Blog / News
Electric cars. Is Singapore in the race? Find out
Is Singapore soon to become a leading electric vehicle (EV) manufacturing hub?
Singapore’s Economic Development Board (EDB) seems to think so, and is in talks with makers of green vehicles around the world to set up shop here.
Singapore’s Electric Vehicle dreams
Obviously, fancy appliance-maker Dyson’s announcement that it will build its first electric car in Singapore seems a good starting point, though official details of that project are scant. Reportedly Dyson’s Singapore factory will be complete in 2020, and cars rolling off the production line in 2021.
Dyson has 400 (UK-based) engineers working on the vehicle, and is spending S$3.54b on the project, with more than S$300m set aside for research and development. Apparently, Singapore was chosen for the manufacturing facility because of its numerous free-trade deals and its proximity to China – by far the world’s largest market for electric cars. Dyson also has around 1,100 employees in Singapore already.
On the plus side, Dyson has extensive experience building powerful and efficient electric motors, and it has a brand-name that allows it to sell its products at a premium to the competition. Whether that translates from vacuum cleaners to cars is another question of course, though Dyson can learn from Tesla’s experience – it did fairly well in the low-volume high-margin luxury segment, but is struggling with production of its Model 3 in the mass-market sector. It should be noted that Tesla has yet to make a profit, however.
Dyson, unlike Tesla, at least starts with a brand name, though Sir James Dyson is perhaps not the headline magnet that Tesla’s Elon Musk is. And whether people are as interested in driving a Dyson as they are drying their hair with one is a question – its association with household appliances could be a negative factor.
Musk differentiated Tesla from the start as a purely electric car maker, allowing the upstart to stake a claim in a market that was dominated by traditional car companies. Dyson will not have that luxury.
And building cars is not easy – unlike bladeless fans, cars need to meet a multitude of safety and other regulations worldwide. The road to success in the car manufacturing business is littered with failures.
Can Singapore become a major player in the electric car industry?
In the meantime, established car companies are spending big dollars on their electric futures – Mercedes-Benz is investing S$15b in electrifying its fleet, so every Mercedes model series will have an electrified option by 2022, and it is investing an extra €1b on battery-production facilities.
And other luxury manufacturers have already beaten Dyson to market – BMW’s very cleverly-conceived i3 should have sold better than it has, proving that clever design and manufacturing aren’t guarantees of success in the electric car game. That said, timing the market is important, just ask Myspace.
Recently Jaguar started to offer its attractive all-electric I-Pace SUV in Singapore too, so Dyson will be competing in a crowded market unless its offering is something genuinely unique (again, there are no details of the Dyson car to go on).
But success on Singapore roads is not the driving factor for Dyson – this car is intended for a global audience. So in some senses the EDB may be onto something by encouraging other companies in the electric car game to establish manufacturing facilities in Singapore as well.
Cars require a multitude of parts, and a manufacturing cluster makes sense – if there’s enough demand, then parts suppliers such as manufacturers of seats, head- and tail-lights, windscreens and the like will also be attracted. If there’s not enough demand, those parts are likely to have to be imported, though with free trade within ASEAN and its relative proximity, existing suppliers based in Thailand could fill those gaps.
That there is already a thriving car manufacturing industry in Thailand may work against the EDB’s plans, but to its credit, the Singapore government has been good at attracting high-value industries over the years, and there’s little doubt that electric cars are going to be a big thing – Norway is banning the sale of petrol and diesel cars by 2025, and China, India, Germany, France and Britain have also announced similar bans down the track, while other countries and individual US states have targets for EV sales too.
According to the International Energy Agency EVs currently account for about 1% of global car sales, but the numbers of EVs sold are growing at about 50% annually – little wonder companies such as Dyson are keen to get involved.
Still, for Singapore to become a player there will be headwinds.
Thailand, which is already ASEAN’s biggest car manufacturer – the country exports more than a million cars annually – is offering tax breaks for manufacturers of EVs. And carmakers can take advantage of lower costs and the ecosystem of suppliers that exists there already.
And even though China, which is the world’s biggest EV market, reduced subsidies for EVs in March, it also has targets for 7m plug-in hybrid or EVs by 2025. Bloomberg New Energy Finance reckons 2.5m EVs will be sold in China in 2022, and expects the number to be higher if pollution-choked cities incentivize sales any further.
Troublingly for EDB, there are already more than 400 EV manufacturers in China, though it is unlikely they will all survive. Those that do, and do so in an environment lacking subsidies, are likely to be successful international brands in the future – watch for brands like BYD in the mass-market and NIO, which races in the Formula E World Championship, in the upper end.
It looks as though EDB has landed a big fish with Dyson. Whether there are any more fish in that pond, we’re going to have to wait and see.
By Tony Tan
Budget Direct Insurance
No-Nonsense, money saving cover for your car