Japanese dominance in Southeast Asia at risk due to Chinese cars

Chinese automakers have been growing , particularly with low-cost electric vehicles. And, according to consulting firm PwC, this is challenging the decades-long dominance of Japanese manufacturers in Southeast Asia.

The market share of Japanese manufacturers—led by Toyota, Honda, and Nissan—fell to 62 percent of sales in the first half of 2025 in the region's six largest markets, down from an average of 77 percent over the past decade. Chinese manufacturers increased their share from almost zero to over 5 percent of 3.3 million units sold.

The Chinese offensive is explained by the price war the sector is facing in China, which has led manufacturers to seek nearby foreign markets, benefiting from a regional trade agreement that guarantees tariff-free access.

"The entry of Chinese electric vehicle manufacturers marks the end of an era of Japanese dominance in Southeast Asia," said Patrick Ziechmann, an analyst at PwC in Malaysia.

In Indonesia, the region's largest consumer market, Toyota's sales fell 12% between January and August, to 161,079 units, while those of China's BYD tripled to 18,989.

Affordable prices are seen as a determining factor: some Chinese models start at $12,000 (more than €10,000).

"Price is the decisive factor. The Japanese have to react, otherwise they will continue to lose market share," said Jongkie Sugiarto, vice president of the Indonesian Automobile Manufacturers Association, as quoted by the British newspaper Financial Times.

The Chinese presence in the country isn't limited to sales. At least 15 brands are already active, and another five are expected to join soon.

Some have set up their own factories, while others produce in partnership with local companies, benefiting from temporary exemptions from import taxes on electric vehicles.

However, starting next year, manufacturers will have to produce locally to continue accessing subsidies, which could hinder the advancement of smaller brands.

In Singapore, the transformation is even more evident: BYD became the best-selling brand this year, overtaking Toyota, which in 2023 led with 25% of sales.

Government incentives for electric vehicles and the aggressive entry of several Chinese brands with innovative marketing strategies have helped shift consumer preferences.

China is also investing in technology, seeking to take advantage of its advantage in automotive software.

Manufacturer Xpeng began exporting models equipped with features like smartphone-controlled parking to the region this year. "We see Southeast Asia as a market full of potential," said company president Brian Gu.

The reconfiguration is already transforming the regional industry. Subaru closed its Thailand plant in 2024, while Suzuki plans to close its facility by the end of 2025.

In contrast, BYD shipped the first vehicle produced in Thailand to Europe in September, signaling global ambitions.

According to Jessada Thongpak, an analyst at S&P Global Mobility, Chinese penetration in Southeast Asia is just the beginning of a process that should be replicated in other regions.

The consultancy predicts that Chinese brands could account for 20% of car sales in Thailand by 2032.

Despite the positive economic impact that Japanese brands have had for decades in the region, consumers "will decide who the ultimate winners will be," said BYD's Asia-Pacific sales director, Liu Xueliang, as quoted by the FT.