Stephanie Yang
Mon, Aug 5, 2024
A record number of brands participated in Indonesia's largest auto show in Tangerang outside Jakarta. One-third of passenger car brands at the event were Chinese companies, drawn to the Indonesian market by the government's favorable policies to spur consumer adoption and local manufacturing. (Stephanie Yang / Los Angeles Times)
Late last year Chinese automaker BYD surpassed Tesla as the world's biggest seller of electric vehicles.
But you won't find its cars in the United States anytime soon. With the Chinese auto industry facing tariffs in the U.S. and the European Union, one of its most important markets is Southeast Asia.
Of the 31 passenger car brands represented last month at the sprawling Indonesia International Auto Show outside Jakarta, about a third were from China. The vast majority of those were electric vehicles.
Striding past fashion models and huge video displays, Safik Bahsein made his way to the BYD display, where he honed in on a BYD Dolphin, which promises 300 miles on a single charge and sells for the equivalent of $26,000.
Visitors look at a BYD car during an auto show last month. Chinese car companies have been gaining ground in Indonesia, particularly in EVs. (Tatan Syuflana / Associated Press)
It's one of three EV models that BYD now sells in Indonesia, the world's fourth most populous country — with more than 275 million people — and the largest car market in Southeast Asia. The company's first shipment of 1,000 EVs arrived last month.
“It’s quite beautiful,” said Bahsein, 49, who works in shipping. “Compared with European cars, I think BYD has good prospects in the future.”
In his view, the quality of Chinese cars now matches those from Europe and Japan. He said he was considering buying one for his wife, though he still prefers his Tesla Model 3, which he had to have specially imported two years ago because there are no dealers in Indonesia.
Read more: China’s highflying EV industry is going global. Why that has Tesla and other carmakers worried
The country's car market has long been dominated by the Japanese brands Toyota, Daihatsu and Honda. But Chinese companies have been gaining ground, particularly in EVs, where Japanese automakers have lagged.
Chinese brands accounted for 43% of EV sales in the first half of 2024, according to the Assn. of Indonesia Automotive Industries.
But getting people to buy EVs has been especially challenging in Indonesia, where there are many cheaper alternatives and a dearth of charging stations. Only 17,121 EVs were sold last year — just 2% of all auto sales.
"Southeast Asia, specifically Thailand and Indonesia, is the beachhead, both as a market and a production base," said Lei Xing, former chief editor of the China Automotive Review. (Tatan Syuflana / Associated Press)
The Indonesian government has created incentives for EV buyers and set a goal of 400,000 EV sales next year. But the international data analytics firm Fitch Solutions has suggested that a more realistic expectation is 56,000 by 2028.
For Goldie Liem, 24, who recently bought a Binguo EV from the Chinese carmaker Wuling, the biggest incentive was the license plate, which exempts Jakarta drivers from road restrictions meant to cut down on traffic.
That saves her time on her daily office commute, which can take up to two hours. She said she also saves on gas, and pays about $60 a year in taxes compared with $430 for her old Mazda.
Read more: Feds pump $2 billion into boosting U.S.-based EV manufacturing
“It gets me from A to B, that’s it,” she said. “I haven’t tried to take it out of town yet, because I’m not that brave, in terms of charging stations and all that.”
It would take much more to make her husband an EV convert. They couple had come to the auto show so he could check out gas-powered BMWs.
In China, the EV industry has flourished thanks to clean energy subsidies and access to comprehensive supply chains for battery technology and vehicle manufacturing. But intense domestic competition has prompted price cuts and led automakers to look overseas for growth.
Brazil, Belgium, the United Kingdom, Thailand and the Philippines are the biggest export markets this year, according to the China Passenger Car Assn. Indonesia is among the fastest growing.
Wuling, a Chinese EV brand, accounts for about 40% of EV sales in Indonesia. But electric cars still only make up about 2% of total car sales, hampered by insufficient charging infrastructure. (Stephanie Yang / Los Angeles Times)
"Southeast Asia, specifically Thailand and Indonesia, is the beachhead, both as a market and a production base," said Lei Xing, an independent auto analyst and former chief editor of the China Automotive Review. "It's not like you’re going into Europe and competing against the Volkswagens and the BMWs. Now with the EV opportunity, Chinese brands are jumping on that."
BYD recently announced plans to build a $1.3-billion EV plant two hours from Jakarta that will begin operations in 2026, joining other Chinese brands Neta and Wuling to build electric cars in Indonesia.
It's no coincidence that Indonesia also happens to be one of the world’s leading producers of nickel and other minerals needed in EV batteries.
China has already invested billions of dollars in Indonesian nickel mines in order to procure the strategic metal. Now Indonesia is trying to attract more Chinese funding to process its natural resources and build cars at home.
In an op-ed this year for China Daily, a state-run newspaper, a senior Indonesian transportation official declared his country’s EV industry “open for business.”
The official, Rachmat Kaimuddin, the deputy coordinating minister of transportation and infrastructure, also encouraged Chinese carmakers to take advantage of the “golden opportunity” of recently announced tax incentives for international car brands producing in Indonesia.
For brands like BYD, building more facilities in other countries is a critical part of global expansion, particularly as the U.S. and EU have threatened to implement harsher policies to keep cheap Chinese models from pushing out their own domestic manufacturers.
