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Business Times
an hour ago
- Business Times
Tariff heat sees Europe heighten focus on Vietnam and Indonesia
[HO CHI MINH CITY / JAKARTA] Europe's engagement with South-east Asia is ramping up, from the recent 150 million euro (S$224.5 million) investment in a new Vietnam engineering hub by German software giant SAP to the UK's removal of barriers for pharmaceutical exports to Vietnam and the European Union's landmark trade deal with Indonesia. The push is being fuelled by geopolitical tensions and US President Donald Trump's Aug 7 tariff package – a flat rate of 15 per cent on most EU imports, in addition to existing steep duties on EU steel and vehicles – which has made selling to the US market costlier and less predictable for European exporters. Ian Betts, chair of the British Chamber of Commerce in Indonesia, said that South-east Asian markets such as Indonesia and Vietnam are now viewed as a 'strategic hedge' against over-reliance on traditional Western markets as they offer dynamic consumer bases, expanding middle classes and improving regulatory frameworks. Stephen Olson, former US trade negotiator and visiting senior fellow at Iseas-Yusof Ishak Institute echoed the sentiment: 'The EU is clearly attempting to diversify its trade relations away from the US, and Asean is a key focal point.' Recent developments, including the breakthrough Indonesia-EU Comprehensive Economic Partnership Agreement (Cepa) and sector-specific pacts such as the UK-Vietnam pharmaceutical deal, underscore this structural shift. The pivot is evident from recent Allianz Trade surveys before and after the US' 'Liberation Day' tariffs on Apr 2, which found that European export interest towards South and South-east Asia doubled from 7 per cent to 14 per cent as trade links between the regions are intensifying with more free-trade agreements (FTAs). A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up The shifting sentiments were more evident when it came to supply-chain exposures. 'The trade war is creating opportunistic friendshoring (with) the Europe-Asia rapprochement,' Allianz analysts wrote. They pointed out that the Asia-Pacific has now become the preferred relocation destination for German companies with current links to North American supply chains – with 43 per cent opting for this, rising sharply from 28 per cent. 'We see a lot of manufacturing and industrial companies leveraging Vietnam as an expansion, and it creates opportunities for wider exchange (between Vietnam and Europe),' said Thomas Saueressig, member of the executive board of SAP, during a press briefing on Aug 7 to launch its new SAP Labs in Ho Chi Minh City. The German enterprise software giant plans to invest more than 150 million euros over the next five years to strengthen its engineering hub in Vietnam, the second in South-east Asia following the one established in Singapore in 2022. '(How we try to boost SAP Labs here) is also a great next signal for more and further increased collaborations and partnerships across industries from Germany, Europe, to South-east Asia, specifically in Vietnam,' he added. Europe is not stopping at Indonesia or Vietnam. The Philippines embarked on a fresh round of FTA talks with the EU in June, with the next one scheduled in October. Negotiations with Malaysia and Thailand are also ongoing, and are at various stages. 'Once (the Indonesia-EU Cepa) is signed, I believe it opens the way for further conclusions and negotiations with other Asean member states,' said Edison Bako, executive director at the European Business Chamber of Commerce (EuroCham) in Indonesia. One of the key challenges for these countries, according to Olson, will be navigating differing perspectives on values-driven social issues and climate change – areas that the EU increasingly intertwines with its trade policies. Indonesian President Prabowo Subianto meeting European Commission President Ursula von der Leyen in Brussels on Jul 13. PHOTO: INDONESIA PRESIDENTIAL SECRETARIAT Indonesia-EU Cepa: Catalyst for broader engagement Politically concluded on Jul 14, 2025, the Indonesia-EU Cepa is set for legal finalisation by September and is poised to serve as a template for Europe's wider strategy in Asean. Under the Cepa, approximately 80 per cent of Indonesia's exports to the EU – including textiles, footwear, fisheries, palm oil and electric vehicle (EV)-related components – will benefit from immediate or gradual tariff elimination, boosting export competitiveness and improving market access. In return, EU companies will gain wider access to Indonesia's rapidly growing market of 280 million consumers, with key export opportunities in meat, dairy products and green technologies. Trade between the two sides is projected to grow by 50 per cent or more in the coming years under the new framework. '(The deal) would also open the floodgates in terms of the prospects for environmental sustainability and governance standards here in Asean,' added Bako. Europe has emerged as one of the top seven sources of foreign investment in Indonesia, with inflows reaching US$4.59 billion in 2024, up 52 per cent from US$3.02 billion in the previous year, driven by growing interest in the EV, healthcare and resource sectors. 'The ongoing uncertainty in EU-US trade relations is prompting many to look more seriously at Asean,' said Fabian Kieble, chairman of EuroCham in Indonesia. 'Indonesia's EV battery and mining sectors are key areas of interest. The country's push for EVs aligns well with European expertise,' he added. Vietnam-UK sectoral strategy Vietnam has been playing a key role in Europe's Asia strategy, with the UK-Vietnam pharmaceutical agreement – confirmed on the same day as the announcement of the Cepa between the EU and Indonesia – symbolising deeper engagement. 'We expect the diversification of trade partners this agreement provides to enhance the UK's resilience against global trade uncertainties while creating new growth opportunities in emerging markets across Asia,' Rachel Finlay, healthcare analyst at BMI, a unit of Fitch Solutions, wrote in a note last month. The deal removes non-tariff barriers for UK pharmaceutical exports and reinforces the Medicines and Healthcare products Regulatory Agency's standards as an internationally recognised benchmark – a move that could ripple through other Asean markets. Sakshi Sikka, associate director of pharmaceuticals at BMI, added: 'This agreement also strengthens Vietnam's broader trade relationship with the UK, which could lead to expanded cooperation in other sectors such as finance and clean energy.' Clarence Hoe, executive director of Americas and Europe at Enterprise Singapore, also observed increased interest from European companies to participate in renewable energy infrastructure projects in South-east Asian markets due to the latter's vast potential and commitment to net-zero targets, as well as pro-energy transition policies. Pha Lai thermal power plant in Hai Duong province, Vietnam. The UK and EU are the co-leads of the International Partners Group, which has been working with Hanoi to implement Vietnam's Just Energy Transition Partnership since December 2022. PHOTO: AFP Singapore: Asean's entry point for European firms While emerging South-east Asian economies present huge growth potential, Singapore remains Europe's launch pad into the region, with more than 19,000 European companies operating in the city-state. Recent manufacturing investments by Sanofi, Biotronik, Siltronic and NTS in Singapore highlight the 'queen bee' effect – where global firms cluster their suppliers and partners around the South-east Asian region, said Dino Tan, senior vice-president and head of Europe at Singapore Economic Development Board. Following the Europe-Singapore Digital Trade Agreement, which was finalised last year, London-headquartered fintech Wise expanded its Asia-Pacific hub in Singapore in April to better serve markets in the region. Norwegian gamified learning platform Kahoot launched its Asia-Pacific hub in the Republic in July, using Singapore as a gateway for its regional growth. 'Singapore is deepening regional economic integration within South-east Asia, which will make it easier for companies to do business in our region,' Tan noted. He highlighted initiatives such as the Johor-Singapore Special Economic Zone, announced earlier this year, as a strategic location that enables European companies to leverage the combined strengths of both Malaysia and Singapore to diversify their supply chains and continue scaling. Additional reporting by Goh Ruoxue in Singapore
Business Times
5 hours ago
- Business Times
