Chinese EV sales in Southeast Asia hit the brakes on gasoline demand growth, but not so fast

China has become the dominant player in the Southeast Asian electric vehicle market, which will increasingly slow the region's gasoline demand growth.

Market & Trading Calls

• Chinese EVs account for 70% of the electric vehicles sold in the big Southeast Asian economies, with the growth of EV sales supported by massive Chinese investments and exports.
• The region’s gasoline annual average demand growth slows to 2.6% during 2021-2030, compared to a potential growth rate of 3.1% without these EVs.
• The aggressive Chinese policy to secure a leading position in the region’s EV market is materially impacting gasoline demand growth. However, the vast fleet of existing gasoline cars and two-wheelers is preventing growth from slowing down even further.
  

Analysis

Increased import tariffs on China-made electric vehicles (EVs) effectively reduced Chinese exports to the US (already from a low base) and the EU. During January-November 2024, Chinese EV sales to these markets declined by 61% and 13% y/y, respectively. The tariffs curtailed China's ability to expand in these regions and offload its heavily subsidized domestic oversupply.

Southeast Asia (here defined as Indonesia, Malaysia, Vietnam, Thailand, Singapore, and the Philippines), with its proximity to China, a 600+ million population, and a $3.4 trillion economy, has become a key market for Chinese EV makers. Despite a 120% rise in exports in 2023, growth slowed to 3% in the first 11 months of 2024 due to a low market share in Vietnam and weak EV sales in Thailand and the Philippines. However, Chinese EVs still accounted for 70% of the EVs sold in the six Southeast Asian countries.

Except for Vietnam, where local manufacturer VinFast dominates the entire market (+90%), the share of Chinese EVs ranges from 80-95% across the other countries, as Chinese brands have massively crowded out the share of Japanese and South Korean automakers.

Chinese EV exports to Southeast Asia, unit

Source: Kpler calculations based on China Customs

Annual change in Chinese EV exports to Southeast Asia, %

Source: Kpler calculations based on China Customs

The aggressive EV uptake, supported by affordable Chinese brands and fiscal incentives, will inevitably have a measurable impact on the region’s gasoline demand growth. Current forecasts indicate that gasoline demand will register a compound annual growth rate (CAGR) of 2.6% during 2021-2030 in Southeast Asian countries.

Southeast Asia gasoline demand, kbd

Source: Kpler

Since EVs are still a nascent phenomenon in the region, with only a 0.6% share in the total passenger car fleet, the projected gasoline displacement in 2024 was 13 kbd, approximately less than 1% of demand. 2024 was a pivotal year for the big car markets in the region as EV sales skyrocketed. Malaysia, which has a passenger car fleet nearly equal to its population, saw EV sales soar by approximately 70%. A similar trend was observed in Vietnam, but Indonesia led the race with a 164% jump, according to estimates. Although this growth is expected to continue, EVs are projected to account for just 6% of the regional passenger car fleet by the decade's end due to the dominance of gasoline-powered vehicles and a substantial two-wheeler market.

Electric vehicle fleet development in Southeast Asia, unit

Source: Kpler

Our projections suggest that the modest share of EVs in the passenger car fleet will displace around 100 kbd of gasoline demand by 2030, equal to around 6% of the projected demand. Without EVs, the compound annual growth of gasoline demand would be 3.1% during 2021-2030. In other words, 2030 gasoline demand (1.65 Mbd) would be 5% higher. China’s aggressive push to dominate the region’s EV market is materially impacting the region's gasoline demand growth. The vast fleet of gasoline cars and two-wheelers is the primary factor preventing a sharper slowdown in demand growth.

Gasoline demand displacement by EVs, barrels

Source: Kpler

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