Leading Chinese automaker BYD delivered its first 1,000 EVs to Indonesian consumers this year, as it expands its manufacturing and sales in one of Southeast Asia's biggest auto markets. (Stephanie Yang / Los Angeles Times)
Last month, the EU announced tariffs of up to 37.6% on Chinese EVs. In the U.S., President Biden raised the existing 25% tariff on Chinese EVs to 100%.
BYD has also opened a plant in Thailand, and has announced investment plans for Turkey, Hungary and Mexico, which could help the automaker sidestep foreign import taxes in the U.S. and Europe on Chinese goods.
Read more: Editorial: China embraced electric vehicles. The U.S. didn't. Now we're paying the price
“These are very strategic locations,” said Xing, the auto analyst. “In order to be global, I think the U.S. and Europe are the last two frontiers.”
In the meantime, there is Southeast Asia. At the auto show, Ricky Aristin, 23, spent two hours browsing cars that could potentially replace his Honda Accord. The highlight was climbing into the driver's seat of a BYD Seal, an electric sedan that sells for about $44,000.
“It feels like an expensive car,” Aristin said. “It’s a good experience from the car with the lowest price.”
Nonetheless, he decided he wouldn't buy an EV until Jakarta has more charging stations.
This story originally appeared in Los Angeles Times.
EV costs on track to match gas guzzlers as early as next year as battery prices drop 'dramatically'
Ines Ferré
·Senior Business Reporter
Sun, Aug 4, 2024
The higher cost of owning an electric versus a gas-powered vehicle is a sticking point for many would-be buyers of EVs. Now, the price of a key EV component is falling, raising hopes that automakers could close the gap as they grapple with waning demand.
Batteries make up about one-third to one-fourth of the cost of producing an electric vehicle, according to Goldman Sachs analysts. The firm predicts the global average cost to automakers for batteries in 2024 will average about $115 per kilowatt hours, about 23% lower than last year. Prices are expected fall another 20% in 2025.
Tesla CEO Elon Musk (TSLA) recently noted costs have come down for lithium-ion cells used in EV batteries, a big reversal from the "massive spike" during the pandemic when car manufacturers put in "giant, giant orders."
Musk said at the company's shareholder meeting in June that "battery cell suppliers have increased their supply, and the orders from other car manufacturers have declined."
The drop in demand has impacted the price of lithium. The essential mineral used to make current EV batteries has plunged more than 70% over the past year.
"Raw material prices are a significant factor in the overall cost of EV batteries. As battery prices decrease due to technological advancements, the contribution of raw material costs becomes more significant," Kieran O'Regan, co-founder of battery data and software company About:Energy, told Yahoo Finance.
To be sure, batteries are just one factor in how much EVs cost, which includes everything from research and development to assembly and manufacturing. But it's one of the most important components as the industry races to catch up with China, where the cost to own an electric vehicle is already cheaper than a gas-powered car.
An EV charging station is seen Thursday, May 9, 2024, in San Antonio. Many Americans still aren’t sold on going electric for their next car purchase. High prices and a lack of easy-to-find charging stations are major sticking points. (AP Photo/Eric Gay) (ASSOCIATED PRESS)
Alan Taub, director of Michigan Materials Research Institute at the University of Michigan, says the battery industry has already come a long way toward bringing down the price of EVs.
"The cost is dropping dramatically through technology," said Taub. "Right now, there's nothing that looks like the Achilles heel of 'you can't get there.'"
This year automakers in the US have scaled back their electric vehicle rollout plans amid waning demand. Price is one reason for the tepid enthusiasm, along with range anxiety and consumer preference for hybrids.
Car companies have tried to make EVs cheaper for consumers through financing deals and cash incentives, according to a report in the Wall Street Journal.
Still, prices in the US haven't come down enough to make it cheaper to buy an EV than a gas-powered vehicle.
The average cost of an electric vehicle sat at $56,371 in June, compared to gas-powered vehicles at $48,644, according to Kelly Blue Book.
Visitors look over a 2024 Cybertruck in the Tesla display at the Electrify Expo, Sunday, July 14, 2024, in north Denver. (AP Photo/David Zalubowski) (ASSOCIATED PRESS)
Part of the reason for the price disparity is US drivers' tendency toward bigger cars that require larger, more expensive batteries. There's also a delay between when battery costs come down and when they're incorporated in pricing of new vehicles.
"There is a time lag that we need to account for here and that's why 2024 is still a tough year from an EV demand perspective, but we do see catalysts opening up in 2025 from a demand perspective," Nikhil Bhandari, co-head of Asia-Pacific natural resources and clean energy at Goldman Sachs, told Yahoo Finance.
Goldman Sachs analysts estimate a breakeven point between EVs and internal combustion engine (ICE) cars, without accounting for government subsidies, will be achieved in the US between 2025 and 2026 as battery prices fall further next year. The cost of ownership not only includes the price of the actual vehicle but also fuel or battery charging, repairs, and maintenance over the lifetime of a car.
Goldman's timeline appears to coincide with comments made by Elon Musk during the company's latest earnings call when he said "we are on track to deliver a more affordable model in the first half of next year."
Interest rate cuts by the Federal Reserve along with government electrification incentives will also likely play a role in spurring demand.
Once prices go well below breakeven, “then [the electric vehicle] actually becomes a cash machine,” said Tom Narayan, RBC Capital Markets global autos analyst, highlighting the cost benefit of not having to include catalytic converters, engines, or transmissions, which are found in ICE vehicles.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
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