E-93: Chinese EV Giants Set Sights on Southeast Asia

Southeast Asia is a fertile market for many industries. But none of them are as buzzing as electric vehicles at present, thanks to the region’s pledge to transition to a decarbonized economy by 2050.?

For context, in 2023, there was a significant 894% year-on-year rise in EV demand in Southeast Asia. This year, the EV sales in the region more than doubled in the January to March quarter from a year before.?

This rapidly growing appetite for electrified vehicles has increased Chinese players' affinity for the region.

China is already a dominant force in the global EV space. Last year, it manufactured about six out of 10 electric vehicles globally, which makes it the top EV manufacturer. At the same time, it accounted for around 60% of global electric car sales in 2023, as per the International Energy Agency.?What makes them attractive is their competitive pricing compared to Western and Asian counterparts.?

Of late, Chinese EV manufacturers are expanding their presence in Southeast Asia aggressively.

The region’s two largest economies, Indonesia and Thailand, are the two most important markets for them. The cherry on top is the incentives rolled out by these countries to stimulate EV demand and attract new investments.

According to a report by Tech In Asia, just in Indonesia, the sales of Chinese EV makers outstripped those of British automobile makers by 8x in the first half of this year.

Meanwhile, Chinese players are doubling down on their investments in Thailand. Over US$1.44 billion has already been committed from China to Thailand as automakers take advantage of government subsidies and tax incentives.?

Besides, the Chinese EV market has become more and more competitive with price wars eating away profits. This has left Chinese players with no other choice but to look to a fresh market, brimming with possibilities. Southeast Asia is that market, which is why they want to grab as much a big pie of it as possible.?

Over 70% of EV sales in the region are from Chinese brands, led by BYD, which has about 47% share of the regional market, as per research firm Counterpoint Research . Vietnam's VinFast is the second largest player here.?

As things stand, Chinese EV manufacturers will continue their upward journey in Southeast Asia, slowly chipping away at the traditional car market dominated by Japanese and Korean firms.

To that end, BYD has recently become the latest EV company to open an EV factory in Thailand, marking its first expansion in Southeast Asia. This facility, announced two years ago, will have an annual production capacity of 150,000 vehicles. It will assemble batteries as well while employing around 10,000 workers. Another Chinese player that is entering Southeast Asia is Hozon, the firm behind the Neta brand of EVs.

On that note, let’s dive into this week’s recap.?

Buzzing Deals

The past week saw several cleantech deals happening across Asia, along with some interesting deals in fintech.?

? South Korean clean tech startup Poen just closed a US$27.3 million series B round from DSC Investment, E& Venture Partners, Hyundai Marine & Fire Insurance, K2 Investment Partners, KDB Bank, L&S Venture Capital, and Lotte Ventures.

Founded in 2019, Poen specializes in remanufacturing waste electric vehicle batteries. With the new funding, Poen plans to accelerate the advancement of its technology, focusing on the development and commercialization of battery modules and packs. To that end, it is on track to form strategic partnerships with major industry players like Hyundai Motor Company, Kia, and LG Energy Solution among others.

? Chinese digital and intelligent operation service provider for new energy logistics vehicles DST bagged a US$20 million Series E+ round from Twin Towers Ventures, the corporate venture capital arm of Petronas, along with existing shareholders. This is the company’s second funding round in six months, after the completion of Series E funding in Q4 2023, which brings the total amount in the Series E round to approximately US$100 million.?

Founded in 2015, DST helps logistic players electrify their fleets while integrating the entire value chain of the new energy logistics vehicle industry. It provides asset operations and services, including vehicle leasing and sales, charging and maintenance, and vehicle disposal.? As of June 2024, DST manages over 130,000 units of new energy logistics vehicles.?

? US and Singapore-based climate tech startup Aether Fuels raised a US$34 million Series A? round from Eni Next, the corporate venture capital arm of Italian multinational energy company Eni.?

