Electrification in ASEAN: The impact on the lubricants industry

By Sushmita Dutta and Amrita Singh, Kline & Company

The ASEAN region is on the brink of a transportation revolution, driven by the shift towards electric vehicles (EVs). This transition marks a new era in mobility, but it comes with a unique set of challenges, particularly in rural areas where power shortages and limited infrastructure present significant obstacles. While urban centres are rapidly advancing in EV adoption, the road ahead is much more complicated for rural areas, creating a dynamic landscape for the electrification process.

The growth of EVs in ASEAN is being propelled by government incentives, rising environmental awareness, and technological advancements. Chinese automakers are flocking to the region, attracted by generous tax breaks and the abundance of natural resources that support the battery production ecosystem. Although local EV adoption is still in its infancy, substantial growth is projected by 2030. Favourable regulations, the expansion of charging infrastructure, and the availability of affordable models from Chinese manufacturers are expected to play a crucial role in accelerating this growth.

Impact on lubricant demand in ASEAN

In terms of lubricants, the consumer automotive segment is seeing the highest growth rates across ASEAN, particularly in Indonesia and the Philippines, which recorded above-average growth in 2023. Conversely, Vietnam has seen the least growth due to declining demand for motorcycle oils (MCOs). Over the next five years, moderate growth in lubricant demand is expected, driven by sales of two-wheelers and passenger cars. However, between 2028 and 2033, the growth rate is expected to slow significantly as EV penetration increases, particularly in countries like Vietnam, where local manufacturers such as VinFast are accelerating the shift towards electric vehicles and establishing themselves as key players in the region’s EV landscape.

Battery electric vehicles (BEVs) will have a negative impact on lubricant demand in terms of both volume and value, though their penetration is projected to remain relatively low until 2030. In the meantime, hybrid electric vehicles (HEVs) and plug-in hybrid electric vehicles (PHEVs) will be the leading players in the transition towards electric mobility. This trend is likely to drive the demand for fully synthetic lubricants, which offer longer oil drain intervals and are more suitable for these types of vehicles. However, the overall demand for passenger car motor oil (PCMO) is not expected to see significant growth due to the extended life of synthetic oils.

ASEAN vehicle parc and its role in the transition

The size of the vehicle parc in ASEAN underscores the importance of this transition to electric mobility. As of 2024, the ASEAN region has a total vehicle parc that is predominantly comprised of motorcycles, with 224 million registered motorcycles, compared to around 41 million registered passenger cars. This heavy reliance on motorcycles reflects the economic and practical realities of the region, where two-wheelers offer a more affordable and convenient means of transport.

Motorcycles, particularly in countries like Indonesia, Thailand, and Vietnam, are essential for daily commutes and logistics. However, as the region transitions towards electrification, this large base of two-wheelers presents a challenge in terms of infrastructure development and electrification strategies. Ensuring that sufficient charging infrastructure is available for electric two-wheelers will be critical in realising the full potential of electric mobility in ASEAN.

The promise and challenges of electric mobility

Urban centres across ASEAN, particularly in countries such as Indonesia, Thailand, Vietnam, and Malaysia, are seeing substantial investment in EV infrastructure. This includes the development of charging stations and government incentives for EV buyers. These advancements are further supported by improvements in battery technology and a growing awareness of the environmental impacts of fossil fuels. As a result, consumers are gradually becoming more receptive to the idea of electric mobility, attracted by lower operating costs and the potential for a reduced carbon footprint.

The rapid rise of e-commerce in the region has also contributed to the growing demand for electric two-wheelers, particularly for delivery services. E-commerce and logistics companies are increasingly integrating electric vehicles into their fleets, making them key players in the ASEAN EV market. Companies such as Gojek in Indonesia, Grab in Thailand, and Shopee in the Philippines have all incorporated electric scooters into their delivery operations. This trend is not only contributing to environmental sustainability but also helping to drive economic growth across the region.

However, the journey towards full-scale electrification is not without its challenges. The lack of sufficient charging infrastructure and battery range limitations remain significant barriers. Public-private partnerships (PPPs) could play a crucial role in overcoming these challenges by facilitating the development of EV charging networks. E-commerce companies may also look to partner with charging solution providers to ensure their fleets have access to reliable and convenient charging options.

