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Regional stocks to ride the EV megatrend

Samantha Chiew
Samantha Chiew8/26/2021 11:35 AM GMT+08  • 9 min read
Regional stocks to ride the EV megatrend
With the EV trend is here to stay, here are some stocks to look at.
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Electric vehicles (EVs) are one of the hottest topics in town.

Decarbonisation agenda, pro-EV policies, technological breakthroughs, urbanisation push factors, infrastructure-readiness, e-mobility and the millennial generation are all fuelling the EV conversation.

According to Maybank Kim Eng’s regional head of oil & gas and automotive research, Liaw Thong Jung, EV penetration is set to reach sales parity with internal combustion engine (ICE) vehicles by 2030 and Asean is accelerating its EV-readiness. The push for EV is gaining momentum as it has already reported a four-year CAGR sales of 43% from 2016 to 2020, and is fast approaching a tipping point.

With that, Maybank foresees faster adoption of two-wheel (2W) EVs compared to fourwheel (4W) EVs and expects EVs penetration rate at 4% in 2020 to reach 20% by 2025, 50% by 2030 and outsell ICE vehicles from 2035.

Furthermore, RHB Group Research notes that EV adoption has gone from just a niche idea to mainstream policy making in recent years, with numerous governments putting in place policies to incentivise consumers to adopt EVs.

“We expect such efforts to continue, as the visible hand of policymaking (including EV purchase incentives, charging stations, etc) will remain important in the foreseeable future. Battery reuse and recycling will be imperative to enable truly sustainable electric mobility,” says the team of RHB research analysts.

So, will Asean embrace the EV revolution? What comes first — EVs or chargers? And most importantly, is this a good time to jump onto the electric bandwagon?

Policies, incentives and disincentives

Maybank recently hosted a panel discussion Invest Asean: The Rise of Asean EV which was moderated by Liaw with speakers Eirik Barclay, group executive vice-president, new ventures and technology of Yinson Holdings; Jinsi Lee, founder and CEO of Oyika; and Lee Yuen How, director of EV Connection.

One thing the three speakers agreed on early in the discussion was that a clear policy coupled with incentives will change consumer behaviour and attract investments to supercharge EV adoption.

According to the experts, the government should be taking the first steps to ensure EV adoption in the country. Having clear timelines for EV adoption and phasing out of ICE vehicles, together with incentives for EV and disincentives for ICEV, will boost electrification. Investments will follow suit, including those related to charging infrastructure and stability of power.

Similarly, RHB foresees that government policies will help to drive EV adoption. Already, the RHB research team notes that policies worldwide are shifting towards a low-carbon future through measures, such as a ban on ICE cars and the adoption of EV.

So far, Singapore is one of the very few countries that have provided consumers with incentives to adopt EVs. Some of the incentives for early adopters include a lower additional registration fee (ARF) of zero for EVs from January 2022 to December 2023, a rebate of up to 45% on the ARF capped at $20,000 on fully electric cars and taxis; and reduced road tax. This means buyers of new fully electric cars could save up to $45,000, while buyers of fully electric taxis can save up to $57,500.

These incentives were announced in February this year during the Budget 2021 speech. Finance minister and deputy prime minister Heng Swee Keat also announced that $30 million will be set aside for EV-related initiatives for the next five years. He described EVs as the “most promising” clean energy vehicle technology today and that this move will help Singapore “catalyse partnerships” between the public and private sectors.

On top of that, Singapore has also vowed to accelerate the development of EV charging infrastructure, as consumers have cited lack of charging infrastructures and range anxiety as concerns for not adopting EV.

In comparison, there was never a subsidy for EVs in Norway, which boasts the highest market penetration of EVs in the world, says Barclay of Yinson. But what the government there has done is to take a more disincentivising approach. It has increased taxes on ICE vehicles and fuels instead. This also meant that the government did not lose any revenue while pushing EV adoption. Norway plans to eliminate new petrol and diesel vehicle sales by 2025.

In addition, Barclay says, “Any country can do this and stay revenue neutral. All they have to do is make the tax on ICE vehicles a little bit higher than the EVs so that the EVs are a little bit cheaper. I think subsidies are really not necessary.”

Chiming in, Jinsi of Oyika, the local company that builds battery swap/charging infrastructures, warns that EVs have found it hard to penetrate markets that offer fuel subsidies.

However, several Asean countries such as Malaysia and Indonesia are still providing subsidies for petrol, which Barclay finds rather odd, as these countries are net importers of fossil fuel.

