The road to e-mobility in Southeast Asia

May 20233 min readClimate FinanceEmerging Markets, Impact

In just a few short years, electric mobility (e-mobility) has emerged as an innovative, fast-growing sector in Southeast Asia. In this article, Sameer Tirkar, Principal, Climate Finance, and Kewal Shah, Investment Officer, share their views on the momentum behind e-mobility and its heightened potential for scale and impact in Southeast Asia.

Why is e-mobility important?

Kewal Shah, Investment Officer at responsAbility

We know that the transport sector, currently dominated by so-called ICE (internal combustion engine) vehicles, accounts for one-quarter of the world's greenhouse gas emissions. We also know that because Asia is home to the world's top ten most-polluted cities, e-mobility is going to be a game changer in the region by improving air quality and reducing CO2 emissions there. Moreover, historical data and studies show that the whole sustainable mobility sector offers economic benefits, given the lower total cost of ownership over the lifecycle of the vehicles.

Sameer Tirkar, Principal, Climate Finance at responsAbility

The sector is also important to responsAbility because of our aim to generate positive impact besides returns for our investors. This means it’s as much about finding growth sectors as it is about creating impact on the ground, which is why we analyze all our investments based on the UN Sustainable Development Goals framework. In this case, we believe the e-mobility segment meets our twin goals of creating sustainable impact and playing a catalytic role in helping it become more mainstream – which could lead to the increased adoption of e-mobility solutions.

This also explains why we are focusing on e-mobility as one of the key segments we want to help scale up in the next three to five years. We have a track record in supporting segments that are at a nascent stage of growth by providing capital across the entire spectrum of the capital structure, be it debt or equity. So ultimately, this is what we’re trying to do: provide growth capital in the e-mobility sector to scale it up.

What is the difference between e-mobility and sustainable mobility?

Sameer Tirkar: There is a subtle but important distinction: e-mobility refers to vehicles that run on electric power, but sustainable mobility takes the whole energy mix of the country into consideration. If a country is largely fueled by conventional sources of energy, such as coal power plants or oil-based power plants, then e-mobility will not create the impact we want to create – it would be like using a diesel generator to charge your electric vehicle. But if the country has an increasing share of renewable energy in its energy portfolio, it makes a lot of sense to support e-mobility.

What are the most interesting e-mobility developments in the region?

Kewal Shah: There has been an emergence of new companies and innovative business models. As an example, we know the two biggest deterrents to EV adoption are the lack of charging infrastructure and the high cost of vehicles upfront. Some companies in the region have come up with a battery-swapping solution that provides the battery as a service, rather than a product to own, reducing the EV’s overall cost to the consumer.

Sameer Tirkar: We are seeing other business models as well, such as fleet operators and EV fleets for individuals. This is why we're looking closely at B2B and EV charging infrastructure businesses, though it’s still too early to say which model has the higher potential. Kewal Shah: People have also started to adopt EVs as an alternative to ICE vehicle ownership. In India, for example, one million electric vehicles were sold in 2022, a record high. And we have seen a more supportive regulatory framework and proactive government push, supporting more seamless EV adoption across the value chain. Countries are also setting their own targets. For example, the Indian prime minister has called for a carbon emission reduction of one billion tons by the year 2030 and committed to a “30 by 2030” goal, where 30% of the total fleet will be electric. It’s more of a top-down approach, with the government pushing for the whole segment to emerge.

How encouraging is the rate of investment?

Sameer Tirkar: It’s still early days, but the initial signs are very encouraging. We know that the e-mobility sector has huge capital needs and we see many players looking to support the growth of e-mobility. Be it through funds like ours, regulatory adjustments and subsidy programmes. A lot of thought is being put into it, but there is still substantial work needed to really scale this up. We hope the early momentum will translate into consistent, sustained growth – as well as an availability of resources and capital for the segment to help it become more mainstream.

The e-mobility segment and its value chain will touch on a lot of impact themes and not just create a better environment through climate action (SDG13). You’re also contributing to sustainable cities (SDG 11) as well as decent work and economic growth (SDG 8) because these companies would provide a lot of employment. And you're looking at good health and well-being (SDG 3) if you're able to reduce the pollution that vehicles cause. With e-mobility, the impact is much wider.