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Can This Malaysian Electric Utility Gain From The Electric Car Revolution?

With Singapore’s Land Transport Authority and vehicle inspection and testing firm Vicom Limited (SGX: V01) still struggling with the process of testing certain electric cars, Malaysia is rushing to set itself up as a  hub for electric cars in Southeast Asia.

The world’s second largest electric vehicle manufacturer, Beijing Auto International Cooperation (BAIC), is building a new electric vehicle production plant in Malaysia. The plant is expected to start operations this year and can produce up to 3,000 electric vehicles a year.

If Malaysia does indeed become an electric vehicle hub in Southeast Asia, what are the companies that might be the well positioned for the opportunity?

Instead of finding out which auto company might win in the race for producing the most popular electric vehicles, another way – and one which I think is safer – to approach the question of the companies or company that might benefit from an electric vehicle boom would be to look at the energy provider for electric vehicles.

The national grid

If we think about the power source, most vehicles today run on the internal combustion engine, which depend on petrol and/or diesel for fuel. But, if electric vehicles start gaining popularity within Malaysia, the source to power these vehicles would move to the national grid. Instead of going to petrol stations to refuel, drivers would be charging up their cars from their homes or charging stations – the electricity needed is likely to come from the national grid.

According to a 2010 report, the transportation sector in Malaysia had accounted for 40% of the total demand for energy in Malaysia. Another 50% came from the residential, commercial, and industrial sectors, which mainly get their energy from the national grid. This means that if all vehicles in Malaysia would be powered by electricity, the demand for energy from the national grid has the potential to double.

The future for an electricity monopoly

Currently, the national grid in Malaysia is still a monopoly that’s controlled by Tenaga Nasional Bhd (KLSE:5347.KL).

Given the dominance of Tenaga Nasional in the energy sector in Malaysia, it would appear that the company is well positioned for a possible future where electric vehicles become increasingly popular.

But that being said, this is based on the assumption that Malaysia can truly become the electric vehicle hub of Southeast Asia. Competition is intense in this area with both Thailand and Philippines also vying for the position with Malaysia. Moreover, Indonesia, now the main automotive hub of Southeast Asia, might also want to join in the fray.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim does not own shares in any companies mentioned above.