mix of Time-based and per kWh 21 SP Group AC 43kW / DC 50kW Per kWh 340 BYD AC 40kW / AC 80kW 122 Shell Recharge AC 43kW / DC 50kW per kWh 18** Caltex DC 50kW Per kWh 4 Charge+ AC 7.4kW / DC 60kW Per kWh 7* Note: * Planned capacity expansion by 2030 Note 2: **Planned to grow to 25 by year’s end Note 3: ***Only 295 are available for private EV owners to use Source: Various sources, RHB
With 340 charging points, SP Group offers the largest number of charging points amongst the publically available EV charging stations for private EV owners. In 2018, the group had announced plans to build 1,000 EV charging points across Singapore by 2020. However, its plans were delayed partly by the COVID-19 pandemic. SP Group has ambitions of becoming the largest EV charging operator in Singapore, with plans to corner around half of the market when EV adoption picks up. BlueSG, a unit of France’s Bollore Group, also dominates the EV charging market. Out of the c.2,000 charging points currently in Singapore, BlueSG has 1,515. However, of these, only 295 are open to private EV owners. Set up in 2017, Singapore-based Goldbell Group acquired BlueSG’s electric car-sharing service from Bollore for an undisclosed sum. However, according to Goldbell, BlueSG’s existing EV charging infrastructure will be managed separately under Bollore, as Goldbell has plans to partner with other EV charging providers for car-sharing users. In July, TotalEnergies – previously known as Total – signed an agreement with the Bollore conglomerate to acquire the Bluecharge charging network in Singapore, which it will manage and operate upon approval by the relevant authorities. These charging points will be rebranded as TotalEnergies. Singapore’s home-grown solar power company Sunseap Group has set up an electric mobility unit called Charge+ with the aim of installing 10,000 EV charging points in the country by 2030. Most will be 7.4kW AC chargers, but there will be some 60kW DC fast chargers. The 7.4kW chargers can charge two vehicles at the same time and can also adjust the available power supply according to the number of vehicles being charged. Charge+, in partnership with OCBC Bank, has unveiled a holistic charging solution and financing package that comprises free charging credits and low-interest EV loans to support the buyers of Tesla EVs in Singapore. Tesla buyers will enjoy a free charging period at Charge+ charging points for a minimum period of six months, which can be extended to as many as 18 months. See important disclosures at the end of this report 50 Market Dateline / PP 19489/05/2019 (035080)
Electric Vehicles Regional Thematic
20 August 2021
Experimenting novel ways to balance load on power grid; SP Group is to trial charging points that can draw energy from EVs back into the power grid. In July, energy supplier SP Group announced that it will trial four charging points that can draw battery charges back from EVs to balance fluctuations in energy production and consumption. The vehicle-to-grid (V2G) technology may help enhance power grid reliability so that the grid can handle the mass adoption of EVs expected by 2040 here. V2G can also enable Singapore's energy system to accommodate larger capacities of renewable energy, among other benefits. SP Group has set up four charging points at one of its substations for this trial. The trial, which is not open to the public, will be conducted with two Nissan Leafs. It will be completed in Jun 2022. The Leaf is currently the only V2G-enabled model in Singapore. The group will look into areas like EV charging during peak and off-peak periods, as well as the management of voltage in the distribution system. If V2G technology is proven viable, it can be a win-win for the electricity system and EV owners, acting as a cost-effective solution to supplement the larger energy storage systems to overcome intermittency. At the same time, EV owners can be paid for use of the EV batteries when needed.
Figure 82: An illustration of V2G
Source: Energy Market Authority
EV charging systems in Singapore. A nationwide EV charging standard – TR25:2016 – was established for the EV charging system in Singapore. The Type 2 AC and Combo 2 DC charging systems would be adopted as the NPCS in Singapore. In Mar 2020, as part of the Singaporean Government’s commitment to create a sustainable transport system, the LTA and EMA jointly announced the addition of CHAdeMO charging systems as an optional public charging standard for EVs. This enables providers of EV chargers to bring in a larger range of public charging options for EV users and support the wider adoption of such vehicles in Singapore. To ensure safe use of the public charging infrastructure, a BEV or PHEV has to be equipped with either a: i. Matching Type 2 vehicle inlet (for AC charging only); ii. Combo 2 vehicle inlet (for AC and DC charging); iii. Matching Type 2 vehicle inlet (for AC charging) and a CHAdeMO vehicle inlet (for DC charging).
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Electric Vehicles Regional Thematic
20 August 2021
Figure 83: EV connectors and inlets that will be used in Singapore Vehicle Connector Vehicle Inlet
Type 2 vehicle connector Type 2 vehicle inlet
Combo-2 vehicle connector Combo-2 vehicle inlet
CHAdeMO vehicle connector CHAdeMO vehicle inlet
Source: Energy Market Authority
Thailand Thailand has become active in promoting the EV car industry. Over the past five years, leading parties – car and parts manufacturers and energy & utility companies – have significantly developed their EV infrastructures and offerings. Thailand’s accumulated EV usage may achieve 1.05m units in 2025 and surge to 15.58m units in 2035 (a 15-year CAGR of 34%) vs a minimal 0.19m EVs on the road in 2020. To serve the projected demand surge, Thailand’s National Electric Vehicle Policy Committee or EV Board has set up a roadmap to achieve 12,000 fast charger units by 2030 vs 2,224 units in mid-2021. We have seen both Thailand’s state enterprises and private companies carrying out major investments to penetrate the EV charging platform business domestically. The Thailand Board of Investment or BOI’s investment promotion approvals include tax incentives for such projects. However, we believe market response remains gradual. Despite the accumulated number of electric vehicle or EV registrations in Thailand – both PHEVs and BEVs saw strong 5- year growth CAGRs of 22% (2015-2020) – electric passenger cars only account for a minimal c.1.7% of total new car registrations over this period. See important disclosures at the end of this report 52 Market Dateline / PP 19489/05/2019 (035080)
Electric Vehicles Regional Thematic
20 August 2021
Figure 84: Thailand’s accumulated EV registrations (2015-2021; as of 30 Apr)
Source: Electric Vehicle Association of Thailand, RHB
The Federation of the Thai Industries undertook a survey of the private sector in April. According to its findings, to boost EV demand, the majority of respondents suggested vehicle and maintenance costs be made attractive while the availability of charging stations must be convenient and support driving ranges. The poll also urged the Thai Government to: i. Promote the manufacturing of qualified EV batteries at reasonable prices; ii. Support investments in public charging stations; iii. Provide a sufficient electricity network to support EV usage in the long run; iv. Optimise the pricing structure of EV energy tariffs. The EV Board has established a challenging roadmap that calls for the acceleration of Thailand’s EV production to attain 50% of total production capacity by 2030 and achieve 100% by 2035. Along the way, accumulated EV production may achieve a total 1.05m units in five years or 2025 – ramping up to 6.22m units in 10 years and 18.4m units in 2035. For accumulated EV usage, we may see 1.05m units on the road in 2025 and surging to 15.58m units in 2035 – providing a robust 15-year CAGR of 34%. This compares with a minimal 0.19m in EV registrations in 2020.
Figure 85: Thailand’s EV production and use targets
Source: Bangkok Post, Industry Ministry
To serve the possible promising demand, the EV Board has set a roadmap with the goal of achieving 12,000 fast-charging units within 2030 vs 2,224 in mid-2021. It is obvious that both Thailand’s state enterprises and private companies have carried out major investments in terms of EV charging platform penetration.
See important disclosures at the end of this report 53 Market Dateline / PP 19489/05/2019 (035080)
Electric Vehicles Regional Thematic
20 August 2021
Figure 86: Number of EV charging stations in Thailand (as of 11 Jun 2021)
Source: Electric Vehicle Association of Thailand
Starting with automakers, over the past 3-4 years, Mercedes-Benz Thailand has provided more than 200 wallbox charging points for its plug-in hybrid cars through its 32 showrooms nationwide. It has also done the same with its business partners, ie leading hotel franchises – Marriott, Hilton, and Minor Hotels – as well as luxury shopping malls in Bangkok. Mercedes-Benz Thailand targets to reach 200 charging points in the coming years. Meanwhile, BMW Group (Thailand) (BMW Thailand) has joined hands with retail giant Central Group, residential developer AP (Thailand), and oil retailer The Shell Company of Thailand (Shell Thailand) to launch a public charging station network under the Charge Now brand. Such a move has shown synergies with BMW Thailand’s business in terms of enhancing customer experiences through its facilities, the housing industry through the installation of charging stations at AP’s low- and high-rise projects, and an increase in the installation of chargers at more Shell Thailand petrol stations going forward. UK-based MG Motor introduced its EV models to the Thai market in 2020 and recently launched its new charging platform – the MG Super Charge – this year. This platform currently has 108 units installed at MG’s dealer showrooms nationwide and the company may investment c.THB500m to add more 500 more charging points by the end of 2021. We expect to see more collaborations between foreign car firms in Thailand – particularly the Japanese brands – and local EV charging platform providers to provide charging services to EV drivers going forward.
See important disclosures at the end of this report 54 Market Dateline / PP 19489/05/2019 (035080)
Electric Vehicles Regional Thematic
20 August 2021
Figure 87: MG’s Super Charge platform Figure 88: EV charging point at a PTT gas station
Source: Company Source: Prachachat Thurakij
Energy and utility companies are also getting involved in the development of the EV charging infrastructure – this is being seen as another alternative to generating an earnings S-Curve. Oil retailer PTT Oil and Retail Business (OR) publicly posted its challenging charging platform expansion target: 300 locations at PTT petrol stations throughout the country by 2023 vs 30 in 2021. As the operator of Thailand’s biggest petrol station network, we think it is possible for OR to become one of key leaders in terms of EV charging locations – with the potential to expand its stations overseas in the longer term. Parent PTT has also set up a subsidiary – ONiON Mobility – that is tasked with the distribution of charging stations and wallboxes to corporate and individual customers. To support cleaner mobility, Bangchak Petroleum (BCP) invested – in July – in a local start- up, EV charger vendor Sharge Management (Sharge). Sharge expects the funding and partnership to pave the way for higher sales, ie 20,000 units within five years when compared to 2,500 units in 2020. The synergy with BCP includes a pilot project for an EV quick-charging system at a Bangchak petrol station in Bangkok in 3Q21. Electricity Generating Authority of Thailand (EGAT) is pushing its EV business solutions products and services. These comprise: i. Charging platform EleX by EGAT, which has been installed at 13 petrol stations. The authority is aiming for a target of 48 stations in 2021 and an increase to 90 stations by end 2022 – this includes charging stalls at PTG Energy’s (PTG) petrol stations; ii. Charger cabinet EGAT Wallbox and EGAT DC Quick Charger as an alternative for EV users and may be released for commercial use in 3Q21; iii. Mobile application platform EleXA for the convenience of EV users; iv. An EV charging station network management system – BackEN – which will connect the entire EV ecosystem to improve efficiency and security of the overall system. Provincial Electricity Authority (PEA) also plays a vital role in developing EV charging platforms throughout Thailand’s provinces. PEA introduced own platform – PEA Volta – with 42 charging units at 11 locations in nine provinces, as a pilot project, last year. The authority has also joined hands with BCP by installing a quick charging zone at upcountry Bangchak petrol stations – the target is to cover 75 provinces with 263 stations by 2022.
See important disclosures at the end of this report 55 Market Dateline / PP 19489/05/2019 (035080)
Electric Vehicles Regional Thematic
20 August 2021
Figure 89: EleX by EGAT’s partnership with PTG Figure 90: EA Anywhere charging station at Siam Centre shopping mall’s car park in Downtown Bangkok
Source: Company Source: Company
There are also another two listed players with outstanding profiles in the EV charging segment: Energy Absolute (EA) and Delta Electronics (Thailand) (DELTA). EA operates the both PHEV and BEV electric charging stations under the EA Anywhere brand. Its targets public area locations that can accommodate EV parking for 1-3 hours, ie departmental stores, hotels, restaurants, hospitals, parking facilities in business districts, rest areas along the country main road networks, and petrol stations. EA has successfully partnered with businesses to install its charging platforms at their premises. The company is currently ranked No. 1 in terms of the number of locations and outlet units – both normal and fast chargers – at 417 stations and 1,633 chargers in 53 provinces, as of June. EA also plans to spend up to THB426m in capex, or c.7% of the company’s total budget, to aggressively expand its EA Anywhere network to 1,000 locations this year. Earnings contributions from the business remains minimal for now, but it could act as another growth driver for EA in the longer term. DELTA is the original-design manufacturer or ODM of electronics, and is the Thai arm of Taiwanese electronic component maker Delta Group. Its export-oriented business includes some EV-related products manufacturing, as well as EV solutions and chargers. It offers efficient PHEV and EV powertrain solutions and power electronic components that focus on high-power upgrade technologies. Among its international operations, DELTA develops and manufactures EV charger products at its Thailand facility – it is one of its green energy infrastructure solutions. Key products include a AC normal charger, DC quick charger, and site management systems. The company has provided its products and solutions to various charging station operators in Thailand, as well as cooperated with the Metropolitan Electricity Authority or MEA and PEA in supplying station charger equipment and solutions for them. DELTA is also exporting opportunities for its EV charging business despite a small product mix currently.
Figure 91: DELTA’s EV solutions Figure 92: Business partnership: EV charging expansion
Source: Company Source: Prachachat Thurakij, Companies, RHB
See important disclosures at the end of this report 56 Market Dateline / PP 19489/05/2019 (035080)
Electric Vehicles Regional Thematic
20 August 2021 EV Principals Volvo Cars
Keeping safety at the forefront. In 1927 the first series- Volvo 2025 Electric Strategy manufactured Volvo car, the Volvo ÖV4, rolled off the production line on the island of Hisingen, Göteborg. Volvo Car Group (Volvo By 2025, Volvo wants half of its global sales to consist of Cars) formed part of the Swedish Volvo Group until 1999, when the BEVs, while the remainder will comprise PHEVs. By the end company was bought by Ford Motor Company. In 2010, Volvo Cars of the decade, it will only sell BEVs. was acquired by Geely Holding. Volvo Cars has committed to put 1m electrified cars on the With almost 40,000 employees worldwide, and a presence in 100 road by 2025. markets through approximately 2,300 local dealers, Volvo Cars chalked in sales of 661,713 units in 2020. Earlier this year, Volvo launched its first fully electric car, the XC40 Recharge. This is in line with its plan to introduce a range Safe and reliable. The Volvo brand is no stranger to anyone who of fully electric Volvo models in the coming years, as well as prioritises road safety. In 1959, Volvo gave the world the V-type 3- high-performance models from Polestar, Volvo Cars' point seat belt, which became a mandatory component for vehicles performance brand established in 2017. for decades. Throughout history, Volvo has successfully built its reputation for building safe vehicles through innovative safety In the future, there will be no Volvo cars without an electric features, such as introducing the world to rearward-facing child motor. The latest generation of Volvos has been designed from seats and integrated child booster seats, side impact protection the outset for electrification, and the choices will include fully system and airbags, and city safety systems programmed to prevent electric cars and plug-in hybrid models, as well as new mild- collisions autonomously, amongst others. hybrid models.
Polestar 2
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Electric Vehicles Regional Thematic
20 August 2021
Volvo Cars – cont.
Technology behind its electrification.
The platform. First introduced in 2014, the Scalable Product Architecture (SPA) platform is a global, full-size, unibody automobile platform that is shared across all models of Volvo and Polestar vehicles. SPA allows Volvo to develop a model range consisting of cars based on the same joint modules and interfaces, scalable systems and components and built in a flexible production system. This means all Volvo models can be built on the same production line, irrespective of complexity and vehicle size.
