Can legacy auto manufacturers in ASEAN challenge the Chinese high auto investment PUSH
We have seen many legacy automotive manufacturers feeling more than a pinch as Chinese electric and hybrid and even new energy vehicles come in with top features, technology and class best warranties. Plus lets not forget the selling prices.
Production capacity for four-wheel light vehicles in ASEAN’s six largest economies was projected to increase by 1.55 million units, or 26%, from 5.9 million to 7.45 million between 2024 and 2030, according to estimates by a global market research firm.
A senior executive at the research firm stated that most of this increase is expected to come from Chinese EV manufacturers. He noted that these companies are entering the market and competing with established automakers for market share, adding that the additional capacity will be introduced into a market where existing facilities are already partially under-utilised.
In addition to host-country incentives (like what Thailand and Malaysia is providing), Chinese carmakers are seeking overseas sales due to strong competition in China, which has limited growth prospects in a saturated domestic market.
The outlook for 2026 in China is also affected by reduced consumer subsidies and the reintroduction of a purchase or import tax which Malaysia has just initiated to start from July 1st 2026.
A senior executive at another market research firm stated that overseas markets are expected to become more significant for Chinese EV manufacturers in 2026 than in previous years, indicating that international expansion has become necessary to support growth (like we see what Harmony Auto Group from China is doing by setting by BYD, Denza and more recently Zeekr showrooms in Malaysia).
Although Chinese carmakers have largely relied on exports in the past, they are increasingly establishing manufacturing facilities or partnering with local assemblers abroad to produce vehicles for domestic sales and other export markets. Localised production enables them to access host-country incentives and address tariff-related cost pressures.
According to an August 2025 report by another research firm, the Chinese EV sector invested more overseas than domestically for the first time in 2024. While most investments were directed towards battery production, expenditure on vehicle assembly has also increased.
Southeast Asia, particularly Thailand, Indonesia and Malaysia, is expected to record a substantial share of this activity, alongside parts of Latin America, according to the executive. She stated that these markets offer EV-related incentives, growing domestic demand and policy objectives linked to the development of EV manufacturing.
In Thailand, subsidies and tax incentives have supported the establishment of production facilities by Chinese EV manufacturers. Great Wall Motor, SAIC Motor, Changan Automobile and GAC Group are among the carmakers that have set up plants in the country, alongside BYD and Chery.
In Indonesia and Malaysia, tax incentives for imports of fully built EVs expires in 2026, leading companies to initiate local assembly operations to maintain market access. Indonesia temporarily reduced import duties for EV manufacturers committed to investing in domestic production facilities, subject to the condition that these facilities become operational by 2026 and meet minimum local content requirements.
Mr. Rachmat Kaimuddin, a deputy at Indonesia’s Coordinating Ministry for Infrastructure and Regional Development, stated in December 2025 that nine automotive brands had committed to producing EVs in the country, according to a report by Jakarta Globe. Most of the nine were Chinese brands, while others included France’s Citroën, Vietnam’s VinFast and Germany’s Volkswagen.
In a separate September 2025 report by a media outlet, Mr. Rachmat stated: “The direction is clear: Build EVs locally. We want investment, production and jobs to grow, not just imports.”
Despite the increase in EV production, analysts state that it is too early to determine the overall impact on local industries. Uncertainty remains regarding the degree to which supply chains will be localised and whether this will support the development of domestic component manufacturers, as occurred when Japanese carmakers expanded into the region in earlier decades.
A senior executive at a consultancy firm stated that the anticipated transfer of technology to local suppliers has not occurred to the extent expected. He added that, in order to maintain competitive pricing, Chinese carmakers are bringing suppliers from China rather than investing in the training and development of local producers.
With regard to employment, the establishment of Chinese factories may generate additional jobs. Indonesian officials have indicated that BYD’s new factory could create approximately 18,000 positions. However, the growth of EV manufacturing may also affect traditional automakers and their local suppliers, potentially leading to workforce reductions.
In Thailand, Japanese manufacturers such as Nissan and Honda have reduced production capacity while losing market share to Chinese competitors.
Another executive at the research firm stated that employment is more likely to shift from established Japanese manufacturers to Chinese firms rather than increase overall. He added that it remains uncertain whether Chinese automakers will expand beyond basic assembly operations in the region and transfer production of higher-value components to local suppliers.
He concluded that governments may consider designing incentives to encourage deeper localisation.
