Southeast Asia’s electric motorbike (EV bike) industry has seen dealmaking activity kick on in 2023 and looks poised to thrive over the next few years, as investor interest in the sector accelerates despite the unfolding market downturn.

Mergermarket data show that EV bike dealmaking volume in Southeast Asia recovered this year after peaking in 2019 at USD 754m despite a small deal count. Following no deals in 2020, deal volume has picked up to USD 175m this year, with the closure of three transactions.

The positive outlook for electrification of two-wheeled transport is driven by growing demand for sustainable transportation and a transition to cleaner energy to navigate environmental and urbanization concerns.

Government support and incentives in Southeast Asia’s major markets are intended to lure foreign investment in EVs, manufacturers of which hope to move up the value chain in well-established industries such as energy and electricals.

“The Southeast Asia region may be a more attractive market for two-wheeled EVs rather than four-wheeled EVs since this is the current profile of the automotive vehicle market in the region,” said Raymond Ravelo, President and CEO of Movem Electric, a green mobility subsidiary of Philippines-based electricity distributor Manila Electric [PSE:MER], which has announced plans to venture into EV production.

Among the deals to have completed in the region this year are: Chinese carmaker Geely Automobile snapping up 49.9% of PROTON Holdings Bhd, a Malaysian holding company, with business in manufacturing motor vehicles and related products; Singapore-based EV maker ION Mobility securing USD 19m via a Series A funding round led by TVS Motor; and the takeover of 100% of Mercedes-Benz Group AG’s Indonesian business by a joint venture between Indonesia’s Inchcape Motors and PT Indomobil Sukses Internasional Tbk (Indomobil).

Investment drive

Based on their own technological initiatives and innovations in battery manufacturing and other related components, many start-ups in this space are now in fundraising mode, needing strong financial support to propel growth stories.

Several private equity and venture-capital firms are seeking investment opportunities in EV companies and related supply-chain firms in Southeast Asia, in line with environmental, social, and governance (ESG) targets. For example, Singapore-based climate change fund The Radical Fund recently closed its USD 40m ESG fund to invest in EV start-ups and early-stage companies in the region, particularly those in two-wheeler markets such as Vietnam, Thailand, and Indonesia.

The market potential for electric two-wheelers, especially in Southeast Asia, is enormous, according to Charles Wong, founding partner of TNB Aura, a SEA-focused VC firm. Based on Statista Market Insights, Indonesia and Thailand are among the top five markets for motorcycles in terms of revenue after India and China. As a result, start-ups in the region address a large enough total market to IPO directly as well.

“Start-ups can be potential acquisition targets for automobile giants; however, we can see successful start-ups like Gogoro going public in 2022 and Ola Electric potentially heading towards an IPO,” says Wong. “Electric bike companies who have developed their own supply chain, presence, and partnerships within the local markets will make strong strategic acquisition targets for other technology giants entering SE Asia, as the adjacent opportunities are equally large,” he adds.

Vietnam also shows huge potential given it is the largest electric two-wheeler market in ASEAN, and the second largest in the world after China, according to Nguyen Ba Canh Son, founder and CEO of Vietnamese EV bike startup, Dat Bike. He feels startups should focus on building up strong capacity and resources in their local markets before expanding overseas. Indeed, many of them could now find scaling up a challenge, as they face gaps in operations, technology, and branding.

“When governments have clear regulatory frameworks by 2025, the Southeast Asian region may see several consolidations, as big automotive players shift to electric motorbike production,” says Son.

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