This year, Malaysia is expected to spend some RM8 billion ($2.6 billion) on fuel and cooking oil subsidies, more than double of the RM3.78 billion originally allocated. “The government is prepared to bear the higher subsidy expenditure to preserve the well-being of the people and the viability of business, especially small traders,” said the Malaysian Finance Ministry in June.

The government will continue with the price maintenance policy of RM2.05 per litre for RON95 petrol and RM2.15 per litre for diesel which had been maintained since February 10.

To that end, Lee of EV Connection, one of the pioneers in the field of EV charging solutions in Malaysia, believes that all stakeholders, public and private, should work together to encourage EV adoption and to provide the necessary infrastructure. “If you leave it to the private sector, they will only build the charging infrastructure where there are high concentrations of EV users, leaving the semi-urban and rural areas to become EV-charging desert. Therefore the government plays an important role in ensuring investment across all areas,” he says.

Electrical surge

As environmental, social and governance (ESG) trends become more critical in investing, the research houses have picked up some stocks that will be riding the EV trend.

In Singapore, RHB likes ComfortDelGro (CDG) and ST Engineering.

RHB has a “buy” call on CDG with a target price of $2.00 in an Aug 20 report. Apart from being positive on the gradual reopening of Singapore’s economy, which is expected to boost demand for public transport services, analyst Shekhar Jaiswal also likes that the group is in the process of electrifying its taxi and public bus fleets.

CDG has already put in Singapore two fleets of fully electric Hyundai Ioniq taxis on trial in 2018 and expanded this with two more fleets of Hyundai Kona electric taxis in 2019. In China, CDG replaced about 330 taxis in 2019 with fully electric ones, while its operations in Perth became the first taxi company in Australia to operationalise two fleets of fully electric Hyundai Ioniq taxis. This year, its Nanjing taxi operations took over 10 new units of Qin, a fully electric taxi model, kick-starting the introduction of EVs into its current taxi fleet.

As for its public buses, CDG was the first bus operator in London to trial five BYD electric double-decker buses. In 2018, CDG’s SBS Transit began trials on diesel-electric hybrid buses in Singapore. In 2019, the group deployed the first two of 50 new hybrid buses in Melbourne, with the entire fleet of 50 buses expected to be in service by 2022. In 2021, some of the Linkker LM312 electric buses were assigned to SBS Transit to operate. These buses are developed by ST Engineering and can be charged via overhead pantographs at bus interchanges.

Jaiswal too has a “buy” call on ST Engineering with a target price of $4.50.

Jaiswal notes that ST Engineering’s venture into the EV space through its electric buses is shows promising outcomes. Apart from working with Finnish electric bus manufacturer Linkker to provide Singapore with its first public transport buses to be charged via overhead pantographs at bus interchanges, ST Engineering also offers the mid-life retrofitting of diesel buses and changes them to electric power.

The analyst also notes that ST Engineering is participating in bids to set up EV infrastructure and sell commercial vehicles. Early this year, the Urban Redevelopment Authority (URA) and LTA invited the submission of bids to build, operate, and maintain over 600 EV charging points at some 200 public car parks across Singapore. The tender drew 19 bidders, including ST Engineering. The group is also the authorised distributor of BYD’s T3 electric van in Singapore. The BYD T3 is a 100% electric light goods vehicle, well suited for Singapore’s urban logistics and sustainable transportation requirements.

Elsewhere, RHB has “buy” calls on Indonesia-listed Astra International and Vale Indonesia; Thailand-listed Global Power Synergy, PTT Oil and Retail and Malaysia-listed Sime Darby.

Separately, Maybank points out that automotive OEMs worldwide are adapting to the EV trend and are changing, especially with a push from the government, this has led to the rise of many pure EV startups, such as Tesla; while traditional automotive OEMs too are increasing efforts to push into EV.

According to Maybank, German carmaker Volkswagen Group (VW) is leading the charge of traditional OEMs rushing into EVs. Following the Dieselgate scandal that came to light in 2015, when VW equipped millions of diesel cars with software that made them appear cleaner during emissions tests, VW has pledged to stop developing new ICE vehicles but will keep selling in some regions.

VW, the largest automotive OEM in the world, will be investing some EUR46 billion to electrify its vehicle line-up and is committed to launch at least one EV every year. It targets to more than double its EV sales to 1 million units in 2021, from 422,000 units in 2020. With that goal in mind, VW aims to be the global EV market leader by 2025 and plans to have most of its vehicles be electric by 2035 with around 40% of its cars by then to drive autonomously.

Photo: Bloomberg

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