Japanese Car Sales Plummet In Southeast Asia As Chinese Cars Gain Market Share – CleanTechnica

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It may come as a surprise to some, but the US and Germany are not the only new car markets on Earth. Tons of new cars are sold every year in Southeast Asian countries like Singapore, Indonesia, Thailand, and Malaysia. Those markets have traditionally been ignored by German and US car manufacturers, but Japanese brands such as Toyota, Honda, Nissan, and Mitsubishi have feasted on sales in those countries for decades. Lately, however, Chinese brands have stolen a march on the Japanese brands. BYD, which only started selling cars in Indonesia in July of this year, is already the sixth best selling car company in that country, thanks to the popularity of its Seal battery electric hatchback which starts at around $40,000.

Bloomberg reports that since 2019, sales of Japanese cars are off 5 percent in Malaysia, 6 percent in Indonesia, 12 percent in Thailand, and a stunning 18 percent in Singapore — this despite several Japanese companies like Toyota, Nissan, and Mitsubishi having factories in southeast Asia. In China, where sales of electric and extended range EVs are booming, the Japanese companies have no similar models of their own, which has led to a 9 percent drop in sales for Japanese brands. All six Japanese automakers tracked by Bloomberg have lost ground in China — even Toyota, which once was a dominant force in that country’s new car market.

But Toyota has clung stubbornly to selling gasoline-powered cars at a time when the trend in China is turning strongly in favor of cars powered by electrons instead of molecules. In Southeast Asia, where loyalty to Japanese marques is so strong that almost every car in Indonesia as recently as 2019 was manufactured by a Japanese automaker, Chinese brands are growing in popularity. That is especially true in Thailand and Singapore, where the share of cars made by Japanese companies now stands at around 35 percent after being well over 50 percent in 2019.

The overall picture is worrying for companies once considered pioneers in efficiency and reliability, Bloomberg says. The loss of market share in Asia also portends a potentially larger slide in Europe and the US. Although, Chinese automakers largely don’t sell passenger cars there due to punitive tariffs. As a group, Japanese carmakers have been slow to shift to fully electric vehicles, a strategy that is costing them dearly as they fall further behind in an industry where winners are bringing new models to market that are based on cutting edge battery technology and advanced software.

China Pushing Japanese Companies Out Of Thailand

The New York Times reports that Japanese companies established Thailand’s auto industry virtually from scratch after World War II. By the late 1970s, Japanese brands commanded around 90 percent of car sales there. They invested in building Thai supply chains, and their cars were also widely perceived by customers as reliable — the same reputation that propelled them to the top of the sales charts elsewhere. In the 1990s, American and South Korean automakers targeted the Thai market but barely made a dent in Japan’s share.

Now this former stronghold for Japanese manufacturers is finally being opened up to Chinese companies that offer something they don’t — electric vehicles at affordable prices. The influx of Chinese brands like BYD, Great Wall Motor, and SAIC Motor in the past two years is ringing alarms in Japan. In December, Srettha Thavisin, Thailand’s prime minister, traveled to Japan with a message for Japanese companies — move quickly, invest in electric vehicles, or lose out to China. “You are not alone in the world,” he warned Japan’s automakers in an interview with Japanese media.

Japanese manufacturers, which account for about 75 percent of vehicle sales in Thailand, are taking steps to stem the erosion of their position. During Thavisin’s trip to Japan, Toyota, Honda, Isuzu, and Mitsubishi said they would invest $4.3 billion over five years to convert their Thai factories to make electric vehicles. Late last year, Honda began producing electric vehicles in that country. That sounds promising, but in July of this year, Honda announced it would cease vehicle production at one of its two factories in Thailand in 2025, while Suzuki said in June it will close its only vehicle manufacturing factory in the country. Japan’s reputation for production on a mass scale is also slipping. While the island nation boasted more than a fifth of global car production two decades ago, that figure has now fallen to 11 percent.

The Chinese electric vehicle companies are formidable competitors. GAC Aion, the electric vehicle division of Guangzhou Automobile Group, has quickly established a manufacturing and sales business and is focusing its attention on breaking Toyota’s domination of the taxi market. Through a Thai partner — Gold Integrate — Aion has released a fully electric sedan dedicated solely for the country’s ride-hailing and taxi markets. Over the past year, the partnership has sold several battery-powered taxis with a nine-year warranty that retail for as little as $25,000 to Thai customers. Toyota has responded by cutting the price of its primary taxi model by nearly $3,000. Huang Yongjie, chairman of Gold Integrate, told the New York Times that move was historic. “Toyota never cuts prices,” he said.

In Indonesia, Toyotas remain the most visible brand on the roads in Jakarta, but Nissans are almost an endangered species. Earlier this month, Nissan reported a sharp downturn in profit fueled by an outdated lineup, elevated spending on sales incentives, and a lack of hybrids in North America, leading it to slash jobs and production. To fight back, Japanese brands are investing in partnerships and long-term projects to develop vehicle software, solid-state batteries, and other technologies they need to remain competitive. Earlier this year, Toyota unveiled prototypes of a so-called carbon neutral combustion engine that could help it further improve its hybrid technology. It is also building its own software platform to rival the luxurious features found in Chinese EVs. Honda, Nissan, and Mitsubishi are moving forward with a partnership they formed this year to collaborate on software and EV infrastructure.

The Perils And Opportunities Of High Tariffs

What Japanese automakers are going through in Southeast Asia is a harbinger of what US and European car companies could face if they are not protected by tariffs. Those tariffs pose an interesting dilemma. For the past 30 years, people have celebrated cheap products from China. Walmart became a marketing powerhouse because the shelves in its stores were filled with low priced products imported from China. But there was a downside to that dynamic. Many US and European manufacturers saw their business decimated by those imports from China, but people wanted low prices more than they wanted to protect domestic companies.

Now the situation is reversed. There is little doubt that low-cost electric cars are precisely what America and Europe need to reach their emissions reduction goals, and yet, if those cars come from China, they will decimate the domestic auto industry on two continents. As many as a million workers could see their jobs imperiled. A decade ago, outsourcing production was considered the smart thing to do; now it is seen as a threat to national security.

China’s advantage in low-cost batteries and the ability to set up supply chains overseas could give it an edge in Southeast Asia, in the Middle East, and in Africa, according to Bloomberg Intelligence. While Chinese brands have been on the offensive in Southeast Asia and Africa since before tariffs took effect, Bloomberg Intelligence senior auto analyst Tatsuo Yoshida sees them doubling down. “It’s likely they’ll strengthen that push,” he said. By the way, the BYD Seal is now available to Mexican drivers. How long will it be before Americans demand access to those lower cost EVs? People really don’t want to overpay for things to support some amorphous political agenda. Tumultuous times ahead for the US auto industry.