The charging network. Improving access to public charging Volvo’s 2022 XC90 and models thereafter are expected to infrastructure is an integral part of boosting EV adoption. With incorporate the upcoming Scalable Product Architecture 2 (SPA 2) that in mind, Volvo and Polestar collaborated with the plug-in – Volvo’s first purely electric car platform. platform, Plugsurfing, to offer a reduced charging price for Volvo Recharge cars and the Polestar 2. Under the collaboration, The battery. To realise its ambitious electrification dream, Volvo customers can enjoy more than 340 high-powered stations inked long-term agreements with leading China-based battery across 24 European countries, at less than half the price during manufacturer, Contemporary Amperex Technology Co. (CATL) and the first 12 months of ownership. Korean LG Chem in 2019, to ensure the multi-billion-dollar supply of lithium-ion batteries over the course of its electrification journey. The brain. Being the industry leader in safety, advanced safety and automated driving technologies will not be missed. The More recently, Volvo Car group has also joined forces with Northolt, future generation of Volvo Cars will be equipped with its latest a leading Swedish battery company. Together, they are setting up technologies such as LiDAR sensors, as standard equipment. an R&D centre to develop and produce more sustainable batteries Volvo is also looking into harnessing real-time data to constantly tailored to power next generation Volvo and Polestar cars. improve safety levels in its future cars.
See important disclosures at the end of this report 58 Market Dateline / PP 19489/05/2019 (035080)
Electric Vehicles Regional Thematic
20 August 2021 Tesla Inc.
“On a mission to accelerate the world’s transition to sustainable energy” A quick look at its origins. Tesla Inc, formerly known as Tesla Motors (2003 - 2017), is an American electric-automobile manufacturer. It was founded in 2003 by American entrepreneurs Martin Eberhard and Marc Tarpenning, and named after Serbian American inventor Nikola Tesla. Tesla Motors was formed to develop an electric sports car. Eberhard was Tesla’s CEO and Tarpenning its CFO. Funding for the company was obtained from a variety of sources, most notably PayPal co-founder Elon Musk, who contributed more than USD30m to the new venture and served as chairman of the company from 2004. In late 2007, Eberhard resigned as CEO and president of technology, and joined the company’s advisory board. It was announced in 2008 that he had left the company, though he remained a shareholder. Tarpenning, who was also vice president of electrical engineering, supervising the development of electronic and software systems for the Roadster (Tesla’s first electric car), also left the company in 2008. Musk took over as CEO. In 2010, Tesla’s initial public offering raised some USD226m.
Source: Company logo Products and launch timeline The Roadster. In 2008, Tesla Motors released its first car, the completely electric Roadster. According to the tests, the car achieved 244 miles (393 km) on a single charge, a range unprecedented for a production electric car. Additional tests showed that its performance was comparable to that of many gasoline-powered sports cars – the Roadster could accelerate from 0 to 60 miles (96 km) per hour in less than four seconds, and reach a top speed of 125 miles (200 km) per hour. The lightweight car body was made of carbon fibre and based on the Lotus Elise chassis. The vehicle’s electric motor was powered by lithium- ion cells – often used in laptop-computer batteries – that could be recharged from a standard electric outlet. Despite a federal tax credit of USD7,500 for purchasing an electric vehicle, the Roadster’s cost of USD109,000 made it a luxury item. The company sold approximately 2,500 Roadsters before ending production in Jan 2012. In Dec 2017, Elon Musk announced that his personal Tesla Roadster would be launched into space, serving as dummy payload on the maiden flight of the SpaceX Falcon Heavy rocket. The launch on 6 Feb 2018 was successful; the vehicle was placed into a heliocentric orbit that took it beyond Mars's orbital path.
Tesla Roadster Tesla Roadster in space, prior to departing Earth’s orbit, with the "Starman" mannequin at the wheel
Source: caranddriver.com Source: Wikipedia
Model S sedan and the superchargers. After stopping production of the Roadster in 2012, Tesla focused on its new Model S sedan, which was acclaimed by automotive critics for its performance and design. It came with three different battery options, which gave estimated ranges of 235 or 300 miles (379 or 483 km). The battery option with the highest performance gave an acceleration of 0 to 60 miles (96 km) per hour in slightly over 4 seconds, and a top speed of 130 miles (209 km) per hour. Unlike the Roadster, which carried its batteries at the front of the car, the Model S had its batteries underneath the floor, giving it extra storage space in front, and improved handling because of its low centre of gravity. The Tesla Autopilot, a form of semiautonomous driving, was made available in 2014 on the Model S (and later on other models).
See important disclosures at the end of this report 59 Market Dateline / PP 19489/05/2019 (035080)
Electric Vehicles Regional Thematic
20 August 2021
Tesla Model S Sedan Tesla Superchargers
Source: autoblog.com Source: autoblog.com
From 2012, Tesla built stations called Superchargers in the US and Europe, designed for charging batteries quickly and at no extra cost to Tesla owners. Later versions of these stations were called Tesla Stations, and had the capability of complete replacement of the Model S battery pack. Tesla Model X and Model 3. Tesla released the Model X, a “crossover” vehicle (a vehicle with features of a sport-utility vehicle, but built on a car chassis), in 2015. The Model X had a maximum battery range of 295 miles (475 km) and seating for up to seven. Owing to demand for a more inexpensive vehicle, the Model 3, a four-door sedan with a range of 220 miles (354 km) and a price tag of $35,000, began production in 2017.
Tesla Model X Tesla Model 3
Source: driving.co.uk Source: driving.co.uk
From cars to SUVs and trucks. Tesla unveiled its safest, most comfortable truck – the Tesla Semi – which is designed to save owners at least USD200,000 over a million miles, based on fuel costs alone. In 2019, Tesla unveiled Model Y, a mid-size SUV with seating for up to seven, and Cybertruck, which will have better utility than a traditional truck and more performance than a sports car. Tesla has pushed the launch of its Semi truck program to 2022, due to supply chain challenges and the limited availability of battery cells. The production start date for its Cybertruck has also been pushed back from the end of 2021 to sometime in 2022.
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Electric Vehicles Regional Thematic
20 August 2021
Tesla Cybertruck Tesla Semi
Source: insideevs.com Source: insideevs.com
Branching out into other solar energy products. A line of batteries to store electric power from solar energy for use in homes and businesses, called the Powerwall, was unveiled in 2015. These batteries are meant to connect with a solar energy system, and can be used as backup power when electricity supply is interrupted or peak demand is high. In Nov 2016, Tesla acquired SolarCity, in an all-stock USD2.6bn deal, and entered the solar energy generation market. Tesla now sells solar panels and full-solar roofing, which is a roof made up of solar panels that still look like a roof. In 2017, the company changed its name to Tesla, Inc. to reflect that it no longer sold just cars.
Tesla – EV product strategy In 2006, Elon Musk signed off on a blog post by summing up Tesla’s company strategy: Build sports cars Use that money to build affordable cars Use that money to build even more affordable cars While doing the above, also provide zero emission electric power generation options So far, the company has stayed on course on this strategy. It started with building the Roadster, and then transitioned into building affordable models of electric cars. During the process, it has continued to make products accessible and affordable to more people – ultimately accelerating the advent of clean transport and clean energy production. The company has developed electric power generation technology not only for vehicles, but also homes, businesses, and utilities. Tesla believes that although electric cars, batteries, and renewable energy generation and storage already exist independently, when combined, they become even more powerful. Tesla’s product strategy and differentiation comes in the form of customisable cars, regular software updates, solar panels, supercharging compatibility, and self-driving features. Built- in relationships with material suppliers have scored Tesla lithium deposits, decreasing the material costs of their highly automated assembly lines. Sales are an innovative factor in Tesla’s marketing division, offering direct-to-customer online customisable order experiences. Tesla’s broad differentiation strategy is a long-term play, with a focus on electric automobile automation, battery technology, and environmentally friendly products such as solar roof tiles. Building a new closely-knit system Although most Tesla vehicles look similar to other vehicles, what lies underneath the hood has fundamentally different architecture – both in terms of hardware and software. This matters because a long research tradition ensures that when incumbent automakers face a new technology architecture, they will struggle to understand and adapt. Telsa’s integration of its self-developed software on its unique hardware ensures that the company has better control of the product, and also provides scope for significantly better customer experience. Parallels can be drawn with the way Apple develops the iPhone. This enables the company to improve its cars’ software functionality every few weeks. This is in contrast to the traditional auto industry model, whereby the product is the same for as long as the customer drives it.
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Electric Vehicles Regional Thematic
20 August 2021
Evidence of Telsa’s competitive advantage on this front is playing out in the auto industry. Early electric vehicles produced by incumbents, on internal combustion engine architectures, failed to match up with Tesla. Even newer fresh/clean efforts to build electric vehicles by incumbent automakers sometimes do not quite measure up. It is always the little things that get in the way – such as the fact that most vehicles built by other manufacturers have up to five separate software systems, rather than a single integrated system like a Tesla, which gives a performance advantage. Taking control of the bottleneck When comparing Tesla vehicles with the competition, and breaking down the car into its components – we noticed that Tesla’s product strategy is significantly different. In any technical system, as it matures, the value eventually sits with the bottleneck that controls the system’s performance. Parallels can be drawn with the personal computing industry, where Intel has made money for decades, while the hard disk drive and other hardware manufacturers have failed to make similar profits. This is largely because Intel controlled the bottleneck to the personal computer system’s overall performance, while other hardware component manufacturers did not. The bottleneck for electric vehicles now, and in the future, will be the batteries. Tesla plans to dramatically lower the prices of batteries by manufacturing at scale This will also lower the barriers to adoption for electric vehicles. As the world migrates towards electric vehicles, the battery bottleneck will only become more obvious, which means, if they succeed, Tesla could end up controlling the biggest profit pool in the future of auto manufacturing. In 2019, Tesla acquired battery manufacturing companies and plans to incorporate new kinds of battery-related technologies into its vehicles, which could further reduce the cost of ownership. While other automakers are also rushing to acquire the right electric battery expertise, they will still be playing catch up as this market grows. Delivering not just products, but customer-focused solutions Taking a step back from focusing purely on Telsa vehicles, and looking at the company’s overall strategy, we see that its strategy is not only about offering clean transport vehicles and products, but offering a complete clean transport solution. While most carmakers deliver products, Tesla tries to deliver a complete experience: Car, software upgrades, charging, insurance – the whole bundle. It is a solution that other automakers will struggle to match anytime soon. The entire car-buying experience is also far superior, with a direct-to- customer online customisable ordering option.
See important disclosures at the end of this report 62 Market Dateline / PP 19489/05/2019 (035080)
Electric Vehicles Regional Thematic
20 August 2021 TOYOTA Mobility For All
“The “bZ” series, cars that exceed being “just zero-emission.” Masahiko Maeda Founded in 1937 by Kiichiro Toyoda, Toyota Motor Corporation produces
Toyota is one of the largest automobile vehicles under five brands: Toyota, Hino,
manufacturers, and the world's first Lexus, Ranz, and Daihatsu. automobile manufacturer to produce above 10m vehicles per year. Toyota is a leader in the development and Beyond Zero Gas sales of fuel-efficient HEVs, starting with Emission Vehicles Toyota is well known for its the introduction of the Toyota Prius in 1997. management philosophy The Toyota Toyota is now developing hydrogen fuel Way and its lean manufacturing cell vehicles, Toyota Mirai, also BEVs practice Toyota Production System. under its Toyota bZ series.
HEV: Toyota is the world's leader in sales of BEV: Toyota's first all-electric vehicle Toyota bZ4X concept, BEV HEVs – one of the largest companies to Toyota RAV4 EV was made in encourage the mass-market adoption of response to government mandates. In hybrid vehicles across the globe. As of Jan 2020, Toyota introduced the C+pod, a 2020, the company sells 44 Toyota and 2-seater car with an estimated range of Lexus hybrid vehicles in over 90 countries, 100km and top speed of 60km/hour. In and the carmaker has sold over 15m hybrid 2021, Toyota unveiled the bZ4X, an vehicles since 1997. electric crossover SUV on its new e- TNGA platform – for sale in mid-2022. PHEV: Toyota’s Prius PHEV was unveiled in By 2025, Toyota plans to introduce 15 Sep 2011. The first Prius plug-in model had a BEVs. maximum electric-only speed of 100 km/hour. Toyota Mirai, hydrogen fuel cell EV The second plug-in hybrid model, Toyota Hydrogen fuel-cell. Toyota's first RAV4 PHV, which generates better power, hydrogen fuel-cell vehicle to be sold was unveiled in 2019 and sales started in commercially – the Toyota Mirai – was mid-2020. unveiled in 2014.
See important disclosures at the end of this report 63 Market Dateline / PP 19489/05/2019 (035080)
Electric Vehicles Regional Thematic
20 August 2021
Toyota milestones
1920s-1930s 1940s 1950s 1960s-1970s In 1933, Toyota automobiles The Central Bank, Bank of Toyota introduced The Toyota The Japanese economy was started production as a division Japan bailed out Toyota with a Way (a management booming. Toyota offered of Toyoda Automatic Loom demand for its reform philosophy) and Toyota affordable cars, such as the Works Production System (lean Corolla which become the manufacturing practices) world’s all-time best selling car
2010s 2000s 1990s 1980s In 2015, Toyota announced an In 2002, Toyota entered the Toyota decided to set up Toyota Toyota invested in North investment of USD1bn over the Formula One competition. Motor Europe Marketing and America, in a JV with Ford five years in artificial intelligence In 2000, it was ranked eighth on Engineering (TMME) to help Motor Company. Toyota and robotics research Forbes. market vehicles in the continent introduced Lexus to market luxury cars to the global market
2020s In 2021, Toyota and its subsidiaries Hino and Isuzu announced the creation of a strategic partnership
Toyoda automatic loom mass production Toyota Standard Sedan AA, 1936 First generation Toyota Crown model, 1955
1980: Toyota Corolla was the world’s best-selling car The Lexus LS400 was introduced in 1989 Supra is among the most popular sports cars
Prius: Flagship of Toyota’s hybrid technology Mirai: Flagship of hydrogen fuel cell vehicles e-Palette is Toyota autonomous car
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Electric Vehicles Regional Thematic
20 August 2021 MERCEDES-BENZ Drive Luxury With Intelligence
“Alongside zero-emissions driving, zero-accident driving is our most important development target.” Ola Källenius – Chairman of the Board of Management of Daimler AG and Mercedes-Benz AG Its first milestone in electric vehicle In 2009, it debuted the Mercedes-Benz S
development was in 1906, when the 400 BlueHybrid as the world’s first mass-
battery-powered Mercédès Electrique produced hybrid automobile that uses a and the Mercédès Mixte with hybrid drive battery with lithium-ion technology. In 2018, Going 100% electric by were introduced as its first series- it launched the GLC F-CELL model as the produced electric cars. In the 1970s- world’s first fuel-cell operated electric car, the end of the decade 2000s, the German automaker carried with a lithium-ion battery as an additional out a series of electrical-driven energy source that can be externally prototypes, testing batteries with lead- charged. acid, nickel-iron, nickel-chloride high-
temperature, and fuel-cell system.
Today, the three-pointed star is pushing Key EV strategies: Expand customer Rather than waiting for an external ahead with the development of its base by growing sub-brands, and lead stimulant, this move would ensure that intelligent battery-electric mobility under the market in electric drive and car Mercedes has a comprehensive EV the EQ Power label. The plug-in technology software. portfolio available at the right time and has been incorporated into the new A-Class market conditions. However, the shift Latest strategy update. Mercedes- and B-Class models. The all-electric concept towards EVs may vary widely across is also part of the group’s new series of Benz aims to launch three dedicated regions, and the group is committed to its electric-only platforms from 2025, products under the sub-brand EQ – Electric profitability targets. Intelligence by Mercedes-Benz, including which may see the company lay the Mercedes-Benz A250e PHEV luxury SUVs, sedans, and vans, which may groundwork to go 100% electric by the become another flagship product, going end of the decade, and to set up eight forward. EQC, a compact SUV, was released battery factories with partners globally. as the first model in 2019. EQV was unveiled Total investments would be over in 2020, followed by another three models EUR40bn or USD47bn, between 2022 including the EQA, EQB, and EQS in 2021. and 2030. It believes that customers’ Two more models – the EQE and EQG – may greater purchasing power will shift the be manufactured in 2022-2023. luxury segment towards battery cars faster than the mass market.