Tariff heat sees Europe boost its focus on Vietnam and Indonesia
[HO CHI MINH CITY / JAKARTA] Europe's engagement with South-east Asia is ramping up, from the recent 150 million euro (S$224.5 millon) investment in a new Vietnam engineering hub by German software giant SAP to the UK's removal of barriers for pharmaceutical exports to Vietnam and the European Union's landmark trade deal with Indonesia. The push is being fuelled by geopolitical tensions and US President Donald Trump's Aug 7 tariff package – a flat rate of 15 per cent on most EU imports, in addition to existing steep duties on EU steel and vehicles – which has made selling to the US market costlier and less predictable for European exporters. Ian Betts, chair of the British Chamber of Commerce in Indonesia, said that South-east Asian markets such as Indonesia and Vietnam are now viewed as a 'strategic hedge' against over-reliance on traditional Western markets as they offer dynamic consumer bases, expanding middle classes and improving regulatory frameworks. Stephen Olson, former US trade negotiator and visiting senior fellow at Iseas-Yusof Ishak Institute echoed the sentiment: 'The EU is clearly attempting to diversify its trade relations away from the US, and Asean is a key focal point.' Recent developments, including the breakthrough EU-Indonesia Comprehensive Economic Partnership Agreement (CEPA) and sector-specific pacts such as the UK-Vietnam pharmaceutical deal, underscore this structural shift. The pivot is supported by recent Allianz Trade surveys before and after the US' 'Liberation Day' tariffs on Apr 2, which found that European export interest towards South and South-east Asia doubled from 7 per cent to 14 per cent as trade links between the regions are intensifying with more free-trade agreements (FTAs). A NEWSLETTER FOR YOU Friday, 8.30 am Asean Business Business insights centering on South-east Asia's fast-growing economies. Sign Up Sign Up The shifting sentiments were more evident when it came to supply-chain exposures. 'The trade war is creating opportunistic friendshoring (with) the Europe-Asia rapprochement,' Allianz analysts wrote. They pointed out that the Asia-Pacific has now become the preferred relocation destination for German companies with current links to North American supply chains – with 43 per cent opting for this, rising sharply from 28 per cent. 'We see a lot of manufacturing and industrial companies leveraging Vietnam as an expansion, and it creates opportunities for wider exchange (between Vietnam and Europe),' said Thomas Saueressig, member of the executive board of SAP, during a press briefing on Aug 7 to launch its new SAP Labs in Ho Chi Minh City. The German enterprise software giant plans to invest more than 150 million euros over the next five years to strengthen its engineering hub in Vietnam, the second in South-east Asia following the one in Singapore in 2022. '(How we try to boost SAP Labs here) is also a great next signal for more and further increased collaborations and partnerships across industries from Germany, Europe, to South-east Asia, specifically in Vietnam,' he added. Europe is not stopping at Indonesia or Vietnam. The Philippines embarked on a fresh round of FTA talks with the EU in June, with the next one scheduled in October. Negotiations with Malaysia and Thailand are also ongoing at various stages. 'Once (Indonesia-EU CEPA) is signed, I believe it opens the way for further conclusions and negotiations with other Asean member states,' said Edison Bako, executive director at the European Business Chamber of Commerce (EuroCham) in Indonesia. One of the key challenges for these countries, according to Olson, will be navigating differing perspectives on values-driven social issues and climate change – areas that the EU increasingly intertwines with its trade policies. Indonesian President Prabowo Subianto meeting European Commission President Ursula von der Leyen in Brussels on Jul 13. PHOTO: INDONESIA PRESIDENTIAL SECRETARIAT Indonesia-EU CEPA: Catalyst for broader engagement Politically concluded on Jul 14, 2025, the Indonesia-EU CEPA is set for legal finalisation by September and is poised to serve as a template for Europe's wider strategy in Asean. Under the CEPA, approximately 80 per cent of Indonesia's exports to the EU – including textiles, footwear, fisheries, palm oil and electric