As Chinese car manufacturers increase exports of electric vehicles to Southeast Asia, Japan and ASEAN are planning to formulate the first joint strategy for car production and sales in the region. The two sides plan to establish a temporary joint strategy by as early as September this year during an economic ministerial meeting, setting targets up to around 2035.
Chinese carmakers like BYD produce far more cars than they sell in China, leading to a significant export volume to markets in Europe, Southeast Asia, and other regions, particularly electric vehicles, by capturing market share with competitive prices.
According to a report by Nikkei on May 20, ASEAN is the location of factories of many Japanese car manufacturers like Toyota and Honda. Japanese car manufacturers assemble over 3 million vehicles per year in ASEAN, roughly accounting for 80% of total production in ASEAN, with many cars exported to the Middle East and other regions.
The joint strategy is expected to cover investments in areas such as personnel training, decarbonization of production, procurement of minerals, biofuels, and other next-generation fields, as well as cooperation in promoting ASEAN-made cars to global audiences on environmental aspects.
In terms of personnel training, Japan plans to use 140 billion yen ($1.3 billion) from the Ministry of Economy, Trade, and Industry budget to aid countries in the Global South. Workers in factories and components suppliers will undergo training in digital technologies.
Japanese technology will be utilized to measure carbon dioxide emissions of factories and promote the transition to renewable energy sources. In terms of investments in next-generation fields, the two sides will consider joint procurement of rare materials used in electric car batteries and explore research in battery recycling and other areas. One of the projects under consideration is the development of biofuels made from waste cooking oil.
Japan and ASEAN will jointly promote these environmental efforts to other regions of the world to boost car exports. They will also collaborate on forecasting the global car market in 2035, including developing countries.
With the assistance of subsidies from the Chinese government, Chinese car manufacturing poses an increasingly significant challenge to Japanese car manufacturers. A new study released on April 10 by the Kiel Institute for the World Economy in Germany indicates that Beijing heavily subsidizes domestic industries, particularly in green technology areas such as electric cars or wind power generation. The total amount of subsidies in China is estimated to be three to nine times higher than that of other OECD countries like the United States or Germany. According to new data analysis, one of the major beneficiaries is electric car manufacturer BYD, leading to significant expansion of BYD’s technology and production capacity, as well as continuous enhancement of its competitiveness.
Thailand provides subsidies and tax exemptions to car manufacturers producing electric vehicles locally. With Chinese companies like BYD taking advantage of this program, 85% of electric vehicles sold in Thailand last year were from Chinese manufacturers.
BYD’s ATTO 3 electric car is sold in markets like Singapore, Thailand, and India, while China’s Neta V-II model from NIO Auto is sold in Thailand, Indonesia, and other markets at prices ranging from $15,000 to $20,000.
A senior executive from a car manufacturer mentioned in a Nikkei report: “Overall demand for cars in Southeast Asia is declining due to factors like rising interest rates. However, subsidies for electric vehicles are very generous, and only Chinese companies benefit from such incentives.”
So far, various Japanese car brands have conducted their businesses independently in ASEAN. However, with Chinese companies like BYD and SAIC Group strengthening their influence in the region, the Japanese government increasingly needs to intervene in formulating joint strategies.
Japan positions itself as a reliable partner, and its contributions in areas like technology development, personnel training, and more will be beneficial for ASEAN.
Colin Langan, an analyst from Fitch Ratings, mentioned that China became the world’s largest car exporter last year. In a recent report, Langan stated that even with an export target of 5 million vehicles by 2023, China’s excess production capacity surpasses 11 million vehicles, flooding the global market with low-cost products.
On May 14, the Biden administration announced a substantial increase in tariffs on a range of Chinese imports, including electric vehicle (EV) batteries, computer chips, and medical products. The new tariffs will affect Chinese imports worth $18 billion.
Biden stated: “As long as the competition is fair, American workers can outperform anyone and compete courageously, but unfair competition has persisted for a long time.”
“For years, the Chinese government has been injecting national funds into Chinese companies… That’s not competition, that’s cheating,” he added.