Milestones with the three-pointed star (Source: Daimler)
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Electric Vehicles Regional Thematic
20 August 2021
Plans: i) Introducing three electric-only EV The German automaker will It expects that plug-in hybrid vehicles and platforms in 2025 – the MB.EA for mid-size manufacture eight fully electric cars fully electric cars will account for more than and larger passenger cars, AMG.EA for in three continents next year. It will half of global car sales by 2025. performance cars, and VAN.EA for electric have battery electric vehicles in all its vans and light commercial vehicles; (ii) segments by 2022. From 2025, all Over the long term, it aims to turn its new forming additional partnerships in Asia and newly launched vehicle architectures car fleet carbon-neutral by 2039. Europe to source batteries, requiring over will be electric-only and customers will 200 gigawatt-hours of cell capacity by 2030; be able to choose an all-electric and (iii) bolstering EV-charging offerings with alternative for every model the partners including Shell. company makes.
Mercedes-Benz currently has production Mercedes-Benz: PHEV and all-electric EQ models facilities in four locations in Southeast Asia – Indonesia, Malaysia, Thailand, and Vietnam. Thailand has the region’s largest factory, based on the wider range of vehicle classes produced in the country. It is operated by local contract manufacturer, Thonburi Group, under the supervision of Mercedes-Benz Manufacturing (Thailand). Thailand’s Board of Investment has approved
investment promotion incentives for the company’s plug-in hybrid and EV cars. Aiming to be a major regional hub for EV manufacturing, it joined hands with the Thonburi Group to kick off the EV production line in Thailand’s capital in 2022, and also carried out a joint investment into battery the production division – Thonburi Energy Storage Manufacturing – to serve its models. Source: Company
How Mercedes-Benz’s PHEVs work Mercedes Benz’s EQ series’ key components
Source: Company Source: Company
New EQS luxury sedan – the future vehicle Investment into a battery factory in Thailand
Source: Company Source: Thonburi Group
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Electric Vehicles Regional Thematic
20 August 2021 ASEAN Power Grids Renewable energy still not growing fast enough After declining by c.1% in 2020, global electricity demand is estimated by the International Energy Agency (IEA) to increase by c.5% in 2021 and 4% in 2022. We note that electricity generated by renewables has increased by 7% in 2020 and is expected to deliver 6-8% growth in 2021-2022. However, this will only be sufficient to accommodate half of the projected global demand growth in 2021-2022, in our view. Fossil fuel-based electricity still accounted for 40-45% of this demand growth, where gas is still lagging behind coal. Closer to us, ASEAN is one of the fastest growing regions in the world in terms of electricity demand, at a CAGR of 6%-plus over the past 20 years. The four largest countries by electricity consumption: i) Indonesia (26%), ii) Vietnam (22%), iii) Thailand (19%), and iv) Malaysia (15%) – these nations account for more than 80% of the region’s total consumption. We will take a closer look at the electricity market and latest RE developments of the four main markets under our coverage, as well as Vietnam – this is because it is one of the major electricity demand contributors. In line with the climate change efforts under the Paris Agreement, ASEAN countries have targeted to achieve a 23% share in total primary energy supply by 2025 (14% in 2017). Recognising this issue, these nations have started looking for solutions to achieve cleaner energy systems. The ASEAN Plan of Action for Energy Cooperation (APAEC) is the regional blueprint for the energy sector – it is being used to set a sustainable energy landscape in ASEAN. This blueprint comprises seven key programme areas (Figure 93).
Figure 93: Seven programme areas of APAEC Phase II Programme areas Key strategies To expand regional multilateral electricity trading, strengthen grid ASEAN Power Grid resilience and modernisation, and promote clean and RE integration. To pursue the development of a common gas market for ASEAN by Trans-ASEAN Gas Pipeline enhancing gas and LNG connectivity. Coal and clean coal To optimise the role of clean coal technology in facilitating the transition technologies towards sustainable and lower emissions development. To reduce energy intensity by 32% in 2025 based on 2005 levels, and Energy efficiency and encourage further energy efficiency and conservation efforts, especially conservation in the transport and industry sectors. To achieve aspirational target for increasing the component of RE to 23% RE by 2025 in the ASEAN energy mix, including through the increasing of RE’s share in installed power capacity to 35% by 2025. Regional energy policy and To advance energy policies and planning to accelerate the region’s planning energy transition and resilience. To build human resource capabilities in nuclear science and technology Civilian nuclear energy for power generation.
Source: ASEAN Plan of Action for Energy Cooperation (APAEC) 2016-2025 PHASE II: 2021-2025
Heavy reliance on fossil fuel, but cleaner technologies in the interim While the developed countries move away from dependence on fossil fuels to RE, ASEAN leaders acknowledge the region still needs to consider fossil fuels in the short to medium term to meet its fast-growing electricity demand. ASEAN is also one of the few regions in the world where coal-fired generation has been expanding. In the short term, the IEA expects coal generation capacity additions from Indonesia (11GW under construction), Vietnam (7GW), the Philippines (2GW), and Cambodia (1GW). This somewhat shows that ASEAN is still heavily reliant on fossil fuels as its primary source of energy supply. Some of the challenges faced by ASEAN countries in increasing RE in the power mix is the high cost of upgrading and integrating systems that need more investment in grids, the Internet of Things, technological know-how, and quality energy infrastructure. Moreover, fossil fuel remains abundant in this region and is the most cost-effective method for now.
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Electric Vehicles Regional Thematic
20 August 2021
Rather than completely ruling out fossil fuels, ASEAN countries should instead explore ways to utilise such fuels in an environmentally sustainable manner to act as a bridge to a carbon- free energy future. According to the 6th ASEAN Energy Outlook, coal will remain central in the region’s power mix at 36% by 2040. Even though RE will continue to grow, it is still considered an intermittent energy source – coal will still play an important role going forward.
Figure 94: ASEAN’s historical energy supply by fuel
Source: ASEAN Centre for Energy’s 6th ASEAN Energy Outlook
To balance the coal-related environmental risks and promote the low-carbon transition, ASEAN requires clean coal technologies or CCTs to enhance coal efficiency and reduce greenhouse gas emissions. Some coal-upgrading demonstrations have been conducted in Indonesia, through which the upgraded brown coal is able to increase a coal-fired power plant’s thermal efficiency by 5% while reducing carbons emission by 15%. Meanwhile, High Efficiency, Low Emissions or HELE coal technologies, such as Supercritical (SC) and Ultra-Super Critical (USC), offer efficiency gains of 42-45% when compared with subcritical technology of 38%. Malaysia has led the way by operating the 1,000MW Manjung 4 plant, ie ASEAN’s first USC coal-fired power plant. Additionally, Indonesia plans to harness the potential of Carbon Capture Utilisation & Storage (CCUS), as well as a pilot project that will be implemented in Gundih, making it ASEAN’s first CCUS project. Other efforts, such as a co-firing system – ie mixing coal with biomass for combustion – are expected to be implemented in the future. In ASEAN, co-firing biomass at coal power plants could be considered a short- to medium- term strategy to reduce coal dependency.
ASEAN power grid Under APAEC Phase II: 2021-2025, strategies and action plans to transition into RE include: i. The deployment of large-scale RE systems; ii. Accommodating higher shares of RE in the ASEAN Power Grid or APG; iii. Increasing infrastructure investment; iv. Promoting smart grids to accelerate RE deployment; v. Promotion of decentralised and distributed RE systems. New and advanced RE technologies, such as waste-to-energy, RE-based hydrogen, energy storage, concentrated solar thermal, and distributed renewables for energy access will also be explored.
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Electric Vehicles Regional Thematic
20 August 2021
The APG is one of the major projects for regional integration. This grid has progressed gradually from bilateral to sub-regional arrangements. Feasibility studies were carried out to identify which interconnection projects were beneficial for the region. Moving forward, the strategy is to accelerate the progress of these integration projects and initiate the expansion of multilateral electricity trades. Another key focus is to integrate RE and other digital developments into the grids to stabilise the APG’s performance.
Figure 95: ASEAN interconnection projects (updated in Apr 2020)
Source: ASEAN Centre for Energy’s 6th ASEAN Energy Outlook
Indonesia In the past few years, Indonesia has become more reliant on coal, as the percentage of electricity generated from this commodity lifted from 53% in 2015 to 60% in 2020. This is largely due to the slower growth of clean energy as compared to the consumption CAGR of 6% in the past five years – except for 2020 due to COVID-19. According to the IEA, there is 10.7GW of RE being installed, predominantly led by hydro (57%), geothermal (21%), and biofuels (18%). The world’s global favourite – solar photovoltaic or PV – only accounted for 3% of total RE installed capacity. Wind and solar generation have only contributed to 0.2% of total electricity generated in 2019 in the country. Leveraging on steam from underground reservoirs of hot water to spin turbines, Indonesia aims to install 8GW of geothermal capacity by 2030, up from about 2.1GW currently.
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Electric Vehicles Regional Thematic
20 August 2021
The Indonesian Government aims to increase the total share of RE in the country’s energy mix from 9% in 2020 to 23% by 2025 and 31% by 2050. To encourage RE adoption, Indonesia has structured certain rules to attract investments, eg simpler electricity pricing, feed-in-tariff systems, and offering more incentives to attract investment. Lately, it was reported that the country was optimistic of achieving its net zero emissions target by 2060 or earlier – a decade earlier than the 2070 target mentioned by President Joko Widodo.
Figure 96: Indonesia’s solar and wind generation is lagging behind the global average
Source: Ember’s Global Electricity Review, March 2021
Malaysia Investments in Malaysian RE infrastructure will be driven by government policies. The Malaysian Government aims to increase the share of RE installed capacity to 31% in 2025 and 40% in 2035. Current installed capacity for RE stands at 7,995MW and is projected to increase to 18,000MW in 2035. Malaysia’s RE will mainly come from solar power, with various government initiatives in place – eg Large Scale Solar, Net Energy Metering, Green Investment Tax Allowance, and Green Investment Tax Exemption, or LSS, NEM, GITA, and GITE – to support the installation of solar panels. According to Report on West Malaysia Generation Development Plan 2020 (2021-2039), the reserve margin is estimated at 52% in 2021 and will drop below 25% in 2030 – settling at 21% by 2039. The Energy Commission has projected a net electricity demand growth of 0.6% pa for 2021-2030 and 1.8% pa for 2030-2039. Being the largest utility company in Malaysia, Tenaga Nasional or TNB has pledged not to invest in greenfield coal plants. The Jimah East power station, commissioned in 2019, will be its last new coal-fired plant. As such, TNB’s coal-related revenue will gradually decrease with the expiry of major coal plants’ power purchase agreements or PPAs, and shall not exceed 20% by 2030 (20.7% in 2022). At the same time, TNB has revealed a 5-year plan to ramp up its RE exposure to 8.3GW by 2025 from 3.4GW as of 2020. Domestically, the focus will be on bidding for LSS voltaic plant projects and small RE jobs, ie mini hydro, biogas, and waste-to-energy, through the existing Feed-in Tariff or FiT scheme and other initiatives.
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Electric Vehicles Regional Thematic
20 August 2021
Figure 97: Reserve margin projections (%) (2021-2039) Figure 98: Capacity mix by fuels (%) (2021-2039)
Source: Report on West Malaysia Generation Development Plan 2020 (2021-2039) Source: Report on West Malaysia Generation Development Plan 2020 (2021- 2039)
Singapore Singapore mostly imports its energy needs as a consequence of land constraints and limited natural resources. Currently, 95% of electricity is generated from natural gas, with the remainder from oil, solar, coal and municipal waste. We do not expect a substantial change in the generation mix, given that natural gas will remain as the dominant fuel in the foreseeable future. Singapore has relatively limited RE options, and the Singaporean Government plans to increase the total capacity of solar energy to 2GW in 2030 from 350MW in 2020. Its strategy is likely to be different from Malaysia’s, whereby LSS power projects in the latter nation are being proposed on vacant land. Singapore’s solar target may be achieved via rooftop and utility-scale floating solar panels. Moreover, regional power grids are the alternative way to access energy via bilateral and regional initiatives. In Oct 2020, the Singaporean Government announced plans to import electricity up to 100MW – ie c.1.5% of the island republic’s peak electricity demand from Malaysia – starting with a 2-year trial under the Laos-Thailand-Malaysia-Singapore Power Integration Project or LTMS-PIP. We believe this will eventually help enhance the share of clean energy, ie hydroelectricity, from regional grids.
Thailand Over the past few years, Thailand’s electricity consumption has been growing at c.2% annually. Overall, electricity demand declined by 3% in 2020 due to COVID-19 impacting the domestic economy. Being a country with a heavy reliance on fossil fuels for its energy needs, natural gas accounts for 60% of the power generated. Note too that 65% of the natural gas consumed is sourced domestically. The remaining comes from Myanmar (16%) and LNG (19%). Thailand currently has installed RE capacity of over 15GW, contributing roughly a third of the overall power mix. This includes the 4GW of hydropower capacity built in neighbouring countries that are exported back to the kingdom. The country’s power sector is undergoing a transition towards clean energy, and the Thai Government is in the midst of drafting a master plan to achieve zero net carbon emissions. Under the 10-year Alternative Energy Development Plan or AEDP, the Thai Government aims to generate 33% of the country’s total power production through renewable sources by 2037, at 29,358MW. Solar is expected to be the largest contributor at 15,574MW, followed by biomass (5,786MW), wind power (2,989MW), hydropower (3,000MW), and waste-sourced power (900MW) by 2037. The current RE target is being reviewed to promote greater investments in low-carbon energy. Note: Thailand is encountering oversupply generation and its reserve margin is in the 40% range. Meanwhile, grid modernisation is another focus to ensure the reliability, resilience, and flexibility of the power system – especially when share of variable RE is on the rise.
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Electric Vehicles Regional Thematic
20 August 2021
Vietnam Vietnam is still quite heavily reliant on coal to produce electricity, accounting for 53% of all electricity generated. This is followed by hydro (26%) and natural gas (16%). The country has managed to ride on its geographical advantage, ie having large rivers, which allow it to expand its hydropower capacity. Meanwhile, other non-RE sources like solar and wind have also started to pick up in recent years. Under the draft proposal of the National Power Development Plan 2021-2030 (PDP 8) released in February this year, the Vietnamese Government does not intend to have any new additional coal-fired thermal plant developments. Instead, the country aims to reduce coal-fired thermal power to 27% of total power capacity in 2030 from 34% in 2020 by using gas-to-power sources, as well as promoting the use of wind and solar energy. Solar and wind capacities in Vietnam – as of 2020 – stood at 16.6GW and 0.6GW. Under PDP 8, the Vietnamese Government plans to increase solar and wind capacities to 18.6GW and 18GW by 2030. The total investment capital from 2020-2030 is c.USD128.3bn, of which USD95.4bn will be for power generation/source/plants and USD32.9bn has been earmarked for power grids. The draft PDP 8 also prioritises the strengthening of grid infrastructure to ensure stable operations with a higher share of renewables.