Rural electrification: A major obstacle

While urban areas are making significant strides in EV adoption, rural electrification remains a complex issue across the ASEAN region. Power outages, insufficient charging infrastructure, and underdeveloped electrical grids make it difficult to implement electric mobility in rural areas. Long-distance travel on electric two-wheelers or cars is impractical, and the lack of reliable electricity in these areas presents a major hurdle for the widespread adoption of EVs.

Rural populations across ASEAN, particularly in countries like Indonesia and the Philippines, heavily rely on two-wheelers for daily transportation. This highlights the importance of developing a robust charging network that can support the shift to electric two-wheelers in these regions. As the region works towards greater economic development and environmental sustainability, ensuring reliable access to electricity in rural areas will be critical to the successful transition to electric mobility.

The future of the ASEAN lubricants market

The ASEAN lubricant market exceeded 3.3 million tonnes in 2023, accounting for approximately 8% of the global market. Over the next decade, the market is expected to grow at a compound annual growth rate (CAGR) of 2%, with market value growing at an even higher rate due to the increasing adoption of synthetic lubricants. While the growth of motorcycle oils is expected to slow as the two-wheeler market transitions towards electrification, the market for passenger car motor oils will continue to expand, driven by the shift towards hybrid and plug-in hybrid vehicles.

Honda remains the dominant player in the ASEAN motorcycle market, particularly in Indonesia, Thailand, Vietnam, and the Philippines. The company’s leadership is driven by its broad range of products, from affordable scooters to premium models, and its strong brand reputation for reliability and fuel efficiency. Honda has committed to achieving carbon neutrality across all its products and corporate operations by 2050, with the electrification of its motorcycles playing a central role in its strategy.

Honda has designated 2024 as the starting point for its global push into the electric motorcycle market. The company plans to expand its electric commuter lineup to include models such as the CUV e: and ICON e:, which will initially launch in Indonesia before expanding to other regions. By 2030, the ASEAN market is expected to see a continued shift towards electric mobility, though this transition is likely to be incremental, with hybrid electric vehicles leading the way.

Challenges and opportunities ahead

The road to electrification in ASEAN is filled with both challenges and opportunities. On one hand, urban areas are making significant progress in adopting electric vehicles, supported by government incentives, improved infrastructure, and growing environmental awareness. On the other hand, rural areas face substantial barriers to electrification, including unreliable power supplies and a lack of charging infrastructure. 

For the region to fully embrace electric mobility, significant investment will be required in infrastructure development, particularly in rural areas. Public-private partnerships will be essential in facilitating the necessary investment, while government policies must continue to incentivise the adoption of electric vehicles.

Additionally, the lubricants industry will need to adapt to the changing landscape. While the demand for traditional lubricants is expected to slow as the region transitions towards electric mobility, the shift to hybrid and plug-in hybrid vehicles will drive demand for synthetic lubricants. This presents a unique opportunity for lubricant manufacturers to innovate and develop products that meet the needs of the evolving market.

Conclusion: A slow but steady shift towards electrification

By 2030, ASEAN is expected to witness a significant shift towards electric mobility. However, this transition will be gradual, with hybrid electric vehicles playing a crucial role in the early stages. Achieving a predominantly electric market will require sustained investment, accelerated infrastructure development, and supportive government policies to ensure the transition is both practical and inclusive for the diverse populations across the region.

As ASEAN continues to evolve, the region’s lubricant market will play a key role in supporting the transition to electric mobility, adapting to the changing demands of consumers and the automotive industry. The next decade will be crucial in determining how quickly and effectively the region can achieve its electrification goals. 

Footnote:

* ASEAN stands for the Association of Southeast Asian Nations Countries which include Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.

** Electric vehicles include Battery Electric Vehicle (BEV), Hybrid Electric Vehicle (HEV), Plug-in Hybrid Electric Vehicle (PHEV), and Fuel Cell Electric Vehicle (FCEV).