Recently, VinFast, often dubbed as the "Tesla of Vietnam," announced its expansion plans into seven Asian markets, including Indonesia. The company aims to commence deliveries from next year and establish its third global manufacturing facility in Indonesia by 2026. This announcement coincided with the 26th ASEAN+3 Leaders' Meeting during the ASEAN Summit in Jakarta, where a joint statement on developing an electric vehicle ecosystem was adopted. Reports indicate that the ASEAN is dedicated to establishing an electric vehicle ecosystem with the support of China, Japan, and South Korea, aiming to become one of the world's most important electric vehicle manufacturing hubs.
Chinese new energy vehicle companies have taken center stage in the endeavor to make Southeast Asia a hub for electric vehicle manufacturing. Firms like SAIC, Great Wall Motors, BYD, and NETA have announced their intentions to build manufacturing facilities in the region, marking a new trend in global electric vehicle production.
Leading Automakers Eye Southeast Asia
"Recent global industry chain data reveals that Southeast Asia has emerged as a new frontier for research and development and capacity expansion in the global new energy vehicle technology," says independent international strategy researcher Chen Jia during an interview. Local smart automotive companies in Southeast Asia are gaining momentum, showing signs of rapid growth.
Several Chinese automotive companies have already targeted the Southeast Asian market and have either initiated or are planning to commence local vehicle production. In July of this year, it was reported that Chinese automaker Geely would invest $10 billion to transform the Perak state of Malaysia into the region's largest automobile city.
In May 2023, SAIC Group officially announced the groundbreaking ceremony for the SAIC Greater New Energy Industry Park in Chonburi Industrial Zone, Chonburi, Thailand. The 120,000 square-meter industrial park will focus on localized production of key components for new energy vehicles, with the first phase expected to be completed within the year, and the entire project slated for completion in 2025. In the same month, Wang Chuanfu, the chairman of BYD, held a rare meeting with Vietnamese Deputy Prime Minister Tran Hong Ha in Hanoi, Vietnam, discussing BYD's expansion into the Vietnamese market.
In March 2023, NETA laid the foundation for its Smart Factory in Bangkok, Thailand. This facility marks NETA's first overseas manufacturing base and is set to become a significant production center for right-hand drive electric vehicles designed for the ASEAN market. The factory is projected to begin production at the end of January 2024, with an annual production capacity of 20,000 units after completion.
"China not only provides continuous support to ASEAN countries, including Indonesia and Malaysia, in various aspects, such as infrastructure investment, localizing production capacity, and the entire industrial chain, but it also contributes to developing global standards for the new energy vehicle industry," Chen Jia explains. "By leveraging new energy vehicle manufacturing capacities in Southeast Asia, among other regions, China is establishing itself as a major player in the global new energy vehicle industry."
In July, the Bangkok Post reported that China's electric vehicle industry has shown immense interest in investing in Thailand, with the total investment expected to exceed $1.44 billion (approximately CNY 10.474 billion). Last year, China overtook Japan, becoming Thailand's largest foreign investor in the automobile industry.
Why Southeast Asia Attracts Investment
Why has Southeast Asia become an investment hotspot for Chinese automakers? "The rapid economic development in Southeast Asia, increased government support for new energy vehicles, and enormous market potential make the region an ideal candidate to become one of the world's key electric vehicle manufacturing hubs," states Zhang Xinyuan, Secretary-General of Co-Found Think Tank, during an interview.
For instance, in Thailand, according to data from the Thai Automotive Association, the sales of pure electric cars reached 13,454 units in 2022, reflecting a YoY growth of 588.5%. It is anticipated that pure electric car sales in Thailand will approach the 50,000-unit milestone this year.
Canalys predicts that the ASEAN automotive market, led by countries such as Thailand and Vietnam, will experience rapid growth over the next ten years. These countries continue to introduce supportive policies and increase infrastructure investments in the new energy industry. Combined with initiatives like the China-ASEAN Free Trade Area and the Regional Comprehensive Economic Partnership (RCEP), these factors are expected to further boost the penetration of Chinese automotive products, particularly new energy vehicles, in the Southeast Asian market. By 2025, the penetration rate of Chinese automotive products in the Southeast Asian region is projected to surge from 2.6% in 2022 to 12.8%.
Moreover, Southeast Asia is continually supporting the development of the new energy vehicle industry by providing incentives, subsidies, and other support. In 2021, Thailand introduced the "30-30" policy, which sets the goal of having 30% of cars produced in Thailand be zero-emission vehicles by 2030.
To achieve these goals, the Thai government has reduced import tariffs on complete vehicles and components. Currently, Chinese EV exports are exempt from import tariffs. Thailand also offers subsidies for electric vehicle purchases and exempts corporate income tax for companies involved in the local production, assembly, and charging station construction of complete EVs and components through the Board of Investment of Thailand (BOI)."
Aside from Thailand, Malaysia has also facilitated policies for EV companies to establish manufacturing facilities in the country. Foreign investments in Malaysia's manufacturing industry and selected service sectors can be wholly owned, and the application process for a new energy vehicle manufacturing license is more convenient.
Southeast Asian governments have significantly enhanced their support for the EV industry, introducing a range of preferential policies and subsidy measures to attract global automaker investments.
Sino-Japanese Automotive Battle in Southeast Asia
In the past, Southeast Asian markets were predominantly dominated by Japanese brands. However, with the rise of Chinese EV companies and the strong support of the Chinese government for EVs, Chinese brands are gradually making their presence felt in the Southeast Asian market.
It is worth noting that Chinese brands have already positioned themselves at the forefront of the electric vehicle segment in Southeast Asia. For instance, in Thailand, based on data published on the official Thai website AutoLife, Chinese brands accounted for approximately 80% of the market share of pure electric vehicles from January to August 2023.
Among these, the BYD Atto 3 claimed the top spot in terms of sales of pure electric vehicles in Thailand, with cumulative sales of 14,300 units from January to August, accounting for a market share of 32.93%.
With the rapid expansion of Chinese new energy vehicle companies in the Southeast Asian market, a showdown between Chinese and Japanese automakers in the region seems inevitable.