From 2021 to 2026, Chinese automakers have pledged approximately US$ 17.7 billion in cumulative investment across the 10 ASEAN nations.

Sun Xiaohong, former secretary-general of the Automotive Internationalisation Committee at the National Chamber of Commerce for Import and Export of Machinery and Electronic Products, disclosed these figures at the 2026 International Forum (TEDA) on Chinese Automotive Industry Development (2026 TEDA Forum) on September 20th. For comparison, China is expected to export approximately 990,000 vehicles to ASEAN in 2025, with a total value of US$ 15 billion. The investment committed over the past five years is therefore close to the value of the industry's annual vehicle exports to the region.

In discussing the industry's next phase, Sun outlined the objective for Chinese automotive exports during the 15th Five-Year Plan as establishing local operations in overseas markets and generating returns from those operations.

Investment increases in South-East Asia

Chinese automakers have increased their investment in South-East Asia.

Investment in ASEAN can be divided into three phases. From 2010 to 2014, investment in the region was approximately US$ 500 million and was primarily focused on light-asset operations. From 2015 to 2021, investment entered an M&A expansion phase, during which Great Wall Motors acquired General Motors' Rayong plant in Thailand, among other developments. Investment during this period reached US$ 2.85 billion. Since 2022, investment has increased, with projects from companies such as CATL and BYD being established in the region and total investment reaching US$ 13.8 billion. The past four years alone account for 80% of the cumulative total.

Investment is concentrated in two markets: Indonesia accounts for 36% and Thailand for 32%. By value-chain segment, vehicle assembly projects account for 54% of the total, while power battery investments account for 34.5%, with the remainder allocated to automotive components. At present, approximately 180 Chinese automotive component suppliers have established operations in South-East Asia.

An increase in investment does not necessarily result in a long-term market presence. Chinese automakers are shifting from establishing capital-intensive operations to developing broader local systems. Differences in local policies, supply chains, market competition and operational standards have affected this transition.

Thailand provides one example. Under the EV3.5 policy rules, by 2027, companies must produce three vehicles locally for every vehicle imported into the Thai market to offset the applicable quota. In May, Thailand's 10 leading industry associations jointly petitioned the government to significantly increase consumption taxes on imported vehicles. The associations cited concerns about the potential impact on domestic industrial activity.

The term "industrial cliff" refers to the risk that if automakers reduce local production and increase imports in the future, existing factories, supporting ecosystems and domestic manufacturing capabilities could be reduced. The concern extends beyond short-term competition to the potential impact on local industry after current policy cycles end.

Indonesia is also introducing higher localisation requirements. Local targets require localisation rates to reach 40% from 2026, 60% by 2029 and 80% by 2030. Indonesia also applies different treatment to battery types: nickel-based batteries qualify for full tax incentives, while non-nickel options such as lithium iron phosphate (LFP) batteries receive reduced benefits.

Sun cited a saying used in Indonesia: policy looks 10 steps ahead, plans five steps ahead and acts only three steps ahead. The observation indicates that local policies can change quickly, making it difficult for companies to base long-term strategies solely on current regulations.

Pricing and market competition

Chinese automakers in South-East Asia have, for some time, used pricing strategies to support sales growth. In September, the Ministry of Commerce, the Ministry of Industry and Information Technology, and the State Administration for Market Regulation jointly issued guidelines on overseas compliance. Of the seven behavioural norms listed, six relate to pricing. This indicates that pricing practices have become a regulatory consideration in overseas markets.

Sun cited several market observations at the forum. The three-year residual value for Chinese brands in Thailand is normally approximately 56.8%. However, some models subjected to significant discounting have recorded new-vehicle prices below their projected residual values. In some cases, individual brands have operated in a manner that has disrupted their after-sales and warranty systems.

"Price competition has no future." While moderate price competition can support market entry, low prices that do not result in a stable market presence, brand trust and after-sales support can result in transactions without establishing a sustainable business operation in overseas markets.

From "going out" to establishing a stable presence

Price competition is one aspect of the broader market conditions in the region. Some South-East Asian countries are also experiencing increased investment concentration and competition between similar products and operations.

Although ASEAN has a free-trade framework, the region does not operate as a fully unified market. Each country maintains its own certification systems, consumption taxes, quotas and licensing requirements. Localisation rates are calculated at the national level, with no unified ASEAN standard. Treating South-East Asia as a single market and applying the same capacity model across all countries does not account for these differences.

In response to the regional differences, Sun proposed a new direction for global expansion: "Stand firm, bring it back."

"Standing firm" refers to establishing local operations after entering a market. During the 14th Five-Year Plan, China's automotive exports focused on "going out" and "moving up". "Going out" referred to increasing export volumes, with a target of more than 8 million vehicle exports nationwide by 2025. "Moving up" referred to increasing international recognition of new-energy and intelligent connected products.

The 15th Five-Year Plan calls for a further change in approach. Establishing a stable presence means not exiting markets easily, avoiding short-term trading activities, and developing local capacity, supply chains and brand recognition.

"Bringing it back" does not only refer to repatriating profits. It also refers to establishing a link between overseas operations and domestic R&D. If overseas operations depend on low prices and subsidies over the long term without generating sustainable returns, they cannot provide a sustainable contribution to technology development. If market conditions change, companies could face a cycle of entering, expanding, encountering difficulties and exiting markets.

Sun forecast at the forum that commercial vehicle exports could reach 1.5 million units in 2026, while passenger vehicle exports are targeted to exceed 10 million units. He also emphasised that the objective is not solely to increase volumes, but to improve the quality and sustainability of growth.

Historically, Chinese automotive exports have focused on scale, speed and incremental growth. At the current stage, companies are considering how to maintain local operations and convert export capabilities into industrial capabilities.

Chinese automakers in South-East Asia have also entered a phase of broader industry-chain exports. Complete vehicles, batteries, power electronics, chassis, rubber and glass components are increasingly being established or supplied in overseas markets alongside vehicle manufacturers.

However, the implementation of production capacity varies across countries. Thailand's project operation rate has reached 76%, while Indonesia's is approximately 40%. Malaysia and Vietnam are at approximately 24%. These figures indicate differences in the development of automotive production capacity between South-East Asian markets. Some markets are releasing production capacity, while others remain in the construction or production ramp-up stages.

The next phase of China's global automotive expansion therefore involves several considerations beyond investment levels: whether investment can be converted into production capacity, whether that capacity can become integrated into local industries, and whether local operations can generate sustainable returns.

The ability to convert investment into industrial capability and establish local operations will affect the development of long-term operations by Chinese automotive companies in South-East Asia. If companies withdraw after periods of price competition, investment alone will not establish long-term operations in the region.