vehicle (EV)-related components – will benefit from immediate or gradual tariff elimination, boosting export competitiveness and improving market access. In return, EU companies will gain wider access to Indonesia's rapidly growing market of 280 million consumers, with key export opportunities in meat, dairy products and green technologies. Trade between the two sides is projected to grow by 50 per cent or more in the coming years under the new framework. '(The deal) would also open the floodgates in terms of the prospects for environmental sustainability and governance (ESG) standards here in Asean,' added Bako. Europe has emerged as one of the top seven sources of foreign investment in Indonesia, with inflows reaching US$4.59 billion in 2024, up 52 per cent from US$3.02 billion in the previous year, driven by growing interest in the EV, healthcare and resource sectors. 'The ongoing uncertainty in EU-US trade relations is prompting many to look more seriously at Asean,' said Fabian Kieble, chairman of EuroCham in Indonesia. 'Indonesia's EV battery and mining sectors are key areas of interest. The country's push for EVs aligns well with European expertise,' he added. Vietnam-UK sectoral strategy Vietnam has been playing a key role in Europe's Asia strategy, with the UK-Vietnam pharmaceutical agreement – confirmed on the same day as the announcement of CEPA between the EU and Indonesia – symbolising deeper engagement. 'We expect the diversification of trade partners this agreement provides to enhance the UK's resilience against global trade uncertainties while creating new growth opportunities in emerging markets across Asia,' Rachel Finlay, healthcare analyst at BMI, a unit of Fitch Solutions, wrote in a note last month. The deal removes non-tariff barriers for UK pharmaceutical exports and reinforces the Medicines and Healthcare products Regulatory Agency's standards as an internationally recognised benchmark – a move that could ripple through other Asean markets. 'This agreement also strengthens Vietnam's broader trade relationship with the UK, which could lead to expanded cooperation in other sectors such as finance and clean energy,' Sakshi Sikka, associate director of pharmaceuticals at BMI, added. Clarence Hoe, executive director of Americas and Europe at Enterprise Singapore also observed increased interest from European companies to participate in renewable energy infrastructure projects in South-east Asian markets due to the latter's vast potential and commitment to net zero targets, as well as pro-energy transition policies. Pha Lai thermal power plant in Hai Duong province, Vietnam. The UK and EU are the co-leads of the International Partners Group, which has been working with Hanoi to implement Vietnam's Just Energy Transition Partnership since December 2022. PHOTO: AFP Singapore: Asean's entry point for European firms While emerging South-east Asian economies present huge growth potential, Singapore remains Europe's launch pad into the region, with more than 19,000 European companies operating in the city-state. Recent manufacturing investments by Sanofi, Biotronik, Siltronic and NTS in Singapore highlight the 'queen bee' effect – where global firms cluster their suppliers and partners around the South-east Asian region, said Dino Tan, senior vice-president and head of Europe at Singapore Economic Development Board. Following the Europe-Singapore Digital Trade Agreement, which was finalised last year, London-headquartered fintech Wise expanded its Asia-Pacific hub in Singapore in April to better serve markets in the region. Norwegian gamified learning platform Kahoot launched its Asia-Pacific hub in the Republic in July, using Singapore as a gateway for its regional growth. 'Singapore is deepening regional economic integration within South-east Asia, which will make it easier for companies to do business in our region,' Tan noted. He highlighted initiatives such as the Johor-Singapore Special Economic Zone, announced earlier this year, as a strategic location that enables European companies to leverage the combined strengths of both Malaysia and Singapore to diversify their supply chains and continue scaling. Additional reporting by Goh Ruoxue in Singapore
Straits Times
6 hours ago
- Straits Times
Can Tesla, VinFast and other foreign EV firms thrive in the Indian market?
