Are Electric Vehicles a Green Window of Opportunity for ASEAN countries?

Among eco-friendly technologies, electric vehicles (EVs) are frequently portrayed as a Green Window of Opportunity that offers developing countries a rare opportunity to catch-up with economically advanced countries. It is pertinent to ask whether ASEAN countries are facing such a pivotal moment, and what factors might impede or complicate the EV industry’s progress in the region.

Green Windows of Opportunity have been defined broadly as opportunities for economic catch-up induced by a regulation-driven shift towards more sustainable economic activities. This concept tends to be accompanied by the assertion that the state can play a more prominent role in these Green Windows, compared to other phases of change driven by technology or market demand, due to the international scope of the regulation-driven shift towards emissions reduction and renewable energy usage.

This article examines the prospects for Green Windows of Opportunity in three EV-related areas: EV start-up carmakers, the transition from existing car industries towards electromobility, and resource-based inputs and component production for EVs. Each area presents potentiality — with challenges and limitations — for ASEAN countries to operationalise Green Windows of Opportunity in vehicle production and interrelated industries, and ultimately to catch up with the economically advanced countries.

First, numerous EV start-ups have arisen all around the globe, but we should be circumspect toward their capacity to facilitate economic catch-up. While we should expect a few EV start-ups to successfully find their place in a dynamic and innovative industry, we should also expect many to fail. Moreover, ASEAN national markets are relatively small, constraining each domestic economy’s capacity to foster EV start-ups and compelling these firms to internationalise rapidly to find enough customers to sustain their capital-intensive business. Vietnam’s Vinfast embodies this challenge of simultaneously scaling up and internationalising operations.

Although EVs constitute a transformation in the powertrain, the industry remains fundamentally capital-intensive and characterised by economies of scale, particularly in the production of the body-in-white (BIW), i.e. the (mostly) steel-made shell of the vehicle. While some body components are sourced from suppliers, BIW production remains largely vertically integrated within carmakers. This can be seen by the fact that fully integrated plants feature a press, body, paint, and assembly shop, of which the first two are exclusively dedicated to BIW production. Some of the most major car components have not changed, hence their continual use as inputs for EVs bodes well for ASEAN countries with established vehicle components industries, notably Thailand. These industries’ capital-intensity, however, poses the same barrier for new countries to participate in the EV supply chain.

EVs certainly can be a Green Window of Opportunity, but ASEAN firms and policymakers must be clear about the scope of their ambition and the needed coordination and support systems.

The second area pertains to how countries manage the transition from existing car industries to EVs. The entry of new carmakers, mainly from China, may be regarded as an opportunity for the ASEAN region to break away from Japanese dominance — along with the transition away from internal combustion engine vehicles. While such diversification of investors offers an opportunity to attract advanced technologies, ASEAN countries will only reap the gains if they integrate technology transfers as part of the new investment. Foreign-owned producers maximising their commercial interests will not voluntarily prioritise transferring advanced EV technology.

ASEAN countries could design investment incentives to facilitate technology transfer—and to negotiate for better deals and newer technologies — to enable the catch-up process. However, ASEAN countries have mostly been pragmatic and practiced FDI attraction without major technological catch-up, adopting strategies that demonstrate moderate — or realistic — ambition or capacity to exploit the full potential of Green Windows of Opportunity.

Third, EV component production could constitute an area of specialisation contributing to catch-up. EV components such as traction batteries and electric motors rely on relatively rare mineral resources, some of which are present in ASEAN nations. While these resources may offer the option to attract investment and participate in new value chains, it is an open question how far such value chains can be localised, or downstreamed via refining and manufacturing operations beyond resource extraction.

While the logic of downstreaming is straightforward, its implementation is complicated. Indonesia provides real-world examples of the serious challenges. Indonesia’s export ban on unprocessed nickel ore led to the opening of numerous nickel smelters, but the policy does not require further processing within Indonesia. Hence, the export ban quasi-mandates smelting but omits further downstreaming into precursor materials, battery materials, cathodes, and battery cells. Indonesia sought to secure non-mandated downstreaming through partnerships with leading battery and car makers, but with mixed outcomes. Battery cell production, another high-potential sector, has progressed but also suffered setbacks. Hyundai and LG Energy Solutions opened a joint EV battery cell plant in 2024, but LG Energy Solutions withdrew from a related, significantly larger project that aimed at localising the entire value chain from mining to battery cathode production. This project would have effectively supported an integrated value chain from mining to EVs. Thus, while there was some progress in downstreaming and assembly, various holes remain in the value chain.

Indonesia’s minerals policy has also prioritised investment and sidelined environmental protection. Mines caused deforestation as well as air and water pollution. Smelters heavily rely on domestic coal, furthering the issue of air pollution. This sidelining environmental protection means that Indonesia hardly can qualify as realising a Green Window of Opportunity. All in all, EVs certainly can be a Green Window of Opportunity, but ASEAN firms and policymakers must be clear about the scope of their ambition and the needed coordination and support systems. They must take into account the potentialities, and the risks and complexities, of pursuing these development pathways.

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