Japan and ASEAN are collaborating to develop a comprehensive strategy for vehicle manufacturing and sales within Southeast Asia. This provisional joint strategy, to extend until 2035, will be discussed by economic ministers meeting in September this year. The strategy aims to foster cooperation in several key areas: personnel training, decarbonisation of production processes, procurement of mineral resources, and investment in next-generation sectors. This initiative arises in response to growing competition from China in the region.

Why is Japan looking to ASEAN?

A large number of Japanese OEMs, including Toyota, Honda, and Mitsubishi, operate within the ASEAN bloc, predominantly using the region for vehicle assembly. Collectively, these Japanese OEMs assemble three million vehicles annually in Southeast Asia, many of which are exported globally.

As electrification gains momentum, Southeast Asia is poised to become an increasingly important hub for Japanese OEMs. The region has already emerged as a key production centre for Chinese OEMs establishing overseas EV manufacturing facilities.

Chinese players in the region

Notable players such as Great Wall Motors, Neta, BYD and GAC Aion are already operating production facilities in the region, spread mainly between Indonesia and Thailand. Following these, battery players such as REPT Battero are looking to move into the region capitalising on the local burgeoning EV market and generous tax breaks and subsidies.

How can this aid Japanese OEMs’ electrification journey?

The electrification path for most Japanese OEMs has been comparatively slow. Toyota has focused on HEV and PHEV sales and just 0.26% of Honda’s sales in 2023 were EVs, however Japanese OEMs are beginning to build out their electrification strategies.

Although the Japanese government has not commitment towards zero emission vehicles, it plans to utilise the JPY140 billion (USD900 million) allocated by the Ministry of Economy, Trade and Industry in budget for assistance to the Global South. A partnership will explore the procurement of rare earth materials for EV batteries and address research into battery recycling, aiding the electrification journey of Japanese automakers.

Rho’s evaluation, Chinese players will maintain EV dominance in the region

Although Japanese OEM EV ambitions remain limited, they are targeting the growing Southeast Asia EV market. Toyota, Mazda, Honda, and Nissan are all planning to release EVs into the market, some of which will be produced in the region. That said, Chinese players already have a strong foothold in the region, with the likes of BYD and SAIC being top selling EV OEMs in the region, most likely these players will continue to dominate the EV market offering the lowest prices.  However, a joint strategy between ASEAN and the Japanese government will certainly aid Japanese automakers in the region.

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Sources: Nikkei