Sign up now: Get ST's newsletters delivered to your inbox Police officers directing traffic outside the Tesla showroom ahead of its opening in Mumbai, India, on July 15. – As growth in electric car (EV) sales slows down in the US and Europe, competition is accelerating in India's nascent electric car market with the entry of billionaire Elon Musk's Tesla and Asian carmakers such as Vietnam's VinFast and China's Leapmotor. India is the world's third-largest car market in terms of domestic vehicle sales, and it is predicted to overtake US and China to become the largest by 2030. The government hopes that electric cars will make up 30 per cent of total car sales by then, up from a mere 2.5 per cent out of the 4.3 million cars sold in 2024. But India is also a challenging market with price-conscious consumers, limited charging infrastructure, difficult road conditions, and high import duties on foreign cars. Telsa drove into the Indian market in July with two variants of its Model Y , a popular electric sport utility vehicle (SUV), which come with a hefty starting price tag of around US$70,000 (S$90,000), compared with just US$37,490 in the US, according to Forbes India. A key reason was the import duty, which can rise to 110 per cent, making the SUV more expensive in India than in many other countries. Tesla, which is currently operating in Mumbai and plans to expand to Delhi, is testing the market, said Mr Srihari Mulgund, India new age mobility partner at EY-Parthenon India, a consulting company. Top stories Swipe. Select. Stay informed. Singapore Over 118,000 speeding violations in first half of 2025; situation shows no signs of improvement: TP Singapore Israel's plan to step up Gaza offensive dangerous and unacceptable: MFA Singapore Four men arrested in Bukit Timah believed to be linked to housebreaking syndicates Singapore Criminal trial of Hyflux founder Olivia Lum and five others starts Aug 11 Singapore Why some teens cook despite Singapore's da bao culture Singapore Man arrested over hacking attempt on RedeemSG portal Singapore 'We could feel the heat from our house': Car catches fire in Bidadari area Asia 'Pain in the neck': Cable theft on the track derails train speed and schedules in Malaysia 'They are trying to see how the market perceives the product. There will be learning, and it will help them develop an India product strategy,' he noted. The government is working to expand infrastructure for charging EVs, which will be key to their acceptance. More than 12,000 EV charging stations were in use nationwide in 2024, and the government aims to have 3.9 million by 2030. Leading up to Tesla's entry on July 15, Mr Musk had criticised the high import duties, remarking that they were 'the highest in the world by far, of any large country'. The United States is negotiating lower automotive tariffs as part of the India-US trade deal. Tesla, which competes in the luxury EV sector, has ruled out manufacturing in India, according to Heavy Industries Minister H.D. Kumaraswamy. Operating on a different model in another part of the cost spectrum is Vietnamese EV-maker VinFast, which was named one of Time's 100 most influential companies in 2024. It is taking orders for two premium SUVs, which will be priced in the range of 1.8 million rupees (S$26,500) to 3.5 million rupees, according to Indian media reports. VinFast opened its first showroom in the city of Surat, in the western state of Gujarat, on July 27 and its second in the city of Chennai, in the southern state of Tamil Nadu, on Aug 2. It has also tied up with local partners to create a charging network and for after-sales service, with plans to launch 35 dealerships by the year end in 27 cities. According to VinFast's press release, its car assembly plant in Tamil Nadu is the company's third operational facility globally. The facility, which is part of a 160 billion rupee investment pact inked between VinFast and the Tamil Nadu government in 2024 , will initially make 50,000 vehicles per year. VinFast Asia chief executive Pham Sanh Chau told NDTV news channel: 'This plant lays a solid foundation for us to make Tamil Nadu not just a manufacturing hub for India, but also VinFast's largest export base for South Asia, the Middle East and Africa.' Mr Puneet Gupta, director for India and Asean markets at S&P Global Mobility, said: 'Tesla and VinFast will both serve as catalysts in driving up EV market share in India. They are expected to attract greater attention from consumers towards electric vehicles and help increase confidence in EV technology.' Chinese automobile start-up Leapmotor's electric cars are also being launched in India, by multinational automotive manufacturing corporation Stellantis, which will assemble the vehicles. India is hoping that such assembly plants, which are at the lower end of manufacturing, will be the starting point for building a manufacturing ecosystem of EVs. While domestic EV manufacturers are keen to protect their turf, the government is encouraging foreign carmakers to come to India and make it their EV manufacturing hub in the region. Consumers with higher purchasing power are turning to EVs Sales of electric cars are inching up in India, the world's fourth-largest economy. In 2024, 99,165 electric cars were sold, which is a 20 per cent increase over the previous year, according to the Federation of Automobile Dealers Associations. EV growth in India has been led by two- and three-wheelers that accounted for a majority of the over two million EVs sold in 2024. The growth is not coming from the entry-level segment, but SUVs – where cars start at around one million rupees – and the premium segment. Consumers with more purchasing power, who own more than one car and are aware of environmental concerns, are likely leading the trend, said analysts. When Mr Surinder Gera decided to replace his 11-year-old diesel car with an electric SUV, he spent as much time convincing his 21-year-old son, with whom he runs the family clothing manufacturing business, as he did researching cars and the charging infrastructure. The family already owns a petrol car. 