Figure 99: Vietnam’s annual electricity generation by source (1985-2020)
Source: EIA
Complications of variable RE It is undeniable that the adoption of electric vehicles or EVs will increase electricity consumption. The impact is very much dependant on how fast EV penetration into each different market is. This has been widely discussed in the earlier sections of this report. Here, we want to highlight the potential complication that the wide acceptance of EVs may not significantly reduce total primary fossil fuel consumption in the power sector – especially in ASEAN, which is still heavy reliant fossil fuels. This could simply mean that EVs are still indirectly being fuelled by fossil fuels, ie coal and gas. In fact, the benefits of energy efficiency from driving an EV could be offset by the conversion losses of energy when electricity is being produced by fossil fuel-fired power plants and transmitted all the way from such plants to the various EV charging stations. In order to resolve this issue, what has been widely suggested is the ramping up of installed RE capacity by as much as possible. The next problem that emerges – upon integrating higher RE into the power grid – how to carry huge variabilities in generation? Generally, solar and wind are known as variable REs, as they are only available when certain weather conditions are in place. They are also often far from the centre of demand and are considered non-synchronous power sources, ie sources that have a power electronic interface with the grid rather than a rotating mass, which is directly connected. As such, this could pose a threat to grid stability, which generally relies on the “inertia” provided by synchronous generators.
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Electric Vehicles Regional Thematic
20 August 2021
The Duck Curve and solutions The Duck Curve, named after its resemblance to said waterfowl, was introduced by California Independent System Operator or CAISO back in 2013. The chart depicts the impact of solar PV deployment to net electricity demand throughout the day and night in California during springtime. According to the curve, solar energy peaks during the daylight hours and tapers off at night when electricity demand increases. This then requires other sources of electricity generation to ramp up energy production in the short span of time when the sun sets. The may not bode well for conventional generators, which require longer time to heat up and cool down, as well as operate much more efficiently – and continuously – for long hours. Curtailment of solar PV generation is a way of relieving the over-generation problem when battery storage technology is not massively viable and mature enough. We believe solar trackers and bifacial solar modules will better capture sunlight and, hence, extend solar PV generation. Planning for firm capacity, ie the amount of power generation that can be guaranteed to meet demand at any given time, is important in terms of providing grid stabilisation. Hydropower is deemed as a relatively stable source of RE, as it can be injected into the grid the fastest. Hence, it could be used to complement solar and wind capacities to derive a more stable output curve. Essentially a smart grid, equipped with smart meters, is needed. Such a system should be able to perform data collection, monitor power plant performance, and execute and provide solutions to accommodate volatility arising from RE plants. Energy storage systems are one of the final solutions to all these, as electricity output can then be stabilised and smoothened.
Figure 100: The Duck Curve
Source: California Independent System Operator
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Electric Vehicles Regional Thematic
20 August 2021
Abbreviations used
BEVs Battery electric vehicles CO2 Carbon dioxide DCFC DC fast chargers EVs Electric vehicles ETS Emissions Trading System ECCG EV Common Charger Grant EVSE Electric vehicle supply equipment FCEVs Fuel cell electric vehicles FCHEVs Fuel cell hybrid electric vehicles GaN Gallium nitride GHG Greenhouse gases HEVs Hybrid electric vehicles ICVs Internal combustion engine vehicles IGBTs Insulated-gate bipolar transistors LCA Lifecycle assessment LFP Lithium iron phosphate MSRP Manufacturer’s suggested retail price MOSFET Metal-oxide semiconductor field effect transistor NCA Nickel-cobalt-aluminium NCM Nickel-cobalt-manganese NLPRs Non-landed private residences OBC Onboard chargers RE Renewable energy SiC Silicon carbide ZEVs Zero-emission vehicles
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Electric Vehicles Regional Thematic
20 August 2021
Appendix – Details of our actionable ideas
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Indonesia Company Update
20 August 2021 Consumer Cyclical | Auto & Autoparts
Astra International (ASII IJ) Buy (Maintained)
Ready To Enter The New Era Of EVs; BUY Target Price (Return): IDR6,900 (40.8%) Price: IDR4,900 Market Cap: USD13,859m Avg Daily Turnover (IDR/USD) 185,988m/12.9m
Keep BUY and SOP-based IDR6,900 TP, 41% upside, c.5% FY22F yield. Analyst Astra International’s subsidiary, Toyota Astra Motor (TAM) just launched Battery Electric Vehicles (BEV) in the Lexus premium segment. TAM has Andrey Wijaya 10 electric vehicles in its line-up, consisting of BEVs, Plug-In Hybrid Electric +6221 5093 9846 Vehicles (PHEV), and Hybrid Electric Vehicles (HEV). It also has a pilot [email protected] project for EV mobility in Bali. TAM is commencing local production of HEVs for the mass market in 2022, which are at more affordable prices than BEVs. More incentives are needed to make BEVs affordable for the mass market.
Launching full BEVs under the Lexus brand. In early 2020, TAM
launched two lines of electric cars: Corolla Cross HEV and Prius PHEV. So far, it offers 10 EVs in its line-up, consisting of one BEV, one PHEV, and Share Performance (%) eight HEVs, which are the most complete electric vehicle variants in the YTD 1m 3m 6m 12m Indonesia market. TAM has sold about 4,000 units of EVs up to Feb 2021. Absolute (18.7) (2.0) (10.9) (21.0) (1.2) Preparing for local production of HEVs. TAM has committed IDR28.3trn Relative (21.7) (4.3) (14.2) (21.8) (22.6) (USD2bn) for a 4-wheeler (4W) vehicle manufacturing expansion, including 52-wk Price low/high (IDR) 4,460 – 6,800 for BEVs and HEVs. From 2022, it plans to locally produce HEVs, catering
to the domestic as well as export markets. TAM is also looking at expanding Astra International (ASII IJ) its production to include other advanced EV variants, such as PHEVs. Price Close Relative to Jakarta Composite Index (RHS) However, the major challenge remains the high prices of PHEVs and BEVs, 7,200 118 owing to high EV battery costs (the biggest chunk of BEV costs, at c.39% 6,700 110
of production costs vs internal combustion engine vehicles, whereby 6,200 101 engines account for c.21% of total costs). 5,700 93 Nusa Dua Bali’s EV Smart Mobility pilot project is aimed at introducing 5,200 85 and socialising EVs to Indonesia consumers. In the Nusa Dua tourism area, TAM is developing an integrated EV ecosystem, including EV charging 4,700 76
stations in a number of areas, and a GPS system to navigate to the nearest 4,200 68
charging station. Two of TAM’s compact BEVs are being tested: The COMS
Jul-21 Jul-21
Oct-20 Oct-20 Apr-21 Apr-21
Jan-21 Jan-21 Jun-21 Jun-21
Mar-21 Mar-21
Feb-21 Feb-21
Nov-20 Aug-20 Aug-20 Sep-20 Sep-20 Dec-20 Dec-20 with one passenger capacity, and C+pod with a two-passenger capacity, for May-21 short distance travel, at 50-100km when fully charged. For long-distance Source: Bloomberg
travelling, TAM has introduced the Prius PHEV to work with online taxi companies. Overall ESG Score: 3.5 (out of 4) More incentives needed to make BEV more competitive. High selling E: Good prices remain the main obstacle for the BEV segment. Indonesia’s ASII was included on Indonesia’s main ESG indexes (IDX purchasing power for 4W currently averages at c.IDR300m. The lowest- ESG Leaders and SRI-KEHATI) for its environmental efforts. priced BEV is the Hyundai Ionic at IDR637m, while the Toyota Lexus BEV One of the innovations conducted by its colleagues (Toyoda is priced at IDR1.2bn. The number of Indonesia consumers who can afford Gosei Safety Systems Indonesia) has been able to reduce 607kg of plastics and minimise the cost of plastics by up to BEVs is very limited. The Government needs to provide more incentives to 67% through a redesign of the steering wheel assembly make BEVs more competitive. Another important factor is the availability of process. more charging stations. S: Excellent
Astra Group is actively engaged in CSR activities, which often involve – but are not limited to – safety and Forecasts and Valuation Dec-19 Dec-20 Dec-21F Dec-22F environmental awareness campaigns. Total turnover (IDRb) 237,166 175,046 209,318 223,777 G: Excellent Recurring net profit (IDRb) 19,152 10,225 16,114 19,040 The company regularly conducts shareholder meetings and Recurring net profit growth (%) (3.2) (46.6) 57.6 18.2 ensures equal distribution of public information to all Recurring P/E (x) 10.36 19.40 12.31 10.42 stakeholders. ASII has received numerous awards for its P/B (x) 1.3 1.3 1.2 1.1 governance practices, including FinanceAsia’s 2020 Asia’s Best Companies. P/CF (x) 12.06 7.18 9.09 6.24 Dividend Yield (%) 5.9 5.9 5.7 5.4 EV/EBITDA (x) 6.02 9.12 5.84 5.29 Return on average equity (%) 15.2 10.7 10.9 11.7
Net debt to equity (%) 36.2 15.9 15.7 9.6
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Astra International Indonesia Company Update
20 August 2021 Consumer Cyclical | Auto & Autoparts Financial Exhibits
Asia Financial summary (IDR) Dec-19 Dec-20 Dec-21F Dec-22F Indonesia Recurring EPS 473.07 252.57 398.04 470.30 Consumer Cyclical DPS 289.80 290.26 279.49 264.51 Astra International BVPS 3,652.03 3,845.07 4,209.64 4,586.00 ASII IJ Return on average equity (%) 15.2 10.7 10.9 11.7
Buy Valuation metrics Dec-19 Dec-20 Dec-21F Dec-22F Valuation basis Recurring P/E (x) 10.36 19.40 12.31 10.42 Sum of Parts: We valued ASII’s automotive division P/B (x) 1.3 1.3 1.2 1.1 based on DCF and DDM, assuming a WACC of 8.6%, FCF Yield (%) 2.3 6.4 3.4 5.9 cost of equity at 12.8%, and terminal value (TV) growth Dividend Yield (%) 5.9 5.9 5.7 5.4 of 2%. The valuations of its heavy equipment, EV/EBITDA (x) 6.02 9.12 5.84 5.29 agribusiness, and auto parts are based on our TPs for EV/EBIT (x) 8.24 15.53 9.07 7.78 the stocks: United Tractors (UNTR IJ, BUY, TP: IDR25,000) and Astra Agro Lestari (AALI IJ, BUY, TP: IDR10,600), Astra Otoparts (AUTO IJ, BUY, TP: Income statement (IDRb) Dec-19 Dec-20 Dec-21F Dec-22F IDR1,170). Total turnover 237,166 175,046 209,318 223,777 Gross profit 50,239 38,558 39,399 43,878 Key drivers EBITDA 35,834 21,916 38,117 42,419 i. Recovery of vehicle sales; Depreciation and amortisation (9,650) (9,046) (13,560) (13,560) ii. Higher CPO prices and sales volumes; Operating profit 26,184 12,870 24,557 28,859 iii. Higher coal prices. Net interest (2,429) (1,066) 1,519 2,582
Key risks Pre-tax profit 34,054 21,741 34,465 40,046 Taxation (7,433) (3,170) (9,817) (11,438) i. Weaker consumer spending; ii. Depreciation of the IDR against the USD; Reported net profit 21,707 16,164 17,847 20,771 Recurring net profit 19,152 10,225 16,114 19,040 iii. Higher NPLs of financing companies
Company Profile Cash flow (IDRb) Dec-19 Dec-20 Dec-21F Dec-22F ASII is a conglomerate with businesses in the Change in working capital (26,578) (6,958) (24,915) (18,681) automotive, heavy equipment, agribusiness, financial Cash flow from operations 16,453 27,634 21,816 31,793 services, information technology and infrastructure Capex (11,864) (15,000) (15,000) (20,000) sectors. Cash flow from investing activities (14,186) (826) (26,127) (15,000)
Dividends paid (11,230) (11,751) (11,315) (10,708)
Cash flow from financing activities (5,414) (10,875) 5,378 (2,872)
Cash at beginning of period 25,193 24,330 47,553 59,002 Net change in cash (3,147) 15,933 1,066 13,921 Ending balance cash 21,608 40,263 48,619 72,923
Balance sheet (IDRb) Dec-19 Dec-20 Dec-21F Dec-22F
Total cash and equivalents 24,730 48,405 59,593 71,293 Tangible fixed assets 92,669 98,623 106,187 113,751 Total investments 58,424 47,804 51,130 51,130 Total assets 351,958 338,203 393,553 415,982 Short-term debt 41,752 37,136 27,990 27,990 Total long-term debt 50,549 42,345 67,230 67,230 Total liabilities 165,195 142,749 166,648 166,004 Total equity 186,763 195,454 226,906 249,979 Total liabilities & equity 351,958 338,203 393,553 415,982
Key metrics Dec-19 Dec-20 Dec-21F Dec-22F Revenue growth (%) (0.9) (26.2) 19.6 6.9 Recurrent EPS growth (%) (3.2) (46.6) 57.6 18.2 Gross margin (%) 21.2 22.0 18.8 19.6 Operating EBITDA margin (%) 15.1 12.5 18.2 19.0 Net profit margin (%) 9.2 9.2 8.5 9.3 Capex/sales (%) 5.0 8.6 7.2 8.9 Interest cover (x) 5.98 3.78 8.39 9.85
Source: Company data, RHB
See important disclosures at the end of this report 77 Market Dateline / PP 19489/05/2019 (035080)
Singapore Company Update
20 August 2021 Industrials | Road & Rail
ComfortDelGro (CD SP) Buy (Maintained)
On The Road To Electrification; BUY Target Price (Return): SGD2.00 (23.5%) Price: SGD1.62 Market Cap: USD2,590m Avg Daily Turnover (SGD/USD) 19.1m/14.2m
Keep BUY and SGD2.00 TP, 24% upside with c.3% yield. The gradual Analyst reopening of Singapore’s economy, over the next few quarters, should support the revival of sequential growth for ComfortDelGro’s earnings – Shekhar Jaiswal aided by normalising public transport services and a rebound in demand for +65 6320 0806 taxi services. An earlier-than-expected reopening of international borders, [email protected] amid more aggressive COVID-19 vaccinations, could support higher taxi earnings. We also see the likely change in the Downtown Line’s financing framework, ongoing restructuring of businesses, and potential value- unlocking in Australia as key catalysts.
Electrifying its taxi fleets. In Singapore, CD put two fully electric Hyundai Ioniq taxis on trial in 2018. These taxis could be fully charged in under 30 Share Performance (%) minutes and travel more than 200km. CD expanded its trial of electric YTD 1m 3m 6m 12m vehicles with two Hyundai Kona electric taxis in 2019. Each fully electric taxi Absolute (3.0) 0.0 (1.8) 2.5 17.4 was able to travel up to about 350km when fully charged. In its continued push towards electrification, in 2019, CD replaced about 330 taxis in China Relative (14.7) (1.5) (1.6) (6.1) (7.4) with fully electric models. The same year, its taxi operations in Perth 52-wk Price low/high (SGD) 1.35 – 1.81 became the first taxi company in Australia to operationalise two fully electric
Hyundai Ioniq taxis. In 2021, its Nanjing taxi operations took over 10 new ComfortDelGro Corporation (CD SP) units of Qin, a fully electric taxi model, kick-starting the introduction of EVs Price Close Relative to Straits Times Index (RHS) 1.90 121 into its current taxi fleet. 1.80 115 Electrifying public buses. In 2016, Metroline, CD’s public bus operations in London, was the first bus operator to trial five BYD electric double-decker 1.70 109
buses. The buses were able to travel 306km on a single charge. In 2018, 1.60 104 SBS Transit, CD’s subsidiary, began trials on diesel-electric hybrid buses in 1.50 98 Singapore. In 2019, CD deployed the first two of 50 new hybrid buses in Melbourne, with the entire fleet of 50 buses expected to be in service by 1.40 92
2022. In 2021, some of the Linkker LM312 electric buses were assigned to 1.30 86
SBS Transit to operate. These buses are developed by ST Engineering
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Nov-20 Nov-20 Dec-20 Dec-20
Aug-20 Aug-20 Sep-20 Sep-20 May-21 (STE SP, BUY, TP: SGD4.50) and can be charged via overhead May-21 pantographs at bus interchanges. Source: Bloomberg
Testing EVs and bidding to set up EV charging infrastructure. VICOM, Overall ESG Score: 3.6 (out of 4) CD’s subsidiary, has been offering EV inspection services since Jan 2019.
