Southeast Asia has emerged as a critical region in the global battery supply chain, driven by its abundant natural resources, strategic manufacturing hubs, and favorable trade policies. Countries such as Indonesia, Thailand, and Malaysia are positioning themselves as key players in battery component production and electric vehicle (EV) assembly, attracting significant foreign direct investment (FDI) while facing scrutiny over environmental and labor practices.
Indonesia dominates nickel production, a crucial raw material for lithium-ion battery cathodes. The country holds the world’s largest nickel reserves, estimated at over 21 million metric tons, and has implemented policies to ban raw nickel ore exports to encourage domestic processing. This has led to a surge in FDI, particularly from Chinese firms investing in high-pressure acid leaching (HPAL) plants to produce battery-grade nickel sulfate. South Korean and Japanese companies have also established joint ventures to secure nickel supply chains. However, environmental concerns persist due to deforestation, water pollution from mining activities, and high carbon emissions associated with nickel processing. Labor issues, including unsafe working conditions and low wages, further complicate the sector’s growth.
Thailand, meanwhile, has become a regional hub for EV manufacturing, leveraging its well-established automotive industry. The government’s ambitious 30@30 policy aims for 30% of all vehicles produced to be electric by 2030, supported by tax incentives and subsidies for EV manufacturers. Major automakers, including BYD, Great Wall Motor, and Toyota, have announced investments in local production facilities. Thailand’s strength lies in battery pack assembly and integration rather than raw material extraction, with a focus on supplying both domestic and export markets. The country benefits from free trade agreements under the ASEAN Economic Community, reducing tariffs for battery components shipped to neighboring markets. Yet, challenges remain in upskilling workers for high-tech manufacturing and ensuring sustainable sourcing of imported materials.
Malaysia plays a complementary role, specializing in battery cell components such as cathodes, anodes, and separators. The country’s advanced electronics manufacturing ecosystem has attracted firms like LG Chem and Panasonic to set up production lines. Malaysia’s trade agreements, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), provide preferential access to key markets like Japan and Australia. However, reliance on imported raw materials exposes the sector to supply chain vulnerabilities, while energy-intensive production processes raise questions about long-term sustainability.
Vietnam and the Philippines are also emerging as secondary players. Vietnam’s growing lithium-ion battery production caters to consumer electronics and EVs, supported by low labor costs and improving infrastructure. The Philippines, rich in cobalt and copper, is exploring opportunities to integrate into the battery supply chain but faces hurdles in regulatory clarity and infrastructure gaps.
Regional trade agreements amplify Southeast Asia’s competitiveness. The Regional Comprehensive Economic Partnership (RCEP) facilitates smoother cross-border movement of battery components among member states, reducing costs for manufacturers. ASEAN’s harmonized standards for EVs and batteries further streamline regional trade. However, disparities in environmental regulations across countries create uneven playing fields, with some nations prioritizing rapid industrialization over ecological safeguards.
Environmental and social governance (ESG) concerns are increasingly shaping investment decisions. Nickel mining in Indonesia has drawn criticism for habitat destruction and conflicts with indigenous communities. In response, some multinational corporations are imposing stricter sourcing criteria, pushing local suppliers to adopt cleaner technologies. Thailand’s EV push faces scrutiny over the carbon footprint of battery production, prompting initiatives to adopt renewable energy in manufacturing. Labor rights remain a contentious issue, with reports of migrant workers in Malaysia and Thailand facing exploitative conditions in factories.
The region’s trajectory in battery component production hinges on balancing economic growth with sustainability. While Southeast Asia offers cost advantages and strategic trade benefits, long-term success will depend on addressing environmental degradation, improving labor standards, and fostering innovation in cleaner production methods. Without systemic reforms, the risk of reputational damage and regulatory backlash could undermine its position in the global battery value chain.
As demand for EVs and energy storage surges, Southeast Asia’s role will likely expand, but stakeholders must navigate complex trade-offs between rapid industrialization and sustainable development. Policymakers, investors, and manufacturers must collaborate to ensure that the region’s battery industry grows responsibly, minimizing ecological harm while maximizing economic benefits for local communities.