'He told me it's too much of a risk, as we travel a lot for our business. But I convinced him. I wanted to bring down my family's carbon footprint,' said the 47-year-old businessman, who is based in the northern Indian city of Ludhiana. In addition, Mr Gera charted every location he had visited in the last five years to see whether charging stations were present along each route. He settled on an SUV made by domestic automobile company Mahindra & Mahindra, which fell within his budget. Mahindra's electric car line-up starts at around 1.5 million rupees. Vocal for local Unlike in other parts of the world, where Chinese EV companies have been rapidly increasing their market share, domestic manufacturers dominate the market in India. China's BYD's, the world's biggest EV-maker, had a US$1 billion investment plan rejected in 2023 amid geopolitical tensions between India and China. So BYD scaled down its plans for India and relies on its assembly plant in the southern city of Chennai, which has an annual capacity of 10,000 to 15,000 units. BYD also imports many of the cars it sells in India. Things may improve for Chinese companies as China and India seek to repair ties following a 2020 clash on their border . More on this topic China's BYD plans push into India's burgeoning electric car market Tata leads with over half of the market share in the electric car segment, followed by MG Motor, which is a joint venture between India's JSW Group and China's Saic Motor. They are followed by Mahindra & Mahindra and China's BYD. Tata Motors, which once had a 70 per cent share, is finding its dominance in the Indian market challenged as more competitors come in with new car models and offer innovations like allowing buyers to lease EV batteries. In response, Tata Motors plans to have around 15 models by 2030. Mahindra & Mahindra in 2024 also announced plans to introduce seven new EVs by 2030. Long and winding road for foreign car brands Newcomers face a squeeze between the competition and aspirational buyers who want multiple features at a low price, said EY's Mr Mulgund. 'India is a very heterogeneous market. There is the rural and urban divide. Building up a dealership and service is no mean feat, and finding the right partners takes time. It can be built, but it's a longer gestation period,' he said. 'The (EV) market is not massive. Price becomes a critical part of any proposition. Indian customers are also ambitious. They want a car at the right price point but want all the bells and whistles. That is a difficult proposition to beat. You need a certain level of scale to deliver that.' Government push In order to push foreign carmakers to manufacture in India, the government in 2025 launched the Scheme to Promote Manufacturing of Electric Passenger Cars in India. Under the scheme, Customs duty is cut to 15 per cent, provided that automakers invest a minimum of 41.5 billion rupees within three years. They can then import 8,000 electric cars with a cost, insurance and freight value of US$35,000 subject to the 15 per cent tax. So far, Tesla has not shown interest, while other car manufacturers such as Mercedes-Benz, Skoda-Volkswagen, Hyundai and Kia have indicated interest, according to Mr Kumaraswamy, the minister. Volvo Car India's managing director Jyoti Malhotra told news agency Press Trust of India that, given the level of investment required, the company would do best to continue to assemble its cars in India, as it is doing, for now. As more benefits are seen, and we anticipate bigger scale, then we can evaluate others, he said. For India, going electric is an environmental imperative, given how pollution levels are climbing in its urban centres. According to the World Air Quality Report 2024 by Swiss air-quality technology company IQAir, Delhi is the most polluted capital city in the world and India is the world's fifth-most polluted country, down from No. 3 in 2023. Vehicular emissions contributed 51.5 per cent to Delhi's pollution. Delhi has banned 10-year-old diesel and 15-year-old petrol cars, and on July 1, banned even the refuelling of such cars. Ms Anumita Roychowdhury, executive director of research and advocacy at the Centre for Science and Environment, said: 'For India, electrification is not just an opportunity to clean up the environment, but it is also an industrial opportunity.' She noted that the government, apart from implementing manufacturing schemes needed to strengthen charging infrastructure, also needed to incentivise consumers more, citing measures like free parking for EVs. 'In India, you require industry to develop its manufacturing capacity adequately. You need a supply chain of critical minerals and battery manufacturing. But the supply chain will evolve only if the (automobile) industry perceives there is a demand in the market. Both have to go hand in hand.'
