Asia is playing ‘catch up’ to Europe in the electric vehicle market, says Fitch analyst

China is the largest player in Asia’s electric vehicle market — but the region is still lagging behind Europe, according to an analyst at research firm Fitch Solutions.

Asia is falling behind because European governments are taking strong measures to boost growth in the sector, said Anna-Marie Baisden, head of autos research at Fitch Solutions, in an interview on CNBC’s “Squawk Box Asia.”

“The region is playing catch-up. When we talk about the Asian EV market, we’re predominantly talking about China, which still accounts for around 90% of sales,” said Baisden.

“But there’s a lot of supportive policy that has been rolled out in Europe, particularly in the EU, over the last year in response to coronavirus … both on the infrastructure side and on national levels in terms of incentives,” she said.

A report by Cairn Energy Research Advisors, a consulting firm focused on the battery and electric vehicle industries, predicted last year that there will be a surge in electric vehicle sales in 2021. It comes as countries around the world push new programs to encourage consumers to buy battery-powered vehicles. 

The report also said the biggest growth in sales for that sector will take place in Europe, mainly because EU governments are committed to lowering carbon dioxide emissions. 

Baisden said the weak uptake of electric vehicles in Asia – mainly in countries like Japan and India — is due to a combination of factors.

While there is underlying demand in Japan, “we’re still waiting for concrete incentive plans,” she pointed out. “We heard in January that there were plans in place to start bringing out financial incentives for purchasing on a local level, particularly with Tokyo having a goal to have all electric car sales by 2030.”

As for India, the electric vehicle sector is likely to receive a boost from Elon Musk’s electric carmaker Tesla.

According to Reuters, the U.S. firm incorporated Tesla Motors India and Energy Private Limited with a registered office in the tech hub of Bengaluru in Karnataka in February.

Even though South Asia’s largest economy holds huge potential to spur grow in the electric vehicle market, the country’s demographics may pose a serious challenge, according to Baisden.

“The supportive policies are there and manufacturers are starting to move that way with locally produced cars. But the demographics are different,” noted Baisden. 

“It has much lower average income than the other Asian markets. There is a lot of potential there, but it really comes down to the demographics in India,” she added.