Thai oil major PTT launches $16b push into EVs and green energy

The logo of PTT is pictured at an exhibition hall in Bangkok, Thailand, May 12, 2016. REUTERS/Athit Perawongmetha

Thailand’s state-owned oil major PTT is expected to invest more than $16 billion over the next decade into an initiative to promote electric vehicles and other green technology as part of a national drive to turn the country into Southeast Asia’s EV hub.

The vision reflects a “business transition going beyond a traditional energy company,” PTT President and CEO Auttapol Rerkpiboon told Nikkei in a written interview.

The company will achieve those aims by committing to business reforms and supporting the government’s environmental goals, Auttapol said.

Majority owned by the government, PTT is Thailand’s largest energy group. Not only does the company extract natural gas and petroleum, it also oversees refinery and fuel distribution operations. Most earnings originate from fossil fuel.

However, as much of the world, including Thailand, begins to shift toward a carbon-free society, demand for fossil fuels will begin to shrink. Seeing the writing on the wall, PTT aligned itself with the government’s decarbonization scheme.

PTT “will shift the portfolio into a lower carbon business in line with global trends,” said Auttapol.

The company will allocate 32% of groupwide investments to new decarbonization businesses through 2030. New businesses are expected to generate 30% of consolidated profit by the same year.

PTT has yet to determine investments through the end of the decade, but the company has said it will invest 863.4 billion baht ($25.8 billion) between 2021 and 2025.

With the same pace and ratio of overall investment, the company is anticipated to pour about $16.5 billion into new green businesses through 2030.

The centerpiece of PTT’s green drive is the development of Thailand’s EV supply chain. The government plans to have 30% of vehicles produced domestically be zero emissions by 2030.

Accordingly, PTT “will support the government’s policies for a green and emission-free future,” said Auttapol.

The group will start by forming an EV manufacturing joint venture with Foxconn, the Taiwanese Apple assembler. PTT will own 60% of the new company, with Foxconn  holding the other 40%, according to last week’s announcement.

A new plant will be built in Thailand’s Eastern Economic Corridor, a special industrial zone. It will produce 50,000 EVs a year when it begins operation around 2023 or 2024, and the output will eventually rise to 150,000 units. This venture is expected to receive roughly $2 billion in investments.

PTT has no expertise in manufacturing automobiles, meaning the company will lean on Foxconn’s technological capabilities. Foxconn is collaborating with top companies worldwide to develop basic platforms and software for EVs.

Formally known as Hon Hai Precision Industry, Foxconn’s prospective business model is one where it wields quick and low-cost turnaround times to win manufacturing contracts from EV makers.

PTT President and CEO Auttapol Rerkpiboon (Photo courtesy of PTT)

The PTT-Foxconn joint venture will set up “an open platform for producing electric vehicles and key components to serve the EV sector,” said Auttapol. Thailand is Southeast Asia’s biggest vehicle producer and is home to numerous auto suppliers. PTT will encourage the parts suppliers to shift from gas-burning cars to EVs, and turn Thailand into a major production hub for electrics.

Factoring into the government’s promotion of EVs through PTT is the dominating presence of Japanese automakers in the market. The Japanese contingent command a 90% share in domestic auto production, and they prioritize hybrid vehicles.

As a result, EV production is few and far between. Last year, only about 1,400 EVs were sold throughout Thailand. There is hardly any charging infrastructure, and EVs are comparatively too expensive to catch on with consumers.

PTT’s partnership with Foxconn has the potential to become a turning point for the market saturated with Japanese vehicles. “Competition will heat up as new players encounter lower barriers to entry,” said Hajime Yamamoto, senior manager at the Nomura Research Institute Thailand.

PTT plans to roll out peripheral businesses, such as manufacturing storage batteries and charging stations. This July, a group power company started up a plant that makes next-generation lithium-ion batteries. The operation adopts technology from U.S. startup 24M Technologies. Capacity will be minor at first, then ramp up to 1 gigawatt-hour a year in the future.

PTT fueling stations located across the country will host EV charging stations. Terminals will be available in 200 additional locations by the end of the year, up from about 30 locations now.

The company will allow customers to book charging appointments from a smartphone app, and provide an EV rental service as well. The company will promote and build an EV ecosystem through those platforms, said Auttapol.

A number of Japanese automakers, among other businesses, are expressing hesitancy toward the promotion of EVs.

“We should consider zero emissions in a collective manner and move forward in stages,” said a source from one company.

Meanwhile, PTT will expand the use of renewable energy at home and abroad. This year alone, the group has invested in an Indian solar power company, as well as in Taiwanese offshore wind farm.

Furthermore, the company is expanding renewable energy investments in China and Vietnam. PTT aims to quintuple the total renewable power generating capacity to 12GW by 2030. Carbon capture technology and emissions trading will also be part of the agenda.

One thing standing in the way of these plans is Chinese automakers and their bid to set up an infrastructure in Thailand to sell low-cost vehicles. Chinese automakers already export EVs to Thailand duty-free due to a trade agreement loophole. The incentives being rolled out by the Thai government will open the door to lower costs and expanded local production.

In addition, Foxconn has already halted one other EV production project. This adds to the uncertainties facing PTT’s green energy push. PTT and Foxconn expect to finalize the joint-venture investment in the latter half of 2022.

This article was first published in Nikkei Asia.

Singapore Reporter/s

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Following vacancies can be applied for (only in Singapore).   

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.