ASEAN's automotive supply chains look for scale in a fragmented region

Differences in local content rules across ASEAN markets can make a single regional manufacturing base challenging, according to Prasanna Shanker, general manager of ZF Foxconn Chassis Modules. Speaking on October 28, he suggested companies “flip the problem the other way around”. Rather than centralising manufacturing, companies could maintain production across the region’s markets while consolidating the supply chains supporting those plants, with Malaysia as one possible hub.

Pooling suppliers in one consolidation centre would let companies manage minimum order quantities and obsolescence across several plants and combine purchasing, Shanker said. The same site could carry out incoming quality inspection instead of each plant building its own laboratory, and break bulk deliveries into line-ready quantities. ZF Foxconn is working on the model, he added.

Too little trade within the region

Dr Susanne Lehmann, an international automotive executive who previously led Volkswagen in Malaysia and was responsible for its ASEAN strategy, argued that the region's free trade agreements are not yet delivering enough. She said trade between ASEAN countries accounts for only around 20% of their total trade. When Volkswagen first shipped Malaysian-built cars to Bangkok, she recalled, the procedures and documents were difficult to navigate, and on arrival the cars were checked against the same model built in Europe. "It feels like they don't trust each other so much," she said.

Lehmann pointed to differences in labour, capital and space costs across the region of a factor of four to five, and said low volumes, high complexity and long lead times have made localisation requirements hard to meet economically. Western OEM volumes in the region have been stable but have not grown, she said, so the traditional route of localising step by step from the assembly shop back through paint and body has not progressed as far as governments hoped.

Her alternative is what she called "region for region", in which each country plays to its strengths. Malaysia could focus on electronics and electronic control units, building on its semiconductor base, Thailand on sheet metal and body work, and Vietnam on interior parts, with batteries eventually sourced from Indonesia. That would require a pull system run from within the region, she said, with local sourcing, supplier qualification, quality assurance and technical teams able to manage the bill of materials, rather than relying on a parent company in Europe, Japan or China.

Building capability before volume

For batteries, localisation means service capability as much as factories. Saba Azizi, head of aftersales service network & business development, Europe, Middle East & Africa at CATL, said the company has 1,400 service stations worldwide, 146 of them in Asia-Pacific. Three of those in the region are full-lifecycle centres under its Ningde Service aftermarket brand, in Jakarta and Thailand, with a third due to open in Kuala Lumpur by the end of 2026.

"You need first to build the connected ecosystem before the volume grows," Azizi said, so that it is clear who receives a service request, who carries out diagnosis, who is certified to handle the battery and who can transport and store damaged units. She identified reverse logistics for unsafe batteries as the biggest gap among logistics providers, and said it is already creating bottlenecks in battery aftersales. She also argued that the battery passport should be treated as an operational tool rather than a compliance obligation, giving service networks managed access to repair and warranty history.

Visibility gaps start inside the company

Data remains the main constraint. Tuan Vi, vice president, supply chain management & logistics Asia Pacific at Schaeffler, said one of the largest visibility gaps sits within companies, where country teams copy shipment information from forwarders' emails into spreadsheets that a control tower in another country cannot see. Schaeffler's pilot in Vietnam uses an AI tool to turn those emails into a shipment view and flag deviations from target lead times. Vi said the company plans to extend it to Malaysia and Thailand in the first quarter of 2027.

Kohei Yamauchi, an automotive manufacturing & supply chain DX leader speaking in a personal capacity, cautioned against pursuing real-time data for its own sake. Investment should match business value, he said, with modular solutions that can be linked later. Ruud Vossebeld, director business development at INFORM, pointed to Europe, where he said Chinese vehicle imports have doubled from 1m last year to 2m this year, as a warning of the port congestion that follows when arrival information is poor.

For Shanker, the weakest link is the last mile, where material can be held at customs over missing documents or rule changes. He wants logistics providers to take on more of that competence. Xianglin Zhao, Asia supplier manager – supply chain at INEOS Automotive, said the company traces key components and their countries of origin through the bill of materials during product development, and chose a semiconductor supplier able to switch production between Asia and Europe. As INEOS prepares to enter Malaysia, Indonesia and Thailand, she sees aftersales parts logistics as the next regional opportunity.

Agreeing the basics

Shanker's closing advice was to agree forecasts and frozen zones with customers and suppliers before adding complexity. "Your hands can't hit what your eyes can't see," he said, quoting Muhammad Ali. Across the morning, speakers accepted that ASEAN's fragmentation will not disappear soon. Their proposals, from consolidation centres and country specialisation to connected service networks and shared shipment data, aim to capture some benefits of scale while the rules still differ from market to market.