CD ventured into EV charging in 2018, with the launch of its first DC fast- E: Good charging station, in partnership with Greenlots. In 2020, it rolled out CD has incorporated the creation of an energy efficient Singapore's fastest public commercial DC Charger, a 100kW Delta Fast transport system as one of its three key pillars of Charger. Early this year, the Urban Redevelopment Authority and LTA sustainability framework. It has already set clear goal and invited bids to build, operate and maintain over 600 EV charging points at targets for GHG emissions reduction, improvements in energy efficiency and the use of RE. some 200 public carparks across Singapore. Tender prices were based on concession fees per kWh of energy payable to the authorities, and ranged from 3 to 80 cents. CD teamed up with French energy group Engie and S: Excellent CD is aiming to achieve zero workplace fatalities and made a bid of 62 cents per kW. workplace injury rates below national averages in its operations, targets that it successfully achieved in 2020. It also achieved zero fatality rate for passenger/commuters in countries where is has public transport operations. To ensure that its transport services are accessible to all Forecasts and Valuation Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F regardless of age or ability, CD has ensured that 100%, Total turnover (SGDm) 3,906 3,229 3,553 3,707 3,829 >90% and >57% of its buses in Singapore, the UK and Recurring net profit (SGDm) 286 62 191 233 251 Australia are wheelchair-accessible. Recurring net profit growth (%) (3.6) (78.4) 209.4 22.0 7.7 Recurring P/E (x) 12.25 56.79 18.35 15.05 13.97 G: Excellent CD’s board is made up of ten directors, nine of which are P/B (x) 1.4 1.3 1.3 1.2 1.2 independent (90%). Reflecting on gender diversity, 30% of P/CF (x) 5.75 7.26 4.78 4.75 4.55 the board is made up of females. CD engages with Dividend Yield (%) 6.0 0.9 2.7 5.3 5.7 governments and regulators on different levels, to help EV/EBITDA (x) 9.28 29.67 9.30 7.38 6.77 shape public policy and regulations that support the land transport sector. It also participates in ESG ratings, such as Return on average equity (%) 10.2 2.4 7.2 8.4 8.8 S&P, Sustainalytics, MSCI and CDP, to disclose its ESG InterestNet debt cover to equity (x) (%) net 19.61 cash net cash8.37 net 24.82 cash net 30.05 cash net 32.23 cash performance and efforts to shareholders.
See important disclosures at the end of this report 78 Market Dateline / PP 19489/05/2019 (035080)
ComfortDelGro Singapore Company Update
20 August 2021 Industrials | Road & Rail Financial Exhibits
Asia Financial summary (SGD) Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F Singapore Recurring EPS 0.13 0.03 0.09 0.11 0.12 Industrials DPS 0.10 0.01 0.04 0.09 0.09 ComfortDelGro BVPS 1.20 1.20 1.25 1.30 1.32 CD SP Return on average equity (%) 10.2 2.4 7.2 8.4 8.8 Buy Valuation metrics Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F
Recurring P/E (x) 12.25 56.79 18.35 15.05 13.97 Valuation basis P/B (x) 1.4 1.3 1.3 1.2 1.2 Our TP is derived through DCF FCF Yield (%) 2.9 8.1 12.4 11.1 10.6 Dividend Yield (%) 6.0 0.9 2.7 5.3 5.7 Key drivers EV/EBITDA (x) 9.28 29.67 9.30 7.38 6.77 i. More earnings-accretive acquisitions; EV/EBIT (x) 9.28 29.67 9.30 7.38 6.77 ii. Higher dividend payout; iii. Contributions from acquisitions; Income statement (SGDm) Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F iv. Fare increases boosting its train business; Total turnover 3,906 3,229 3,553 3,707 3,829 v. Pause in taxi fleet contraction; Gross profit 3,906 3,229 3,553 3,707 3,829 vi. Favourable regulations supporting the taxi EBITDA 416 123 365 442 474 industry. Operating profit 416 123 365 442 474 Net interest (21) (15) (15) (15) (15) Key risks Pre-tax profit 407 117 363 443 477 i. Continuing decline in taxi fleet size; Taxation (88) (25) (76) (93) (100) ii. Increased competition from ride-hailing players Reported net profit 265 62 191 233 251 leading to lower daily rental rates for taxis; iii. Sharper-than-estimated decline in margins for Recurring net profit 286 62 191 233 251 existing businesses; iv. iv. Loss of existing contracts for the public Cash flow (SGDm) Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F transport business. Change in working capital (86) (73) 0 (0) 0 Cash flow from operations 610 484 735 739 772 Company Profile Capex (507) (199) (300) (350) (400) CD, one of largest land transport companies in the Cash flow from investing activities (367) (110) (287) (334) (382) world, is a market leader in Singapore and has a Dividends paid (274) (144) (79) (141) (194) significant overseas presence. Its businesses include Cash flow from financing activities (230) (241) (93) (156) (209) bus, taxi, rail, car rental & leasing, automotive Cash at beginning of period 586 594 743 1,097 1,347 engineering services, testing services, driving centre, Net change in cash 14 133 354 249 181 insurance broking services, outdoor advertising, and Ending balance cash 594 743 1,097 1,347 1,528 car dealerships.
Balance sheet (SGDm) Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F
Total cash and equivalents 594 743 1,097 1,347 1,528 Tangible fixed assets 2,706 2,620 2,511 2,460 2,460 Total investments 25 23 23 23 23 Total assets 5,379 5,309 5,479 5,703 5,905 Short-term debt 199 110 110 110 110 Total long-term debt 331 353 353 353 353 Total liabilities 2,370 2,280 2,242 2,258 2,276
Total equity 3,009 3,029 3,237 3,446 3,629 Total liabilities & equity 5,379 5,309 5,479 5,703 5,905
Key metrics Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F Revenue growth (%) 2.6 (17.3) 10.0 4.3 3.3 Recurrent EPS growth (%) (3.6) (78.4) 209.4 22.0 7.7 Gross margin (%) 100.0 100.0 100.0 100.0 100.0 Operating EBITDA margin (%) 10.6 3.8 10.3 11.9 12.4 Net profit margin (%) 6.8 1.9 5.4 6.3 6.6 Dividend payout ratio (%) 80.0 50.1 50.0 80.0 80.0 Capex/sales (%) 13.0 6.1 8.4 9.4 10.4 Interest cover (x) 19.6 8.4 24.8 30.0 32.2
Source: Company data, RHB
See important disclosures at the end of this report 79 Market Dateline / PP 19489/05/2019 (035080)
Thailand Company Update
20 August 2021 Utilities | Power
Global Power Synergy (GPSC TB) Buy (Maintained)
Aiming To Be The Leading Battery Producer Target Price (Return): THB82.0 (6.8%) Price: THB76.8 Market Cap: USD6,584m Avg Daily Turnover (THB/USD) 1,046m/32.7m
Keep BUY and TP THB82.00, 7% upside with 2% yield. We expect Global Analyst Power Synergy to grow consistently in line with its power projects in the pipeline and under study. As a first mover in the battery business, it should Thailand Research gain a head start over its peers. Given superior fundamental growth, strong +66 2088 9999 support from parent company and new S-Curve business, the group should [email protected] outperform and trade above average peers’ P/E. At its current valuation, risk/reward is compelling, trading below the average utilities sector.
For Thailand’s EVs, GPSC comes to mind. We see demand of battery in
Thailand rising exponentially, given the continuing uptrend in EVs,
renewable energy, and smart cities. GPSC is one of first movers to enter
the battery business, called New S-Curve. Apart from being the power Share Performance (%) flagship of PTT it also aims to be a battery solutions provider. Its batteries YTD 1m 3m 6m 12m debuted with the mobility type on 25 Dec 2019, followed by the stationary Absolute 4.1 5.1 5.5 (1.9) 12.5 type on 24 Feb 2021. The trigger point was on 19 Jul 2021 when it began to run its first 30MWh semi-solid battery plant – also South-East Asia’s first Relative (0.9) 9.3 9.4 (5.6) (3.2) – which has the capacity to scale up to 100MWh going forward. 52-wk Price low/high (THB) 51.8 – 85.8
Superior batteries. GPSC has invested in 24M Technologies Inc (33% Global Power Synergy (GPSC TB) stake), which allowed it to gain know-how in producing semi-solid batteries. Price Close 24M Technologies’ semi-solid battery is superior compared to other battery 88 116
types, in terms of longer life cycle, shorter production time, and safer. GPSC 83 112
also invested in Chinese battery producer Anhui Axxiva New Energy 78 107
Technology (11.1% stake), which plans to operate its first 1GWh battery 73 103
factory in 1H22. This should enhance GPSC’s synergies via sales channel, 68 99
and battery supply. 63 94
Outpacing competitors. Strong support from parent company PTT and 58 90 having a first-mover advantage with solid progress, we believe GPSC is 53 85 superior to peers. Although we do not expect its small-scale production to 48 81
be profitable in the near term due to the lack of economies of scale, as
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Aug-20 Dec-20 Aug-20 Sep-20 Sep-20 Nov-20 Nov-20 Dec-20 battery demand rises to a significant degree, GPSC could invest >1GWh of May-21 capacity to catch up with demand in the long run. Battery operations are Source: Bloomberg
expected to deliver positive earnings and play a significant role in its Overall ESG Score: 3.7 (out of 4) performance. Given the downtrend in lithium-ion prices, this should help boost demand for EVs in tandem with lower EV prices. E: Good Robust growth supported by existing power business. GPSC’s growth Being power producer, GPSC has highest exposure to this is backed by its currently electricity capacity of 6,761MWe, which is secured ESG pillar. It aims to achieve a 30% renewable energy (RE) by power purchase agreements (PPAs). It is seeking growth opportunities portion of total capacity in the long term. It is also playing a via conventional and renewable energy, with a focus in Asian markets – key role in parent PTT’s 10-year ambition to have an RE Cambodia, Laos, Myanmar and Vietnam (CLMV), India, and Taiwan. Note capacity of 8GW. GPSC focuses on both clean conventional and RE power plants across Thailand and that it recently invested in large power projects, namely India’s solar and other markets in Asia. Taiwan’s offshore wind projects. These acquisitions open considerable chances for it to grow over a sustained period due to its JV with high- S: Excellent expertise partners and high demand of clean energy in those countries. GPSC applies PTT’s and international standards per those specified by Dow Jones Sustainability Indices and the United Nations Sustainable Development Goals. It also conducts its social responsibility activities based on three Forecasts and Valuation Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F principles: i) Activities linked to its mission and operations, Total turnover (THBm) 66,562 69,578 79,630 79,131 77,122 ii) using its own expertise and potential, and iii) engaging in Recurring net profit (THBm) 4,859 8,963 9,787 10,708 10,528 projects that are suitable for society’s needs.
Recurring net profit growth (%) 44.0 84.5 9.2 9.4 (1.7) G: Excellent Recurring P/E (x) 28.47 24.14 22.11 20.21 20.56 GPSC has a corporate governance score of 5 – the highest P/B (x) 1.4 2.1 2.0 1.9 1.9 possible – from the Thai Institute of Directors. Its disclosure policy is in compliance with regulations set by the SET. As P/CF (x) 6.10 12.85 16.40 12.86 12.90 it is a utility company, GPSC also discloses important Dividend Yield (%) 1.9 1.7 2.0 2.1 2.1 information broadly and promptly to stakeholders. EV/EBITDA (x) 12.47 13.71 13.15 13.33 13.37 Return on average equity (%) 5.3 7.4 7.7 8.2 7.7 Net debt to equity (%) 75.8 70.2 66.7 71.9 64.3
See important disclosures at the end of this report 80 Market Dateline / PP 19489/05/2019 (035080)
Global Power Synergy Thailand Company Update
20 August 2021 Utilities | Power Financial Exhibits
Asia Financial summary (THB) Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F Thailand Recurring EPS 2.70 3.18 3.47 3.80 3.73 Utilities DPS 1.46 1.30 1.55 1.60 1.65 Global Power Synergy BVPS 55.98 36.49 37.81 39.37 40.82 GPSC TB Return on average equity (%) 5.3 7.4 7.7 8.2 7.7
Buy Valuation metrics Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F Valuation basis Recurring P/E (x) 28.47 24.14 22.11 20.21 20.56 DCF P/B (x) 1.4 2.1 2.0 1.9 1.9 FCF Yield (%) 14.2 6.1 2.7 (2.1) 5.3 Key drivers Dividend Yield (%) 1.9 1.7 2.0 2.1 2.1 i. New greenfield and brownfield projects; EV/EBITDA (x) 12.47 13.71 13.15 13.33 13.37 ii. Higher dispatch factors from customers; EV/EBIT (x) 21.25 23.50 22.07 21.71 22.04 iii. Efficiency improvements via lower heat rates and
higher availability factors. Income statement (THBm) Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F
Total turnover 66,562 69,578 79,630 79,131 77,122 Key risks Gross profit 11,499 13,129 15,071 15,841 15,054 i. Power plants may face unplanned maintenance; ii. Delays in project’s construction progress can EBITDA 17,127 20,894 21,809 22,340 21,912 lead to cost overruns; Depreciation and amortisation (7,079) (8,706) (8,817) (8,625) (8,625) iii. Fluctuations in FX and interest rates may Operating profit 10,048 12,187 12,993 13,715 13,287 negatively impact operations. Net interest (5,140) (4,024) (3,869) (3,934) (3,736) Pre-tax profit 5,931 9,484 10,688 11,339 11,184 Company Profile Taxation (247) (993) (1,521) (1,297) (1,294) Global Power Synergy is one of the largest power Reported net profit 3,743 7,509 8,087 8,908 8,728 producers in Thailand and the power flagship of PTT Recurring net profit 4,859 8,963 9,787 10,708 10,528 Group, via independent power producers, small power producers, and very small power producers. Cash flow (THBm) Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F Change in working capital 1,041 1,422 (3,226) (280) (103) Cash flow from operations 22,664 16,843 13,194 16,828 16,780 Capex (3,040) (3,624) (7,316) (21,405) (5,295) Cash flow from investing activities (82,047) (7,370) (7,382) (23,862) (7,876) Dividends paid (2,630) (3,666) (4,371) (4,512) (4,653) Cash flow from financing activities 77,912 (10,495) (1,365) (5,822) (2,913) Cash at beginning of period 5,660 18,839 20,289 26,275 14,954
Net change in cash 18,529 (1,022) 4,447 (12,856) 5,992 Ending balance cash 24,189 17,816 24,736 13,419 20,945
Balance sheet (THBm) Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F Total cash and equivalents 20,053 22,823 26,536 15,215 22,818 Tangible fixed assets 101,336 100,081 98,575 111,351 108,017 Total investments 17,581 17,576 17,522 17,675 17,835 Total assets 252,017 256,656 263,879 267,805 274,505 Short-term debt 24,166 9,053 0 0 0 Total long-term debt 79,356 92,321 104,380 103,070 104,810 Total liabilities 141,841 144,789 147,215 145,610 147,073 Total equity 110,176 111,867 116,664 122,195 127,432 Total liabilities & equity 252,017 256,656 263,879 267,805 274,505
Key metrics Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F Revenue growth (%) 167.5 4.5 14.4 (0.6) (2.5) Recurrent EPS growth (%) 19.7 17.9 9.2 9.4 (1.7) Gross margin (%) 17.3 18.9 18.9 20.0 19.5 Operating EBITDA margin (%) 25.7 30.0 27.4 28.2 28.4 Net profit margin (%) 5.6 10.8 10.2 11.3 11.3 Dividend payout ratio (%) 70.2 48.8 54.0 50.6 53.3 Capex/sales (%) 4.6 5.2 9.2 27.1 6.9 Interest cover (x) 1.95 3.03 3.36 3.49 3.56
Source: Company data, RHB
See important disclosures at the end of this report 81 Market Dateline / PP 19489/05/2019 (035080)
Thailand Company Update r
20 August 2021 Energy & Petrochemicals | Oil & Gas Services
PTT Oil and Retail Business (OR TB) Buy (Maintained) Oil Dominator Driving Through EV Charging; BUY Target Price (Return): THB32.00 (14.3%) Price: THB28.00 Market Cap: USD10,107m Avg Daily Turnover (THB/USD) 992m/31.4m
Keep BUY and DCF-based THB32.00 TP, 14% upside. Our call and TP Analyst is based on PTT Oil and Retail Business’ leadership in oil retail with opportunities to advance into new segments. It is also a recurring income- Thailand Research based firm that suits long-term investments. OR holds solid positions in the +66 2088 9999 oil retail and commercial energy markets. Additionally, it prudently uses the [email protected] synergies between its petrol stations and non-oil businesses to pave the way for favourable long-term opportunities through various new potential endeavours – this includes the relevant electric vehicle (EV) future trend.
