For years, the business formula for Chinese OEMs in Southeast Asia was simple: build in China, ship abroad. Now Chinese automakers are trying something more ambitious – building vehicles inside ASEAN and using the region as a platform for domestic sales, deeper supply-chain localisation and potentially exports to new destinations.
But the strategy is seemingly facing headwinds. Recent years have shown that factories are arriving faster than the market can absorb them. Chinese plants already established in key target markets are running well below capacity. According to the International Energy Agency's (IEA) Global EV Outlook 2026, Chinese BEV plants were operating at only around 20% of capacity in Thailand and less than 15% in Indonesia.
Chinese brands are still winning customers across ASEAN. In 2025, Southeast Asia accounted for more than half of Chinese automakers' overseas manufacturing footprint, according to the IEA. Stronger deliveries to the region are also seen as one factor behind a 21% surge in China's finished-vehicle exports, which reached 7.1 million units in 2025, up from 5.86 million in 2024.
Indonesia and Thailand have seen an outstanding increase in the presence of Chinese automotive businesses over the past five years, according to GlobalData's ASEAN Automotive team.
In 2021, only three Chinese brands – MG, DongFeng and Wuling – were present in the Indonesian market. In 2026, that figure has jumped to 22. Thailand has gone through a similar transition, from just three brands – MG, Haval and Ora – in 2021 to 23 today.
The big Chinese nearshoring push
The surge in investment is not simply a bet on today's ASEAN market. It is also a response to the forces reshaping the Chinese automotive industry itself.
"China itself has become intensely capacity-rich and brutally competitive," commented Bill Russo, CEO of Automobility Limited, a Shanghai-based automotive consultancy.
In these circumstances, Chinese automakers need international growth – but increasingly, globalisation requires localisation.
"I describe this as a shift from 'exporting from China' toward 'producing in the market, for the market'," Russo said. "ASEAN is one of the first places where we can see that transition occurring at scale."
Chinese automakers have already established almost 1 million vehicles of annual manufacturing capacity across Southeast Asia, more than half of their 1.7 million-unit overseas footprint, according to the IEA.
But while the factories are being built at speed, their utilisation tells a different story.
"We have observed that almost all Chinese automakers are not meeting their sales targets, which has led to a reduction in their production plans," commented Titikorn Lertsirirungsun, a member of the GlobalData ASEAN Automotive Team.
Weak demand in some markets is one of the factors to blame, though there is more to it than that.
"The increasing number of Chinese automakers in the market is another reason they are unable to meet their sales targets," Lertsirirungsun explained.
What looks like overcapacity today is partly the result of Chinese automakers building ahead of the market, Russo added.
However, this does not necessarily mean that the investments were based on flawed forecasts or poor decisions.
"I would not judge these investments solely on today's utilisation rates," Russo said, adding that some plants will certainly struggle as there are too many brands chasing too little near-term demand, and consolidation is inevitable.
The bet on future demand
For Chinese OEMs, however, low utilisation today does not necessarily undermine the longer-term case for ASEAN production. The investments are designed to secure market access, meet localisation requirements and create a manufacturing base that can scale as demand develops.
"Collectively, ASEAN will become an important production base for Chinese automakers," Russo said.
Both the Indonesian and Thai governments are trying to address the overcapacity issue by implementing local-content and production regulations, Greg Basich, associate director at automotive market research firm Counterpoint Research, noted.
"For example, in Thailand, the government has a 1:2 to 1:3 import-to-local-production ratio. In Indonesia, the ratio is 1:1," Basich said.
He also added that Thailand's National Electric Vehicle Policy Committee is considering higher excise taxes on EVs that do not use domestic components, as the country attracts hundreds of new projects. Indonesia's finance minister has announced plans to provide tax discounts and waivers on new EV purchases.
"These regulations are fairly recent or are being decided on, so although they could improve utilisation by stimulating demand and requiring more vehicles to be produced domestically in each country, it will take time for them to have an impact," Basich said.
And domestic sales are only part of the opportunity. If ASEAN becomes a meaningful production base, Chinese automakers could also use it to reach markets beyond the region.
"ASEAN gives manufacturers access to a large regional market and, depending on rules of origin and trade agreements, potentially to markets beyond Southeast Asia," Russo said. "Thailand in particular already has an established automotive manufacturing and export ecosystem, while Indonesia brings the additional strategic advantage of being deeply integrated into the battery-material value chain."
Made in ASEAN, supplied by China
Nearshoring EV production into ASEAN will do more than put Chinese factories closer to their customers – it will redraw the region's automotive logistics map, according to analysts. Finished vehicles flowing out of China are expected at some point to be increasingly be replaced by batteries, components and production equipment moving into ASEAN, while locally assembled cars create new regional and export flows.
"Initially, localisation does not necessarily mean localisation of the entire supply chain," Russo said, explaining that vehicles may be assembled in Thailand or Indonesia while a significant share of battery cells, electronics, powertrain components, intelligent-driving hardware and other high-value content continues to come from China.
"That means we should expect a shift in the logistics mix: proportionally fewer finished vehicles moving from Chinese ports into ASEAN and more batteries, components, modules and production equipment moving into regional manufacturing hubs," Russo added.
Over time, however, economics are likely to push supply chains toward deeper localisation. Shipping large quantities of components indefinitely is expensive, adds inventory and working-capital requirements, and increases exposure to tariffs, rules-of-origin requirements and supply disruptions. Once sufficient production volume exists – major Chinese suppliers will have an incentive to follow their OEM customers into the region, as has happened elsewhere in the automotive industry.
"This creates what I would call a China-centered but increasingly distributed supply chain," Russo said. "China remains the technology, engineering and industrial backbone, while manufacturing and supplier capacity progressively move closer to end markets."
But the new logistics map will depend heavily on one unresolved question: can Chinese automakers make their ASEAN factories competitive enough to serve markets beyond the region?
So far, there are indications that this may be difficult.
"Unlike Japanese carmakers, we do not anticipate significant export volumes from Chinese manufacturers' plants in Thailand and Indonesia," commented Tanitta Tumrasvin, a member of the ASEAN Automotive team at GlobalData.
"Economies of scale are a crucial factor in production costs. The production cost in China is significantly lower than in ASEAN," Tumrasvin said.
For instance, Tumrasvin added, GAC Thailand has reported that a Thai-built vehicle costs about 40% more than a Chinese-built vehicle.
Moreover, the same trend of governments protecting their domestic markets that is driving Chinese automakers towards nearshoring in Southeast Asia could also limit exports from Thailand and Indonesia.
"There is a rising trend of protectionist policies in the global market, with many countries announcing policies to attract Chinese companies to invest and produce locally. This will further limit export opportunities from ASEAN," Tumrasvin stated.
