APAC CIO View

The most visible and familiar manifestation of electrification in Asia is the continued rise of electric vehicles (EVs). China has been the clearest example of this shift. As of November 2025, battery electric vehicles and plug in hybrids accounted for around 60% of retail passenger vehicle sales, a remarkable jump from about 30% in January 2024. (Figure 3) Beyond China, South Korea has emerged as another major Asian market actively pushing EV adoption. As part of its 2030 Nationally Determined Contribution target to reduce Greenhouse Gases (GHG) emissions by 40% from 2018 levels, Korea aims to deploy 4.2 million cumulative EVs by 2030.^[4] National and municipal incentives remain a core part of this strategy. In 2026, Seoul plans to boost EV uptake by complementing central‑government subsidies—EV buyers who trade in gasoline or diesel cars can receive South Korean Won (KRW)300,000 (~USD 203) from the city, on top of KRW 1 million (USD 677) from the central government.^[5] Despite these efforts, foreign brands have been the largest beneficiaries: Tesla ranked fifth in Korea’s domestic vehicle sales in 2025, as imported EV purchases surged 78% versus 38% for domestic EVs. Nearly KRW 2 trillion (~USD 1.5 billion) in combined subsidies is estimated to have supported purchases of China‑manufactured Tesla vehicles.^[6]

Apart from China and Korea, other Asian markets are also catching up—albeit from a smaller base. In India, Toyota’s joint venture Toyota Kirloskar Motor entered the fully electric segment in January 2026 with the launch of the Urban Cruiser Ebella, its first battery electric SUV for the local market.^[7] Bloomberg forecasts that by the early 2030s, EV sales as a percentage of total vehicle sales in India, Japan, South Korea, and Southeast Asia will exceed 60%. (Figure 4) However, EV penetration as a share of the total vehicle fleet remains modest across most of Asia. By 2040, Bloomberg expects EVs to represent less than half of all vehicles in India, Japan, and Southeast Asia, while China and South Korea are projected to reach 66% and 62%, respectively. (Figure 5)

While transportation has been the most visible driver of electrification, EV adoption is not the end point of Asia’s energy transition. The next major frontier likely lies in industrial and building electrification, particularly in heating—an area that remains heavily reliant on fossil fuels across much of the region. Power, industry and transport account for roughly 85% of global GHG emissions, with industry and power dominating in Asia. (Figure 6) Electrification targets these sectors most directly, displacing coal‑ and fossil‑fuel‑intensive processes and delivering the largest structural reductions in fossil‑fuel demand.

Electrification in manufacturing, heavy industry, and buildings refers to replacing direct fossil fuel use with electric technologies, especially for thermal processes. Although Asia serves as the world’s manufacturing hub, countries such as China, Indonesia, and Vietnam continue to exhibit deep dependence on fossil fuel based industrial energy. According to the World Bank’s “Industrial Decarbonization in East Asia” (2025), less than 30% of industrial energy consumption in these markets is powered by electricity.^[8] As a result, thermal energy has become the central focus of the next wave of electrification.

Heat pumps are emerging as a pivotal technology in this transition.

• In China, air to air heat pumps dominate due to their cost effectiveness and ease of deployment.
• In Japan, a more mature heating market has enabled steady growth in reverse cycle systems and heat pump water heaters, supported by national subsidies. By 2035, heat pumps are expected to meet around 40% of Japan’s space heating demand, while their market share in China is projected to double over the same period.^[9] The International Energy Agency (IEA) emphasizes that consistent policy frameworks will be essential to maintain this adoption momentum.

Japan and South Korea—both with sizable industrial sectors—face a distinct set of opportunities and challenges. Their machinery sub sectors already exhibit over 70% electrification, reflecting early adoption and strong government backing. Much of their industrial equipment is already compatible with electric or hybrid systems. In Japan, the Investment Promotion for Energy Conservation program offers companies up to JPY 10 million (~USD 65,000) per facility to install industrial heat pumps.^[10] Meanwhile, South Korea’s Ministry of Climate, Energy and Environment aims to deploy 3.5 million heat pumps by 2035 to curb fossil fuel based heating demand.^[11]

Supportive policies provide long term demand visibility for industrial electrification, but structural challenges remain. Grid upgrades will be necessary to manage higher loads in industrial clusters, and several heavy industries—such as chemicals, steel, and materials—still rely on ultra high temperature processes that are difficult to electrify. These sectors may therefore see a slower or more uneven transition.

As electrification accelerates across transportation, industry, and buildings, the pressure on Asia’s existing power infrastructure intensi-fies. The grid itself becomes the next critical bottleneck. Higher thermal load electrification, rising EV penetration, and the growing deployment of heat pumps all require significant grid upgrades—not only to increase capacity but also to fundamentally redesign how electricity is delivered and managed. This underscores grid modernization as a central enabler of Asia’s broader energy transition.

Modern grids must be smarter, stronger, and far more flexible than the traditional systems built around centralized fossil fuel plants. Instead of one way, predictable power flows, they now need to accommodate intermittent renewable supply, two way energy move-ment, and sharp demand spikes from electrified transport and industry. At the heart of this transformation are transformers, which enable voltage conversion across transmission and distribution networks and ultimately determine how much electrified load the sys-tem can support.

Electrification in Asia therefore requires a substantial expansion and upgrading of transformer capacity. This has historically been a long‑cycle, capex‑intensive segment with high entry barriers and multi‑year visibility, contributing to its durability as a structural theme in the region. Global transformer prices have risen more than 60% between 2022 and 2025, supported by renewable project commit-ments, data centre growth, and post pandemic supply constraints. Producers with higher overseas exposure generally capture stronger pricing and margin profiles, reflecting tighter supply demand balances in markets such as the U.S. and Europe.^[12]

Geopolitics and lead time dynamics are also shaping competitive positioning within Asia. Some manufacturers have strengthened their foothold in Western utility markets through long standing export relationships and local capacity expansion, while others are gaining share in emerging markets through shorter delivery times and competitive pricing. This divergence creates differentiated risk reward profiles across the power equipment value chain.

Beyond core equipment makers, upstream materials—including copper, aluminium, and grain oriented electrical steel (GOES)—stand to potentially benefit directly. Copper alone represents 10–20% of transformer production costs, closely tying raw material demand to the accelerating grid expansion cycle.

Asia’s data centre boom is intensifying electricity demand, especially across major hubs, where facilities already consume up to 9% of national power. (Figure 8) With data centre electricity needs rising rapidly, AI driven load growth is set to deepen grid strain and accel-erate the urgency of large scale network upgrades. Asia is also deploying renewables at a significantly faster pace than Western econ-omies. China and other Asian markets reached a 12% wind and solar generation share five to eight years earlier than Europe or North America (Figure 7), and China hit its 2030 wind and solar capacity target six years ahead of schedule—underscoring the region’s accel-erating clean power momentum. Compared with the US and Europe, Asia’s grid modernization is advancing faster in scale but from a younger baseline. While Western grids struggle with aging infrastructure and slower permitting, Asia’s accelerated investment, manu-facturing depth, and policy momentum may have it positioned to outpace both regions in enabling large scale electrification and long term energy resilience. Ultimately, grid modernization is not just an operational necessity—it represents a long‑term structural theme that is expected to support multiple stages of Asia’s electrification journey. As electrified demand grows, the grid is increasingly emerging as a key system constraint and an important area of focus for long‑term, policy‑aligned infrastructure investment.