Long-term potential despite short-term pandemic challenges. Due to
COVID-19, OR’s 2021 oil retail sales are set to grow at a lower rate (c.+5%) due to lower travel vis-à-vis +8% under normal times. Meanwhile, F&B sales Share Performance (%) are likely to grow c.8% lower than the +21% average of the last three years. YTD 1m 3m 6m 12m We believe 2021 earnings still have growth, thanks to OR’s good Absolute 0.0 (5.9) (5.1) 0.0 0.0 performance in 1Q21 and last year’s very low base – we expect a full-year earnings of THB9.9bn (+8% YoY). However, the company has the potential Relative 0.0 0.7 1.3 0.0 0.0 to capture post-pandemic market share, given its strong position in terms of 52-wk Price low/high (THB) 18.0 – 34.0 market share, as well as its nationwide network of petrol stations and F&B
outlets. In 2022 and 2023, we estimate earnings to recover to THB11.5bn OR TB (OR TB) (+17% YoY) and THB14.3bn (+24% YoY) on the normalising market Price Close Relative to SETPROP Index (RHS) 36 210
situation, as well as new station and F&B outlet expansions. 34 198 Capturing the global EV future trend. OR plans to develop EV charging 32 186 30 174
facilities at its petrol stations. It also aims to provide EV maintenance 28 162 services via the company’s maintenance and auto services wing, FIT Auto. 26 150 OR is looking to invest c.THB13bn in this EV charging project – it currently 24 138 has 31 EV charging stations domestically – and the company plans to have 22 126 20 114
c.90-100 charging stations in Thailand by end 2021 and 300 stations by 18 102
2022. The charging model has also been continuously developed via 16 90
upgrades from normal charging to the much faster quick charging, which
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May-21 May-21 May-21 takes 20-30 minutes to charge, ie a suitable synergy time. This provides May-21 customers who are waiting for their EVs to charge the opportunity to grab a Source: Bloomberg meal and/or purchase items from OR’s petrol stations and F&B outlets. Overall ESG Score: 3.4 (out of 4) Strong partners in the EV business. OR, which is under the PTT Group, holds abundant facilities to operate its businesses. The company also has E: Good strong partners such as electricity producer Global Power Synergy (also Being dependent on the transportation business, OR has under PTT’s umbrella) that can help the company prudently manage the highest exposure to this ESG pillar. However, it aims to electricity fees. OR is able to store electricity during off-peak periods from achieve more environmental products such as increasing electricity producers and sell at peak times, which provides attractive the usage of green energy ie EV car charging in the long margins. term. This initiative is reflected in its Café Amazon and green partners, which tend to design environmentally Key downside risks include consumption delays due to economic friendly outlets. slowdowns or the COVID-19 pandemic. S: Excellent OR applies PTT’s and international standards per those specified by Dow Jones Sustainability Indices and the Forecasts and Valuation Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F United Nations Sustainable Development Goals. It also Total turnover (THBm) 577,134 428,804 464,983 543,388 576,732 conducts its social responsibility activities based on three principles: i) Activities linked to its mission and operations, Recurring net profit (THBm) 10,742 9,146 9,857 11,558 14,308 ii) using its own expertise and potential, and iii) engaging in Recurring net profit growth (%) 293.1 (14.9) 7.8 17.3 23.8 projects that are suitable for society’s needs. Recurring P/E (x) 23.46 27.55 29.83 29.07 23.48 G: Excellent P/B (x) 6.5 6.7 3.4 3.1 2.8 OR follows the guidance of PTT, whose corporate P/CF (x) 12.28 27.53 66.92 38.31 23.84 governance score is among the highest in the country– from Dividend Yield (%) 3.8 0.9 0.9 1.0 1.3 the Thai Institute of Directors. Its disclosure policy is in compliance with regulations set by the SET. As it is a utility EV/EBITDA (x) 24.50 21.87 19.19 19.98 16.62 company, OR also discloses important information broadly Return on average equity (%) 32.7 23.0 14.4 11.2 12.6 and promptly to stakeholders. Net debt to equity (%) 72.6 107.3 0.7 2.7 net cash
See important disclosures at the end of this report 82 Market Dateline / PP 19489/05/2019 (035080)
PTT Oil and Retail Business Thailand Company Update
20 August 2021 Energy & Petrochemicals | Oil & Gas Services Financial Exhibits
Asia Financial summary (THB) Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F Thailand Recurring EPS 1.19 1.02 0.94 0.96 1.19 Energy & Petrochemicals DPS 1.05 0.25 0.25 0.29 0.36 PTT Oil and Retail Business BVPS 4.30 4.20 8.26 8.97 9.88 OR TB Return on average equity (%) 32.7 23.0 14.4 11.2 12.6
Buy Valuation metrics Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F Valuation basis Recurring P/E (x) 23.46 27.55 29.83 29.07 23.48 DCF P/B (x) 6.5 6.7 3.4 3.1 2.8 FCF Yield (%) 4.0 0.7 (5.3) (1.0) 1.2 Key drivers Dividend Yield (%) 3.8 0.9 0.9 1.0 1.3 i. Opening of new service stations and consumer EV/EBITDA (x) 24.50 21.87 19.19 19.98 16.62 stores; EV/EBIT (x) 36.13 36.34 35.13 35.95 27.27 ii. Continuous development of new businesses and
service platforms. Income statement (THBm) Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F
Total turnover 577,134 428,804 464,983 543,388 576,732 Key risks Gross profit 34,067 33,122 33,787 40,754 45,414 i. Consumption slowdowns due to the pandemic and a sluggish economy; EBITDA 11,188 13,064 15,032 16,620 19,632 ii. Delays in opening new stations and F&B outlets. Depreciation and amortisation (3,602) (5,203) (6,819) (7,382) (7,668) Operating profit 7,586 7,861 8,213 9,238 11,964 Company Profile Net interest (1,560) (1,447) (1,383) (1,121) (886) OR operates an integrated oil and non-oil retailing Pre-tax profit 13,028 10,568 11,736 13,760 17,034 platforms in Thailand and abroad. This includes the Taxation (2,132) (1,776) (1,878) (2,201) (2,725) sale and distribution of petroleum products, as well as Reported net profit 10,896 8,791 9,857 11,558 14,308 other products in the retail and commercial marketing Recurring net profit 10,742 9,146 9,857 11,558 14,308 segments, eg coffee shops, F&B outlets, and convenience stores. Cash flow (THBm) Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F Change in working capital 13,027 (689) (7,379) (4,528) (1,925) Cash flow from operations 20,522 9,152 4,393 8,770 14,095 Capex (10,467) (7,322) (20,000) (12,000) (10,000) Cash flow from investing activities (10,467) (7,772) (20,000) (12,000) (10,000) Dividends paid (9,450) (2,250) (2,957) (3,467) Cash flow from financing activities 5,755 (8,676) 45,288 (9,387) (6,419) Cash at beginning of period 10,490 26,300 19,004 48,684 36,067
Net change in cash 15,811 (7,296) 29,681 (12,617) (2,324) Ending balance cash 26,301 19,004 48,684 36,067 33,743
Balance sheet (THBm) Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F Total cash and equivalents 26,300 19,004 48,684 36,067 33,743 Tangible fixed assets 40,302 42,421 55,602 60,220 62,552 Total investments 6,049 7,111 7,000 7,000 7,000 Total assets 152,176 144,979 199,915 206,860 213,223 Short-term debt 4,076 10,350 10,352 8,194 6,487 Total long-term debt 50,335 49,319 38,992 30,828 24,373 Total liabilities 113,468 107,063 100,738 99,082 94,604 Total equity 38,708 37,916 99,177 107,778 118,618 Total liabilities & equity 152,176 144,979 199,915 206,860 213,223
Key metrics Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F Revenue growth (%) (2.9) (25.7) 8.4 16.9 6.1 Recurrent EPS growth (%) 293.1 (14.9) (7.6) 2.6 23.8 Gross margin (%) 5.9 7.7 7.3 7.5 7.9 Operating EBITDA margin (%) 1.9 3.0 3.2 3.1 3.4 Net profit margin (%) 1.9 2.1 2.1 2.1 2.5 Dividend payout ratio (%) 86.7 25.6 30.0 30.0 30.0 Capex/sales (%) 1.8 1.7 4.3 2.2 1.7 Interest cover (x) 4.86 5.43 5.94 8.24 13.50
Source: Company data, RHB
See important disclosures at the end of this report 83 Market Dateline / PP 19489/05/2019 (035080)
Malaysia Company Update
20 August 2021 Industrials | Industrial Services
Sime Darby (SIME MK) Buy (Maintained)
The Electrified Future; Still BUY Target Price (Return): MYR2.70 (28.0%) Price: MYR2.11 Market Cap: USD3,387m Avg Daily Turnover (MYR/USD) 9.20m/2.21m
Maintain BUY and SOP-based MYR2.70 TP, 28% upside and 4.7% FY22 Analyst (Jun) yield. Sime Darby – via its Sime Darby Motors unit – currently offers the bulk of Malaysia’s plug-in hybrid electric vehicles (PHEVs) and battery Eddy Do Wey Qing EVs (BEVs). These are available through marques it represents: MINI, +603 9280 8856 Porsche, BMW, and Volvo. Its fully EV line-up offered across marques [email protected] represents a market share of roughly 24%, but it is worth noting that there are only <500 BEVs on Malaysian roads. We think SIME is well positioned to benefit from potential policies to increase EV adoption going forward.
BMW dealership in the largest EV market in volume terms. China is the
world’s largest auto and EV market, with ample incentives given by the Chinese Government through subsidies and accelerated rollouts of battery Share Performance (%) charging infrastructure to boost EV adoption. China has set a target for new YTD 1m 3m 6m 12m energy vehicles (NEVs), which include battery-powered and hybrid EVs, to Absolute (8.7) (4.1) (5.4) (5.4) (1.9) make up 20% of new car sales by 2025. SIME, through its China BMW Relative (1.2) (3.1) (0.5) 0.5 2.6 dealerships, stands to benefit from the surge in NEV demand through its PHEV/EV offerings, supported by BMW’s target for 20% of its vehicles to 52-wk Price low/high (MYR) 2.11 – 2.53
be electrified by 2023. Sime Darby (SIME MK) Widest selection of EVs in Malaysia. SIME currently offers the majority of Price Close Relative to FTSE Bursa Malaysia KLCI Index (RHS) PHEVs and BEVs available in Malaysia, leveraging off the electrification 2.60 125 road map of the marques it represents. A survey done by wapcar.my shows the group has just under 30% market share of BEVs here across the 2.50 120 marques it represents. It offers two of the three BEVs currently available in 2.40 115 Malaysia: MINI Cooper SE 3 Door and Porsche Taycan. 2.30 110 Upcoming BEV launches. Jaguar is introducing its first all-electric car, the 2.20 105 I-Pace. Volvo – which already had its entire line up electrified through PHEV 2.10 100
offerings – is introducing its first BEV, the fully electric XC40 Recharge. 2.00 95
BMW is adding the i4 grand coupe, and iX xDrive50 and xDrive40 SUVs,
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Aug-20 Sep-20 Sep-20 Nov-20 Nov-20 Dec-20 Dec-20 Aug-21 May-21 into its BEV line-up. We note that the mentioned models are currently open May-21 for registration of interest at their respective websites. Source: Bloomberg
Forecast unchanged. Weakness in coking coal prices may pose a Overall ESG Score: 3.0 (out of 4) downside risk to SIME’s industrial division’s profitability. A resurgence of COVID-19 cases within its operating countries also presents downside risks E: Good to our recommendation and earnings forecasts. We maintain our BUY call SIME is committed to its sustainability commitments, with specific targets detailed across operating segments in its and MYR2.70 TP on this counter. annual reports. Proactive steps are in action to reduce its carbon footprint, and reduce dependency on non- renewable energy sources. However environmental statistics are lacking. However, SIME remains on track to achieve its target to reduce its carbon and energy footprint by 5% in 2023 from the 2018 baseline.
S: Good Aside from its up-to-date health & safety policies, SIME Forecasts and Valuation Jun-19 Jun-20 Jun-21F Jun-22F Jun-23F recently introduced a next-generation safety culture programme called Safe Engage Lead & Focus or SELF, Total turnover (MYRm) 36,156 36,934 43,226 42,479 45,147 which will be rolled out to all operations in stages. It makes Recurring net profit (MYRm) 950 1,040 1,195 1,198 1,269 social investments through philanthropic foundation Recurring net profit growth (%) 10.9 9.5 15.0 0.2 5.9 Yayasan Sime Darby by offering scholarships to Recurring P/E (x) 15.11 13.80 12.00 11.98 11.31 outstanding individuals, and funding impactful P/B (x) 1.0 1.0 0.9 0.9 0.9 conservation, outreach, and development programmes. There are no major issues between the company and its P/CF (x) 10.76 4.74 11.22 5.04 6.34 employees. Dividend Yield (%) 4.7 4.7 5.7 4.7 4.7 EV/EBITDA (x) 5.02 3.78 4.55 3.96 3.47 G: Excellent Return on average equity (%) 10.6 12.6 7.9 7.7 7.8 50% of SIME’s board members are independent, following the best practices of the Malaysian Code on Corporate InterestNet debt cover to equity (x) (%) 17.26 5.6 14.02 3.5 11.41 5.5 net 11.99 cash net 13.32 cash Governance 2017. We notice that it has been very forthcoming with regards to sharing information with the market.
