Southeast Asia has long served as a stronghold for Japanese car brands, particularly the renowned duo of Toyota and HondaThese companies have established a firm grip on the automotive market in regions like Thailand, where Japanese vehicles have historically eclipsed their competitors in sales figuresIn the past five years alone, the proportion of new car sales attributed to Japanese brands in Thailand has consistently exceeded 70%, with Toyota and Honda collectively representing over 50% of that marketSimilar patterns of dominance can also be observed in Indonesia, Malaysia, the Philippines, and Vietnam.

However, a significant shift is underway in the automotive landscape, as Chinese car brands have started to carve out a notable presence in Southeast Asia's competitive car marketConsider Thailand as a case in point: between January and October of 2024, brands such as BYD, SAIC MG, and Changan made it into the top ten car brands by sales volume, marking a noteworthy entry for these Chinese manufacturers

BYD, in particular, managed to capture 4.9% of the market share, climbing two spots compared to the previous year and affirming its place among the top four automakers in the country.

The transformation occurring in this market can be partially attributed to the rise of electric vehicles (EVs) from Chinese manufacturers, which many believe allow these brands to leapfrog their competitionHowever, this interpretation only scratches the surface of the real underlying reasons for their ascentChinese automotive brands' rapid growth and establishment in Southeast Asia is attributed to two primary factors: their substantial improvements in vehicle manufacturing capabilities and the stagnation of their Japanese counterparts.

Surprisingly successful models that previously languished in China have become instant hits in Southeast AsiaA prime example is the Baojun Yun Duo, an electric vehicle from SAIC-GM-Wuling that, despite a lukewarm reception in the Chinese market, found great success after its introduction to Indonesia in May 2024. Official reports indicate that over 600 orders were placed before its launch, an impressive feat in a local context where the average monthly sales of EVs were around 2,900 units in the first eight months of the year.

The Yun Duo stands out not only for its immediate surge in orders but also for the significant sales it managed to maintain after its launch, consistently ranking amongst the top three in Indonesia's EV sales

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Interestingly, despite being deemed a premium offering in Indonesia with a starting price of approximately 3.98 billion Indonesian Rupiah (around 18,000 Chinese Yuan), its success hints at a shifting perception of Chinese brands in a market that previously associated quality primarily with Japanese manufacturersNo longer are Chinese brands solely reliant on price competitiveness; they have begun to stake their claim by building a reputation for quality that garners public support for higher price points.

Furthermore, the Yun Duo re-emerged under the MG brand in India in September 2024, swiftly becoming the leader in local EV salesSimilar trajectories can be noted for other models—like the MG4 and BYD Seal—which, although not prominent in the Chinese market, are swiftly dominating Southeast Asia.

It's essential to recognize that the influence of Chinese automotive brands extends beyond just electric vehicles

The fuel-powered segment is experiencing similar acclaimTake Proton, a Malaysian automaker that has benefitted from a 49.9% ownership stake by GeelySince Geely's acquisition in 2018, Proton's sales have surged from 64,744 vehicles to 154,611 in just six years—an impressive feat accounting for roughly 20% of Malaysia’s total new car sales.

As Proton's CEO Li Chunrong noted, vehicles like the Proton X70—derived from Geely's offerings—have become household names in Malaysia, not to mention that the Proton X50 has similarly attracted enthusiastic salesThis form of introduction into new markets showcases how Chinese brands also leverage their reputation for strong, intelligent vehicle features and advanced technological configurations to undermine Japanese competitorsVehicles equipped with features like remote start and voice control are commonplace among Proton's models priced under 10,000 Malaysian Ringgit, significantly enhancing user experience against competing Japanese models, which often double that price for similar features.

The burgeoning presence of Chinese brands in Southeast Asia has inevitably impacted Japanese brands, particularly as their entry has reversed years of Japanese dominance

In countries like Indonesia, Thailand, and the Philippines—where previously only Japanese brands advocated value for money—the new wave of Chinese automotive offerings is broadening consumer choices.

For instance, the Toyota Avanza—a bestselling model in Indonesia priced at approximately 11,000 RMB—faces unprecedented competition from Chinese brands offering superior specifications at similar price pointsModels from Geely and Wuling, such as the Geely Xingjian 7 and Wuling Xingguang S, boast higher specifications and features than their Japanese counterpartsIn comparison, the Avanza's modest 1.3L naturally aspirated engine provides a max horsepower of just 98, leaving much to be desired in terms of performance, especially when fully loaded with passengers.

This evolving dynamic suggests that the previous appeal of Japanese cars in Southeast Asia, largely based on their reputation for durability and efficient space utilization, now faces a robust challenge

While Japanese vehicles could rely on a lack of formidable local competition in most Southeast Asian countries, the introduction of proficient Chinese manufacturers is reshaping competitive landscapesChinese brands have thrived on both pricing strategies and enhanced product capabilities, evidenced by manufacturers like Geely, GAC Aion, BYD, Great Wall, Wuling, and Neta establishing manufacturing bases throughout Southeast Asia.

These factories not only signify significant investments in local markets but also establish comprehensive production frameworks, contrasting sharply with the Japan-dominated CKD (Completely Knocked Down) assembly method that has often characterized Japanese operations in the regionThe complete integration of production lines in locales like the Proton Malaysia facility and Great Wall’s plant in Thailand marks the beginning of a competitive edge that Chinese brands can leverage to flood the market with high-quality offerings.

As Chinese automotive giants continue to expand their factories in Southeast Asia, the emergence of prolific “Chinese cars” inevitably reshapes consumer expectations and preferences