Chinese EVs in Southeast Asia: More Sustainable Approach Needed

Chinese electric vehicle (EV) enterprises are gaining market share in Southeast Asia, but they risk encountering the fate of Chinese motorcycle enterprises in the 1990s. Then, market share reverted to Japanese manufacturers due to factors such as poor build quality. To sustain their market presence in the region, Chinese EV firms will need to improve in areas such as product quality and after-sales service.

With their growing populations and economies, the car market in Southeast Asian countries continues to expand. Traditionally, this market was dominated by Japanese brands such as Toyota, Honda and Nissan. Recently, however, Chinese EV brands have been gaining market share in Southeast Asia at the expense of their Japanese rivals. One analyst points out that the region is becoming a major expansion region for Chinese OEMs (Original Equipment Manufacturers). In total, Chinese EV enterprises have invested more than $1.44 billion in Thailand, the largest automobile production country and second largest economy in Southeast Asia.

Nevertheless, a raft of problems might hold back the development of Chinese EV enterprises in Southeast Asia. If they are not careful, they could encounter the fate of Chinese motorcycle companies in the late 1990s. During that period, over 20 brands from China — including Loncin, Lifan, Zongshen and Jialing — rushed into the Southeast Asian market. After beating the Japanese brands at their game, a fierce price war erupted among Chinese companies. This forced them to lower product prices and quality, which eventually affected consumer trust and their brand prestige. In addition, poor build quality, inadequate after-sales service and outdated technology led consumers to turn back to Japanese brands.

To avoid repeating the same mistakes, Chinese car firms should adopt a more sustainable approach. Product quality tops the list of factors driving consumers’ choice of brands in most Southeast Asian markets. According to one survey, some consumers in Southeast Asia have expressed concerns about the quality and safety of Chinese EVs. They centre on poorer safety standards and reported incidents of batteries catching fire. Although Chinese brands have not obtained a significant share (less than 20 per cent) in the car market in general, they have almost done so in the smaller EV segment with 70 per cent market share. Besides, price competition leads companies to focus on reducing production costs, which often leads to the neglect of employee welfare and environmental protection. The investment and operation of BYD in Brazil has drawn controversy over labour rights. There are similar concerns and anxieties with numerous Chinese EV enterprises operating in Thailand.

Chinese enterprises should pay more attention to consumer preferences by adapting their products to local conditions. If they fail to do so, early adopters of their products are likely to shift back to Japanese brands, which are more sensitive to local consumer preferences.

Chinese EV enterprises venturing into Southeast Asia should also improve their sale and servicing networks. From factories to consumers, an expansive sales and service network is necessary, including delivery, charging, maintenance and insurance. Chinese EV enterprises are using the same playbook as Chinese motorcycle companies in the late 1990s. Their modus operandi then was to sell a batch of products and then move to another market, ignoring the construction of after-sales service system. In Southeast Asia, Chinese EV enterprises need to build their sales networks from scratch. Granted, the resources required to establish such localised service systems are substantial. To overcome these challenges, Chinese EV enterprises should establish partnerships with local suppliers to build an integrated service system.

Some insiders have also pointed out that the models launched by Chinese EV companies in Southeast Asia are highly similar in positioning. Despite the unique competitive advantages of EVs, their similar positioning makes it difficult for Chinese EV firms to achieve a larger market share. Consumers in China and Southeast Asia have similar but different needs for vehicles. According to one report, Thai consumers, like their Chinese counterparts, are concerned about affordability, energy efficiency and convenience of charging. In addition, Thai customers prefer vehicles durable enough to endure monsoons, high temperatures, rainstorms and country roads. Besides, due to larger families, consumers in Indonesia and Malaysia prefer bigger cars with more interior space.

Consequently, Chinese enterprises should pay more attention to consumer preferences by adapting their products to local conditions. If they fail to do so, early adopters of their products are likely to shift back to Japanese brands, which are more sensitive to local consumer preferences. To sustain profitability, Chinese marques can reduce costs by making adjustments in vehicle power, charging speed and intelligent driving. These factors do not rank high on the list of concerns for local consumers.

In sum, Chinese EV enterprises have to address the brand prestige deficit caused by price wars, a lack of service system and neglect of local consumer preferences. This sustainable approach is critical if Chinese companies are to succeed in the Southeast Asian market in the long term.

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