See important disclosures at the end of this report 84 Market Dateline / PP 19489/05/2019 (035080)
Sime Darby Malaysia Company Update
20 August 2021 Industrials | Industrial Services Financial Exhibits
Asia Financial summary (MYR) Jun-19 Jun-20 Jun-21F Jun-22F Jun-23F Malaysia Recurring EPS 0.14 0.15 0.18 0.18 0.19 Industrials DPS 0.10 0.10 0.12 0.10 0.10 Sime Darby BVPS 2.16 2.21 2.26 2.34 2.42 SIME MK Return on average equity (%) 10.6 12.6 7.9 7.7 7.8 Buy Valuation metrics Jun-19 Jun-20 Jun-21F Jun-22F Jun-23F Recurring P/E (x) 15.11 13.80 12.00 11.98 11.31 Valuation basis P/B (x) 1.0 1.0 0.9 0.9 0.9 Sum-of-Parts FCF Yield (%) 6.8 17.1 4.9 15.8 11.8 Dividend Yield (%) 4.7 4.7 5.7 4.7 4.7 Key drivers EV/EBITDA (x) 5.02 3.78 4.55 3.96 3.47 i. Strength in regional consumer discretionary EV/EBIT (x) 6.42 5.32 7.39 6.64 5.86 spending; ii. Intensity of macroeconomic activity supporting Income statement (MYRm) Jun-19 Jun-20 Jun-21F Jun-22F Jun-23F demand for heavy equipment. Total turnover 36,156 36,934 43,226 42,479 45,147 Gross profit 5,652 5,774 6,758 6,641 7,058 Key risks EBITDA 2,738 3,619 3,076 3,184 3,396 Downturn in the global macroeconomic environment. Depreciation and amortisation (598) (1,053) (1,181) (1,284) (1,387) Operating profit 2,140 2,566 1,895 1,900 2,009 Net interest (92) (132) (122) (102) (64) Company Profile Pre-tax profit 1,889 2,328 1,667 1,692 1,840 Sime Darby is a multinational conglomerate involved in Taxation (281) (402) (433) (440) (478) four core sectors (automotive, industrial, logistics and Reported net profit 1,546 1,873 1,195 1,198 1,269 healthcare). It was formed as a result of the demerger Recurring net profit 950 1,040 1,195 1,198 1,269 of SD Plantation and SD Properties. It key earnings
drivers are its motor and industrial divisions. Cash flow (MYRm) Jun-19 Jun-20 Jun-21F Jun-22F Jun-23F
Change in working capital (695) 215 (1,326) 157 (562)
Cash flow from operations 1,334 3,029 1,278 2,847 2,263
Capex (361) (573) (573) (573) (573) Cash flow from investing activities (184) (1,444) (679) (679) (679) Dividends paid (593) (680) (816) (680) (680) Cash flow from financing activities (778) (1,594) (938) (782) (744) Cash at beginning of period 1,672 1,723 1,694 1,255 2,542 Net change in cash 372 (9) (339) 1,386 840
Ending balance cash 2,044 1,714 1,355 2,642 3,382
Balance sheet (MYRm) Jun-19 Jun-20 Jun-21F Jun-22F Jun-23F Total cash and equivalents 1,723 1,694 1,255 2,542 3,282 Tangible fixed assets 5,727 6,010 5,402 4,691 3,877 Total investments 1,864 1,640 1,640 1,640 1,640 Total assets 25,510 27,273 28,419 28,735 29,591 Short-term debt 2,397 2,121 2,021 1,921 1,821 Total long-term debt 178 110 110 110 110 Total liabilities 10,392 11,860 12,627 12,424 12,692 Total equity 15,118 15,413 15,792 16,310 16,899 Total liabilities & equity 25,510 27,273 28,419 28,735 29,591
Key metrics Jun-19 Jun-20 Jun-21F Jun-22F Jun-23F Revenue growth (%) 6.9 2.2 17.0 (1.7) 6.3 Recurrent EPS growth (%) 9.5 9.5 15.0 0.2 5.9 Gross margin (%) 15.6 15.6 15.6 15.6 15.6 Operating EBITDA margin (%) 7.6 9.8 7.1 7.5 7.5 Net profit margin (%) 4.3 5.1 2.8 2.8 2.8 Dividend payout ratio (%) 44.0 36.3 68.3 56.8 53.6 Capex/sales (%) 1.0 1.6 1.3 1.3 1.3 Interest cover (x) 17.3 14.0 11.4 12.0 13.3
Source: Company data, RHB
See important disclosures at the end of this report 85 Market Dateline / PP 19489/05/2019 (035080)
Singapore Company Update
20 August 2021 Industrials | Aerospace & Defence
ST Engineering (STE SP) Buy (Maintained)
Electrifying Singapore’s Buses; BUY Target Price (Return): SGD4.50 (10.3%) Price: SGD4.08 Market Cap: USD9,385m Avg Daily Turnover (SGD/USD) 13.5m/9.98m
Keep BUY and SGD4.50 TP, 10% upside and c.4% yield. We reiterate Analyst our positive view on ST Engineering’s earnings outlook. This is based on its growing defence business, gradual return in demand for commercial Shekhar Jaiswal aerospace maintenance, repair and overhaul (MRO) business which relies +65 6320 0806 more on narrow body aircraft, and higher demand for passenger-to-freighter [email protected] (P2F) conversions amidst the slower return of international aviation demand. Strong revenue visibility owing to its high orderbook, and its ability to sustain dividend payments are also positive.
Venturing into EV through buses. In Oct 2018, STE was awarded one of
the three tenders to supply 20 single-deck fully electric public transport buses to Singapore’s Land Transport Authority (LTA) for SGD15.1m. STE Share Performance (%) supplied the Linkker LM312 low-floor single-deck city bus to Singapore bus YTD 1m 3m 6m 12m operators in 2021. It worked with Finnish electric bus manufacturer Linkker Absolute 6.8 3.6 8.8 8.5 26.7 for the electric drivetrain for these buses. STE’s electric buses are the first Relative (6.0) 1.2 8.0 (1.1) 0.7 public transport buses in Singapore to be charged via overhead pantographs at bus interchanges. STE also offers the mid-life retrofitting of 52-wk Price low/high (SGD) 3.22 – 4.08
diesel buses and changes them to electric power. Initiated by the LTA in 2017, STE undertook the retrofitting project as a proof-of-concept to ST Engineering Ltd (STE SP) Price Close Relative to Straits Times Index (RHS) determine its feasibility. It completed the conversion project in 2019 and the 4.3 119 bus was taken out of lay-up in Jul 2021. 4.1 114
Autonomous EV bus. An autonomous variant of the Linkker LM312 fully 3.9 109 electric bus, called the STROBO Series 12 Bus, is used by STE for research and development. The group also has an Autonomous Mini-bus (ST 3.7 104
Autobus), which is a low-floor, battery-electric single-deck city bus. Two 3.5 99 units of the ST Autobus were trialled as part of the Autonomous Bus Trial 3.3 94 at Sentosa in 2019. The same year, STE and BYD signed an MoU to
develop autonomous bus platforms, as part of the former's plans to form a 3.1 89
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consortium, in response to the Call for Collaboration by the LTA and Aug-20 May-21 May-21 Singapore Economic Development Board. STE will expand its portfolio of Source: Bloomberg autonomous bus platforms to include BYD's electric buses. The STE autonomous vehicle kit will be integrated onto the BYD buses and the partners will look at marketing the joint platform internationally. Overall ESG Score: 3.4 (out of 4)
Bidding to set up EV charging infrastructure and sell commercial E: Good vehicles. Early this year, the Urban Redevelopment Authority and LTA STE believes in conserving resources and contributing to a invited for bids to build, operate, and maintain over 600 EV charging points sustainable future by developing and deploying greener at some 200 public carparks across Singapore. The tender drew 19 bidders, products and solutions. In 2020, it reported a 44% reduction including STE. STE is also the authorised distributor of the BYD T3 Electric in GHG emissions intensity over the 2010 base year and Van in Singapore. The BYD T3 is a 100% electric light goods vehicle, well recycled 54% of 11,700 tonnes of material and waste generated. suited for Singapore’s urban logistics and sustainable transportation requirements. S: Excellent In 2020, it delivered SGD6.7bn in economic contributions . despite challenging business conditions. STE continued Forecasts and Valuation Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F operations as an essential service provider across its global geographies, providing work for local companies in its Total turnover (SGDm) 7,868 7,158 7,508 8,031 8,591 supply chain, and delivering to its customers. It offers Recurring net profit (SGDm) 589 522 552 618 662 internship positions to technology and engineering students Recurring net profit growth (%) 11.8 (11.4) 5.7 12.1 7.1 and has pledged SGD1m to the NTUC Education and Recurring P/E (x) 21.58 24.36 23.09 20.60 19.24 Training Fund over four years.
P/B (x) 5.7 5.6 5.4 5.1 4.8 G: Excellent P/CF (x) 21.55 8.29 14.50 12.41 11.61 Despite having exposure to the defence business, STE Dividend Yield (%) 3.7 3.7 3.7 3.7 4.1 does not design, produce or sell anti-personnel mines, EV/EBITDA (x) 14.54 15.22 13.96 12.57 11.68 cluster munitions, white phosphorus munitions and the Return on average equity (%) 25.9 23.1 23.6 25.2 25.5 related key components. STE’s board comprises of 11 directors, of which seven are independent (63%) and two Net debt to equity (%) 75.7 51.1 45.8 34.2 23.0 Interest cover (x) 12.84 7.87 11.84 13.13 13.82 are female (20%).
See important disclosures at the end of this report 86 Market Dateline / PP 19489/05/2019 (035080)
ST Engineering Singapore Company Update
20 August 2021 Industrials | Aerospace & Defence Financial Exhibits
Asia Financial summary (SGD) Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F Singapore Recurring EPS 0.19 0.17 0.18 0.20 0.21 Industrials DPS 0.15 0.15 0.15 0.15 0.17 ST Engineering BVPS 0.71 0.73 0.76 0.80 0.85 STE SP Return on average equity (%) 25.9 23.1 23.6 25.2 25.5 Buy Valuation metrics Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F
Recurring P/E (x) 21.58 24.36 23.09 20.60 19.24 Valuation basis P/B (x) 5.7 5.6 5.4 5.1 4.8 Our TP is derived by using an average of forward P/E, FCF Yield (%) 3.3 10.6 4.7 5.9 6.6 P/BV, EV/EBITDA and DCF of adjusted free cash flows. Dividend Yield (%) 3.7 3.7 3.7 3.7 4.1
EV/EBITDA (x) 14.54 15.22 13.96 12.57 11.68 Key drivers EV/EBIT (x) 22.72 25.49 23.04 20.25 18.71 i. Strong order wins; ii. Contributions from MRAS and Newtec Income statement (SGDm) Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F acquisitions. Total turnover 7,868 7,158 7,508 8,031 8,591
Gross profit 1,635 1,527 1,632 1,775 1,893 Key risks EBITDA 1,022 939 1,020 1,113 1,174 i. Poor execution of diversification in the aerospace Depreciation and amortisation (368) (379) (402) (422) (441) sector; Operating profit 654 561 618 691 733 ii. Lower-than-expected contribution from Net interest (37) (62) (33) (31) (26) acquisitions; iii. Delay in the implementation of Singapore’s smart Pre-tax profit 695 534 654 733 785 nation initiative. Taxation (103) (9) (98) (110) (118) Reported net profit 578 522 552 618 662 Company Profile Recurring net profit 589 522 552 618 662 STE is an integrated engineering group in the aerospace, electronics, land systems and marine Cash flow (SGDm) Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F sectors. The company has over the years, diversified its Change in working capital (439) 587 (126) (64) (57) businesses and geographical coverage. Cash flow from operations 590 1,533 878 1,027 1,098 Capex (172) (192) (280) (270) (260) Cash flow from investing activities (1,273) (295) (266) (255) (245) Dividends paid (468) (468) (468) (469) (526) Cash flow from financing activities 720 (959) (515) (515) (572) Cash at beginning of period 416 453 731 828 1,084 Net change in cash 37 279 98 256 281 Ending balance cash 453 731 828 1,084 1,366
Balance sheet (SGDm) Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F Total cash and equivalents 453 731 828 1,084 1,366 Tangible fixed assets 1,805 1,757 1,718 1,650 1,552 Total investments 453 469 455 440 425 Total assets 9,521 9,561 10,022 10,307 10,602 Short-term debt 1,869 496 0 0 0 Total long-term debt 469 1,551 2,047 2,047 2,047 Total liabilities 7,030 6,987 7,360 7,491 7,645 Total equity 2,491 2,575 2,662 2,816 2,957 Total liabilities & equity 9,521 9,561 10,022 10,307 10,602
Key metrics Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F Revenue growth (%) 17.5 (9.0) 4.9 7.0 7.0 Recurrent EPS growth (%) 11.8 (11.4) 5.5 12.1 7.1 Gross margin (%) 20.8 21.3 21.7 22.1 22.0 Operating EBITDA margin (%) 13.0 13.1 13.6 13.9 13.7 Net profit margin (%) 7.3 7.3 7.3 7.7 7.7 Dividend payout ratio (%) 81.0 89.7 84.9 75.9 79.4 Capex/sales (%) 2.2 2.7 3.7 3.4 3.0 Interest cover (x) 12.8 7.9 11.8 13.1 13.8
Source: Company data, RHB
See important disclosures at the end of this report 87 Market Dateline / PP 19489/05/2019 (035080)
Malaysia Company Update
20 August 2021 Consumer Cyclical | Auto & Autoparts
UMW (UMWH MK) Neutral (Maintained)
Championing Carbon Neutrality Target Price (Return): MYR2.94 (1.0%) Price: MYR2.91 Market Cap: USD802m Avg Daily Turnover (MYR/USD) 1.20m/0.29m
Keep NEUTRAL and MYR2.94 TP, 1% upside and 2% yield. In line with Analyst its principal’s plan to become climate neutral worldwide by 2050, UMW Toyota Motor (UMWT) will be mass producing hybrid electric vehicles Eddy Do Wey Qing (HEVs) here with at least one HEV by end 2021. Toyota believes it has a +603 9280 8856 responsibility to ensure that each and every customer has the opportunity [email protected] to choose the lowest-possible CO2 product on the journey towards carbon neutrality – irrespective of market, segment, and budget.
