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In the automotive industry, the ASEAN (Association of Southeast Asian Nations) consisting of 10 countries, including Indonesia, the Philippines, Vietnam, and Thailand, is often referred to as the “Second Japan.” The ASEAN countries, with a population of 679.44 million as of last year, have been dominated by Japanese companies such as Toyota and Mitsubishi for over half a century in the local automobile market, starting from the 1960s.
In this market, recently, South Korean automakers such as Hyundai and Kia have stepped up to the plate with electric cars. While they couldn’t compete when the industry was centered around internal combustion engine vehicles, the shift in the global automotive industry towards electric cars has opened up opportunities. Recognized for their technology and performance in the global market, “K Electric Vehicles” are seen as capable of competing head-to-head with Japanese cars in the ASEAN market as well. It’s also favorable that major ASEAN countries like Indonesia, Thailand, and Vietnam are accelerating the development of electric vehicle infrastructure. Just as Samsung and LG entered the ASEAN consumer electronics market, which was dominated by companies like Panasonic in the early to mid-2000s, with their technological prowess, this time, it is expected that South Korean electric cars can confidently outperform Japanese competitors in the ASEAN market.
◇Ioniq 5 Becomes Indonesia’s Top Electric Car in 2023
In the ASEAN region, where Indonesia has the largest population, the market share of Japanese and South Korean companies is 91 percent versus 3 percent this year. However, when considering electric cars alone, South Korean cars hold a 57 percent market share, while Japanese cars are at 7 percent. In Indonesia, from January to July this year, Hyundai’s electric car, the “IONIQ 5,” has sold 3,819 units, securing the top spot in electric car sales. In contrast, Toyota’s BZ4X sales during the same period were limited to 362 units. While South Korea lags behind Japan in internal combustion engine cars, it takes the lead in electric cars.
This success is attributed to Hyundai’s investment of billions of won until last year to establish an electric car production system in its local Indonesian factory. Among the car companies operating in Indonesia, Hyundai was the first to decide on local electric car production, considering not only the domestic market in Indonesia but also the ASEAN markets, including Thailand and Vietnam, which are promoting the transition to electric cars.
Until the mid-2010s, the idea of Hyundai building a complete car factory in the ASEAN region was unthinkable within the group. It was considered trying to break a rock with an egg in a market dominated by Japanese companies. However, with the sharp drop in sales in China, which was seen as a global core production base, due to the THAAD incident in 2017, “decoupling from China” became inevitable. Along with this, the global shift to electric cars was another major change. While it was impossible to beat Japan in internal combustion engine cars, electric cars with a competitive edge were considered to be potential “game changers” according to the management’s judgment.
◇Korean Future Car R&D Centers Sprouting Across ASEAN
Korean car companies are also establishing a supply chain network for K-electric vehicles across the ASEAN region. In May, Hyundai Mobis broke ground for an electric car battery system factory near Jakarta. LG Energy Solution, in partnership with Hyundai Motor, is investing ￦1.2 trillion in a battery cell production facility that will start operations next year, capable of supplying 150,000 electric cars annually (US$1=￦1335). An end-to-end production structure will be created in Indonesia, which has the largest reserves of nickel, a key mineral for batteries, enabling the facility to procure materials, produce batteries, and manufacture electric vehicles locally.
Moreover, R&D hubs for future vehicles are emerging in the ASEAN region. Hyundai Motor is opening its “Global Innovation Center” in Singapore by the end of this year. This center will experimentally produce various future cars while conducting R&D collaboratively. LG Electronics is expanding its automobile software R&D center in Haiphong, Vietnam, with plans to increase its workforce to 1,000 by 2024. This expansion is aimed at developing infotainment software suitable for ASEAN consumer preferences.
◇South Korea, Japan, and China in a Three-Way Battle from Next Year
The Korean-Japanese battle in the ASEAN auto market is expected to intensify. Toyota has already entered the fray, announcing in July last year that it will invest $1.8 billion in Indonesia over the next five years to expand production facilities. Similar to Hyundai Motor, Toyota also expressed intentions to produce both locally adapted internal combustion engine vehicles and electric cars. Plans are in place to expand its Thai factories as well. Chinese companies are also entering the competition, with BYD, China’s leading electric vehicle manufacturer, set to start production at an electric car plant in Thailand next year. Wuling Motors, a Chinese automaker, began local electric car production in Indonesia last year, following in Hyundai’s footsteps.
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