Set up in 2022 as a spin-out of Temasek’s deep-tech early-stage investment platform Xora Innovation, Aether Fuels caters to the aviation and ocean shipping industry with breakthrough solutions for producing sustainable fuels that are practical, economical, and scalable. It uses novel process flows, plant configurations, catalysts, and unique equipment to reduce capex and feedstock costs and maximize efficiencies and yield to make sustainable fuels.

Aether will use the new capital to further expand its R&D infrastructure, scale up its novel catalysts and process technology, and expand and accelerate the construction of a fully integrated production plant.

? Vietnamese clean energy company Nami Energy netted a US$10 million investment from Singapore-based Clime Capital through the VC’s Southeast Asia Clean Energy Fund II. Founded in 2019, the company provides rooftop solar solutions and other on-site energy solutions like battery storage and energy efficiency measures, to commercial and industrial clients. The new funding will be used to expand operations across Vietnam.

? Fintech company Partior raised over US$60 million in a series B funding round led by Peak XV Partners. Valor Capital Group and Jump Trading Group also joined in new investors, while existing shareholders like JPMorgan, Standard Chartered, and Temasek pitched in.

Founded in 2021, Partior provides blockchain-based clearing and settlement infrastructure supporting the money movement globally. It grew from the Project Ubin collaboration backed by the Monetary Authority of Singapore. Its founding shareholders include Temasek, DBS, J.P. Morgan, and Standard Chartered.

The new investment will help build new capabilities including intraday foreign exchange swaps, cross-currency repurchase agreements, a programmable enterprise liquidity manager, and just-in-time multibank payments.

What’s Hot In AI In Asia

Singapore has reaffirmed its commitment to strengthening AI governance with new guidelines designed to foster a supportive business ecosystem. Particularly for businesses that would need datasets to deploy applications on LLMs, the city-state will introduce safety guidelines as part of its AI Verify testing framework and software toolkit.

These guidelines, aimed at generative AI model developers and application deployers, will establish a common standard for development with a focus on transparency and rigorous testing.

It’s not by surprise that Singapore was recently named the second-best AI hub globally by researcher Linkee.ai. The first on the list was Boston. Linkee.ai assessed the cities worldwide and attributes a score based on the number of available AI jobs, salaries in the AI sector, and prominent AI research institutions. The country had the second-highest number of available AI jobs among the top ten AI hubs and an average salary of US$158,000 for AI specialists, surpassed only by Zurich.

Beijing was eighth in the list of top 10 AI hubs. Interestingly, Chinese AI startups are heading to Singapore in a bid for global growth. Now the city-state has always been popular with companies from China, but AI entrepreneurs are accelerating the shift as they can’t access some of the newest technologies due to US trade sanctions on China.??

Meanwhile, Southeast Asia countries have found a new partner in Japan. The country of the rising sun will help the region train large language models in their local languages and cultural context, fueling the advancement of artificial intelligence.?

Japan is confident that it can offer unique assistance to the Association of Southeast Asian Nations with partnerships between Japanese AI companies and businesses across the region. Japanese developers will work with Southeast Asian peers to train localized LLMs by compiling data sets and testing the models. Japan also plans to provide computational resources, like graphics processing units used for data processing, to Southeast Asian countries.

For instance, Tokyo-based Elyza, a unit of mobile carrier KDDI, is already developing a Thai LLM. Last December, Singapore kickstarted an initiative to develop LLMs trained in Indonesian, Malay, and Thai languages. Japan may collaborate on this effort as well.

On top of it, to encourage this collaboration, Japan's government has set aside a budget of US$867 million to provide subsidies to companies expanding into emerging markets and developing countries of the Global South.?

The increasing demand for AI services, which require massive computational power and storage, is driving data center companies to expand their capacity.

For instance, Singapore’s Princeton Digital Group is set to double the capacity of its data centers in three years to tap the emerging market in Asia. The Warburg Pincus-backed company will add over 300 employees in markets including Japan, Malaysia, Singapore, and India by the end of 2025.

And that’s the wrap for this edition of #ICYMI, our weekly curated highlights from the Asian tech ecosystem. Subscribe to receive it every Thursday and stay updated on the noteworthy tech developments you might have missed during the week. Like this newsletter? Share it with your friends and colleagues here.