Reintroducing HEVs. Earlier in July, UMWT announced an additional
investment of MYR270m into its Bukit Raja plant. The internally funded
investment will be spread across two years – the aim is to advance into the
mass production of hybrid HEVs. This is in line with its principal’s strategy Share Performance (%) to achieve carbon neutrality by 2050, as well as the Government’s YTD 1m 3m 6m 12m aspirations to position the country as a progressive nation that promotes Absolute (14.4) (2.7) (6.7) 2.8 9.4 more green technology and environmental sustainability. We believe this sets the groundwork to provide sustainable vehicle offerings via HEVs when Relative (6.9) (1.7) (1.8) 8.7 13.9 the regulatory environment turns favourable. 52-wk Price low/high (MYR) 2.19 – 3.60
Previous efforts to introduce hybrid vehicles was short lived. As part UMW (UMWH MK) of a government-mandated effort to raise public awareness of energy Price Close efficient vehicles, tax incentives were offered for CKD and CBU electric Relative to FTSE Bursa Malaysia KLCI Index (RHS) vehicles (EVs) previously. UMWT offered fully imported Prius and Prius-C 3.8 148 hybrids, and a CKD XV50 Camry Hybrid – they were subsequently 3.6 141 3.4 135
discontinued when prices turned uncompetitive when the incentives were 3.2 128
terminated. We believe this reflects the regulatory shortcomings, where the 3.0 121 absence of transparency and visibility in the EV policy framework had cost 2.8 115 foreign direct investments in the automotive sector, slowing EV adoption. 2.6 108 2.4 101
Potentially a hybrid Corolla Cross by end 2021. The Bukit Raja plant 2.2 95 currently houses the assembly lines for the Vios, Yaris, and soon-to-arrive 2.0 88
Corolla Cross. Taking cues from the current hybrid offerings in Thailand, we
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Dec-20 Aug-20 Sep-20 Sep-20 Nov-20 Nov-20 Dec-20 Aug-21 May-21 think the first hybrid stemming from this investment could be the hybrid May-21 Corolla Cross and/or Corolla sedan as they share the same platform and Source: Bloomberg
powertrain. Other hybrid variants offered by Toyota Thailand – Corolla Altis, Camry Hybrid, and C-HR Hybrid – are also possibilities. Earnings forecast unchanged. Earnings should be supported by the replacement cycle, pent-up demand on consumer spending following a broad-based economic recovery, and deliveries of recently launched Overall ESG Score: 2.9 (out of 4) volume models. A COVID-19 resurgence may affect earnings in all E: Good segments, while stiff competition in the sector might exert downwards UMW has taken efforts to monitor and improve its pressure on UMW’s bottomline. Slower-than-expected normalisation in environmental standing, especially with energy demand post sales & services tax exemption at end 2021 and sustained consumption, carbon emissions, and water management. disruptions in semiconductor chip supplies could also bring downside risks Its carbon footprint increased 2.36% in FY19. to our earnings estimates. The opposite represents the upside risks. S: Good Aside from the up-to-date health & safety policies and Forecasts and Valuation Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F guidelines, UMW is also consistent with its CSR Total turnover (MYRm) 11,739 9,555 10,983 11,589 12,076 participation – achieving 9,241 volunteer hours in 2019. It recorded average training hours of 12.36 hours per Recurring net profit (MYRm) 255 285 212 264 385 employee in FY19. Recurring net profit growth (%) (33.3) 11.7 (25.6) 24.4 46.0 Recurring P/E (x) 13.33 11.93 16.04 12.89 8.83 G: Good P/B (x) 0.9 0.9 0.8 0.8 0.7 Management has held regular engagements with the market and media while adhering to Global Reporting P/CF (x) 13.33 3.70 162.52 8.11 6.97 Initiative Sustainability Reporting standards and principles. Dividend Yield (%) 2.9 1.4 2.1 2.1 2.1 EV/EBITDA (x) 4.31 11.52 5.39 4.65 3.81
Return on average equity (%) 14.9 (2.6) 7.0 7.7 9.7 InterestNet debt cover to equity (x) (%) 4.12 18.6 (1.01) 7.6 2.29 11.4 2.96 9.1 3.78 5.0
See important disclosures at the end of this report 88 Market Dateline / PP 19489/05/2019 (035080)
UMW Malaysia Company Update
20 August 2021 Consumer Cyclical | Auto & Autoparts Financial Exhibits
Asia Financial summary (MYR) Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F Malaysia Recurring EPS 0.22 0.24 0.18 0.23 0.33 Consumer Cyclical DPS 0.08 0.04 0.06 0.06 0.06 UMW BVPS 3.16 3.31 3.55 3.84 4.23 UMWH MK Return on average equity (%) 14.9 (2.6) 7.0 7.7 9.7 Neutral Valuation metrics Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F Recurring P/E (x) 13.33 11.93 16.04 12.89 8.83 Valuation basis P/B (x) 0.9 0.9 0.8 0.8 0.7 P/E FCF Yield (%) (2.7) 20.1 (11.2) 0.6 2.6 Dividend Yield (%) 2.9 1.4 2.1 2.1 2.1 Key drivers EV/EBITDA (x) 4.31 11.52 5.39 4.65 3.81 i. Introduction of attractive new car models EV/EBIT (x) 7.17 na 12.59 9.77 7.31 ii. Turnaround at various legacy non-core oil and gas businesses Income statement (MYRm) Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F iii. Long term growth potential from aerospace business Total turnover 11,739 9,555 10,983 11,589 12,076 Gross profit 1,902 1,418 1,771 1,855 1,950 Key risks EBITDA 867 258 601 668 745 i. Weaker MYR Depreciation and amortisation (345) (374) (344) (350) (356) ii. Weaker-than-expected economic growth Operating profit 521 (116) 257 318 389 iv. Higher start-up losses from aerospace venture Net interest (127) (116) (112) (108) (103)
Pre-tax profit 737 27 417 504 649 Company Profile Taxation (109) (78) (54) (69) (88) UMW is the largest company in the automotive sector. Reported net profit 524 (100) 282 334 455 Its 51%-owned subsidiary UMW-Toyota imports, Recurring net profit 255 285 212 264 385 assembles and distributes Toyota and Lexus vehicles
in Malaysia. Cash flow (MYRm) Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F
Change in working capital (144) 450 (414) (49) (41)
Cash flow from operations 255 920 21 419 488
Capex (345) (237) (400) (400) (400) Cash flow from investing activities 430 (100) (210) (184) (117) Dividends paid (99) (23) (70) (70) (70) Cash flow from financing activities (584) (602) (181) (202) (206) Cash at beginning of period 1,312 1,472 2,051 1,681 1,714 Net change in cash 101 218 (370) 33 165
Ending balance cash 1,408 1,686 1,681 1,714 1,879
Balance sheet (MYRm) Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F Total cash and equivalents 1,472 2,051 1,681 1,714 1,879 Tangible fixed assets 2,702 2,463 2,519 2,569 2,613 Total investments 2,098 2,370 2,370 2,370 2,370 Total assets 11,135 11,447 11,336 11,578 11,910 Short-term debt 424 548 448 348 248 Total long-term debt 2,180 1,990 1,990 1,990 1,990 Total liabilities 5,037 5,030 4,718 4,729 4,711 Total equity 6,098 6,417 6,618 6,850 7,199 Total liabilities & equity 11,135 11,447 11,336 11,578 11,910
Key metrics Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F Revenue growth (%) 3.9 (18.6) 14.9 5.5 4.2 Recurrent EPS growth (%) (33.3) 11.7 (25.6) 24.4 46.0 Gross margin (%) 16.2 14.8 16.1 16.0 16.1 Operating EBITDA margin (%) 7.4 2.7 5.5 5.8 6.2 Net profit margin (%) 4.5 (1.0) 2.6 2.9 3.8 Dividend payout ratio (%) 18.9 (46.9) 24.9 21.0 15.4 Capex/sales (%) 2.9 2.5 3.6 3.5 3.3 Interest cover (x) 4.12 (1.01) 2.29 2.96 3.78
Source: Company data, RHB
See important disclosures at the end of this report 89 Market Dateline / PP 19489/05/2019 (035080)
Indonesia Company Update
20 August 2021 Basic Materials | Metals
Vale Indonesia (INCO IJ) Buy (from Neutral)
Higher ASP Offsets Lower Production Volumes Target Price (Return): IDR6,200 (+22%) Price: IDR5,100 Market Cap: USD3,523m Avg Daily Turnover (IDR/USD) 80,924m/5.64m
U/G BUY from Neutral, new IDR6,200 TP from IDR6,600, c.22% upside. Analyst Falling inventory amidst rising nickel demand will maintain the benchmark price’s upward trend (our FY21-22F: USD18.5-19k/tonne) – cushioning the Andrey Wijaya negative impact on Vale Indonesia’s lower production volumes (FY21-22F +6221 5093 9846 earnings revised by -8% and -1%). Yet, its valuation target stays [email protected] reasonable, as we roll forward our valuation to 10.5x FY22F EV/EBITDA from 12.6x FY21F – derived from its 5-year band (currently: 8.1x). Downside risks to our call: Downward trend of nickel prices and rising fuel costs. Short supply remains the strongest higher nickel price catalyst
throughout 2021. Pressure on stock scarcity (LME and SHFE inventory
was down 14% YTD to c.227k tonnes) has given back traction to nickel’s Share Performance (%) price movements – the LME nickel price gained 21% to c.USD19,400 from YTD 1m 3m 6m 12m March’s bottom, as the global nickel market deficit rumbles on (5M21: Absolute 0.0 (1.5) (8.1) (20.0) 43.3 c.61,200 tonnes vs 2020’s c.61,000 tonnes surplus). Conversely, global demand jumped 23% YoY in the same period. Recovery from the stainless Relative (2.7) (3.6) (11.5) (18.7) 26.1 steel segment (1Q21 global output increased 12% YoY), combined with 52-wk Price low/high (IDR) 3,440 – 6,725 short-term nickel production issues (eg Russia’s Norilsk Nickel production
fell during this period), became the main factors behind the nickel price Vale Indonesia (INCO IJ) revival – at least, until end-2021, in our view. Price Close Relative to Jakarta Composite Index (RHS) 7,100 173
Lower output will be supported by higher ASPs. In 1H21, INCO booked 6,600 163
a nickel matte volume production of 30,246 tonnes (-17% YoY), falling short 6,100 153
(at 47%) of its FY21 guidance of 64,000 tonnes. While such a decline was 5,600 143
expected due to maintenance on its electric furnace (works on one unit 5,100 133
scheduled for 4Q21-1Q22), we have more conservative FY21-22 volume 4,600 123
projections, at 61,000 and 69,500 tonnes. However, our higher ASP 4,100 113 assumptions (FY21: USD14,750/tonne, +37% YoY) will alleviate the risk of 3,600 103 reduced volumes. We think INCO’s FY21-22F topline (full exposure on 3,100 93
c.78% nickel content) will stay prosperous, with 67% and 16% YoY growth.
Jul-21
Oct-20 Oct-20 Apr-21 Apr-21
Jan-21 Jan-21 Jun-21 Jun-21
Mar-21 Mar-21
Feb-21
Nov-20 Aug-20 Aug-20 Sep-20 Nov-20 Dec-20 Dec-20 Aug-21 May-21 This is supported by firmed sales channels: 80% and 20% to Vale Group May-21 and Sumitomo Metal Mining. INCO posted 1H21 earnings of USD59m Source: Bloomberg (+11% YoY), with a stable NPM of 14% – this is still above the 10-year 1H margin average (positive bottomline only) of c.12%. Overall ESG Score: 2.9 (out of 4) E: Good Class II nickel remains the backbone. Apart from the ongoing progress INCO received a Green PROPER (beyond compliance) – of the Pomalaa high pressure acid leach (HPAL) smelter (key commercial Indonesia’s pollution control, evaluation, and rating terms with Sumitomo Metal Mining to be finished next year), INCO’s programme – recognition from the Ministry of Environment development of a rotary kiln electronic furnace smelter in Bahodopi & Forestry in 2020. This was for its initiatives in (c.73,000 tonnes pa of iron-nickel alloy output, 49% ownership, 36-month environmental management systems, efficient utilisation of construction period) is the nearest topline catalyst. Its sales reliance on resources, and community empowerment. INCO will Class II nickel – mostly utilised by the steel industry – remains a focus for contribute to Vale Global’s goal to reduce 33% of emissions produced by 2030. the next 2-3 years, in our view. Nonetheless, apart from stable operational margins (10-years average: c.17% vs peers’ c.6%), a healthy balance sheet S: Good (1Q21 net cash: USD422m vs FY20’s USD389m) and fair ESG points from A community development programme was built through renewable energy initiatives (c.365MW hydro-powered plant contribution) active participation between the company, the community, are key testaments for its investable perks. and the Government. INCO’s successful programmes includes the organic rice and herbal garden business. In Forecasts and Valuation Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F 2020, it disbursed c.USD4.1m (+21% YoY) for community Total turnover (USDm) 782 765 886 1,045 1,014 development and empowerment. Recurring net profit (USDm) 64 93 141 171 140 Recurring net profit growth (%) 6.9 44.5 51.4 21.9 (18.1) G: Good INCO’s sustainability management responsibilities and Recurring P/E (x) 54.84 37.96 25.07 20.57 25.13 decision-making are carried out collectively by the board of P/B (x) 1.8 1.7 1.6 1.5 1.4 directors, with the supervision of the board of P/CF (x) 112.57 11.85 na 25.28 17.79 commissioners. Moreover, the company has a strategic risk Dividend Yield (%) na na na na na management, ie the Framework for Integrated Risk EV/EBITDA (x) 16.60 13.58 9.62 8.44 9.21 Management (FIRM), which is based on ISO 31000 standards. Return on average equity (%) 3.0 4.2 6.6 7.1 5.7
Net debt to equity (%) net cash net cash net cash net cash net cash
See important disclosures at the end of this report 90 Market Dateline / PP 19489/05/2019 (035080)
Vale Indonesia Indonesia Company Update
20 August 2021 Basic Materials | Metals Financial Exhibits
Asia Financial summary (USD) Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F Indonesia Recurring EPS 0.01 0.01 0.01 0.02 0.01 Basic Materials BVPS 0.20 0.20 0.22 0.23 0.25 Vale Indonesia Return on average equity (%) 3.0 4.2 6.6 7.1 5.7
INCO IJ Buy Valuation metrics Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F Recurring P/E (x) 54.84 37.96 25.07 20.57 25.13 Valuation basis P/B (x) 1.8 1.7 1.6 1.5 1.4 10.5x EV/EBITDA, slightly higher than its 5-year mean FCF Yield (%) 4.4 4.9 (5.6) 1.1 2.8 EV/EBITDA band. EV/EBITDA (x) 16.60 13.58 9.62 8.44 9.21 EV/EBIT (x) 31.35 26.53 15.22 13.16 16.35
Key drivers i. Improved ASP from the increase in nickel prices; Income statement (USDm) Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F ii. Higher production and sales volume; Total turnover 782 765 886 1,045 1,014 iii. Lower fuel costs. Gross profit 118 124 221 244 191
EBITDA 196 229 329 358 311 Key risks Depreciation and amortisation (92) (112) (121) (128) (136) i. Weaker ASP; Operating profit 104 117 208 230 175 ii. An increase in global inventory; iii. Production missing estimates; Net interest (0) 1 11 20 30 iv. Rising oil and coal prices. Pre-tax profit 89 105 197 227 194 Taxation (32) (22) (59) (68) (58) Company Profile Reported net profit 57 83 138 159 136 Vale Indonesia produces nickel in matte, an Recurring net profit 64 93 141 171 140
intermediate product, from lateritic ores at its integrated metric and processing facilities near Sorowako, Cash flow (USDm) Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F Sulawesi. Change in working capital (64) 57 (83) (33) 3
Cash flow from operations 31 297 (74) 139 198
Capex 125 (123) (125) (100) (100)
Cash flow from investing activities (166) (151) (125) (100) (100) Cash flow from financing activities (24) (2) (0) (0) (0) Cash at beginning of period 301 249 389 332 471 Net change in cash (159) 145 (199) 39 98 Ending balance cash 249 389 332 471 625
Balance sheet (USDm) Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F Total cash and equivalents 249 389 332 471 625 Tangible fixed assets 1,467 1,479 1,604 1,604 1,604 Total investments 15 31 31 31 31 Total assets 2,223 2,315 2,448 2,640 2,794 Total long-term debt 0 0 (0) (0) (1) Total liabilities 281 294 277 296 299 Total equity 1,942 2,020 2,171 2,344 2,495 Total liabilities & equity 2,223 2,315 2,448 2,640 2,794
Key metrics Dec-19 Dec-20 Dec-21F Dec-22F Dec-23F Revenue growth (%) 0.7 (2.2) 15.8 18.0 (3.0) Recurrent EPS growth (%) 6.9 44.5 51.4 21.9 (18.1) Gross margin (%) 15.0 16.3 25.0 23.4 18.8 Operating EBITDA margin (%) 25.1 29.9 37.1 34.3 30.7 Net profit margin (%) 7.3 10.8 15.6 15.2 13.4 Capex/sales (%) (16.0) 16.1 14.1 9.6 9.9 Interest cover (x) 20.2 31.8 (34.8) (14.7) (6.9)
Source: Company data, RHB
See important disclosures at the end of this report 91 Market Dateline / PP 19489/05/2019 (035080)
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(2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
KUALA LUMPUR JAKARTA RHB Investment Bank Bhd PT RHB Sekuritas Indonesia Level 3A, Tower One, RHB Centre Revenue Tower, 11th Floor, District 8 - SCBD Jalan Tun Razak Jl. Jendral Sudirman Kav 52-53 Kuala Lumpur 50400 Jakarta 12190 Malaysia Indonesia Tel : +603 9280 8888 Tel : +6221 509 39 888 Fax : +603 9200 2216 Fax : +6221 509 39 777
BANGKOK SINGAPORE RHB Securities (Thailand) PCL RHB Bank Berhad (Singapore branch) 10th Floor, Sathorn Square Office Tower 90 Cecil Street 98, North Sathorn Road, Silom #04-00 RHB Bank Building Bangrak, Bangkok 10500 Singapore 069531 Thailand Tel: +66 2088 9999 Fax :+66 2088 9799
See important disclosures at the end of this report 94 Market Dateline / PP 19489/05/2019 (035080)