EV makers set to invest USD 20 bn in South and Southeast Asia: S&P Global report
Electric Vehicle Makers to Invest $20 Billion in South and Southeast Asia
Electric vehicle (EV) manufacturers are planning to invest over $20 billion in South and Southeast Asia (SSEA) to develop a strong EV industry in the region. This information comes from a report by S&P Global Ratings. The report notes that while the project will be expensive and face typical international investment risks, it could benefit EV makers, especially those from China.
Investment Details
Claire Yuan, a credit analyst at S&P Global Ratings, stated that rated carmakers are expected to spend more than $20 billion on building EV production in SSEA over the next few years. This expansion is likely to strengthen the business of some rated entities.
Impact on Japanese and Korean Carmakers
Japanese carmakers, who have traditionally been strong in SSEA's light-vehicle market, might see a decrease in market share as EV adoption increases. However, they are expected to maintain a strong position by focusing on internal combustion engines (ICE) and hybrid vehicles, which are still popular due to limited EV charging infrastructure in the region. Korean carmakers are increasing their production capacity in SSEA and are balancing between EV and hybrid models based on demand.
Financial Considerations
The investment will be spread over several years and shared with partners, helping manufacturers manage costs. Although this expansion requires significant capital, S&P estimates that EV-focused capital expenditure in the region will account for less than 15% of the total capital expenditure of the rated carmakers in the coming years. This will allow them to grow in the SSEA market without excessive financial strain.
Doubts Revealed
Electric Vehicle
An electric vehicle (EV) is a type of vehicle that runs on electricity instead of petrol or diesel. It uses batteries to store energy and is considered more environmentally friendly because it doesn't produce pollution like traditional cars.
S&P Global Ratings
S&P Global Ratings is a company that provides financial information and credit ratings. They help investors understand the financial health of companies and countries by giving them a score based on their ability to pay back money they owe.
South and Southeast Asia
South and Southeast Asia are regions in Asia that include countries like India, Thailand, Indonesia, and Malaysia. These areas are known for their diverse cultures, languages, and economies.
Japanese carmakers
Japanese carmakers are companies from Japan that make cars, like Toyota and Honda. They are known for making reliable and efficient vehicles, but they might face challenges as more people start using electric vehicles.
Internal combustion and hybrid vehicles
Internal combustion vehicles are traditional cars that run on petrol or diesel. Hybrid vehicles use both a petrol engine and an electric motor, which makes them more fuel-efficient than regular cars.
Korean carmakers
Korean carmakers are companies from South Korea that produce cars, such as Hyundai and Kia. They are known for making affordable and high-quality vehicles and are now increasing their production of electric vehicles.
Capex
Capex stands for capital expenditure, which is the money a company spends to buy, maintain, or improve its fixed assets, like buildings, vehicles, or equipment. It's important for companies to manage capex carefully to ensure they have enough money for other expenses.
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