Volkswagen charts new ASEAN logistics strategy
Volkswagen Group Malaysia is reshaping its ASEAN logistics model to counter fragmented rules, high import duties and intensifying Chinese competition. Managing director of the regional division, Susanne Lehmann, explains how localisation, regional sourcing and export-led manufacturing will anchor the group in Southeast Asia.
Volkswagen Group is reshaping its strategy in Southeast Asia as it seeks to build a competitive and export-capable supply chain across one of the automotive industry’s most fragmented regions. Speaking at the ALSC ASEAN 2025 conference, which is returning this year in Malaysia, Susanne Lehmann, managing director of Volkswagen Group Malaysia, set out the scale of the challenge and the opportunity as the group deepens its footprint.
Regional supply and demand
Volkswagen Group has one assembly hub in the region, in Malaysia, supported by contract manufacturers in Kulim and Pekan. It also operates national sales companies and importer relationships across Japan, Korea, Taiwan, Australia, New Zealand, Singapore, Malaysia, Vietnam, Thailand and the Philippines. Four of its brands have a direct presence, including Volkswagen, Audi, Porsche and Scania, which also offers electric trucks.
The economics of the region are varied, according to Lehmann, who has led Volkswagen Group Malaysia for nearly two years after senior roles in Germany, Mexico and China. She describes ASEAN as both heterogeneous (varying across the region) and strategically important, where differences in regulation, import duties, economic health and trade structures create a level of complexity that demands a new operating model.
“The economic development is very heterogeneous,” Lehmann says. GDP levels, regulatory environments and market maturity differ widely between the ASEAN Six (Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam). Malaysia stands out with a car population higher than Germany at 768 vehicles per thousand inhabitants.
“But most of these cars are very old,” she says. “So [it’s a] big chance for us as manufacturers.” Despite some contractions in the market, specifically in Thailand and Indonesia, she says that volume is stabilising, and that there are opportunities ready for the taking in the market.
Similarly, EV demand in the ASEAN Six also varies from country to country. She says that EV adoption in Indonesia is 18%, and just 5.4% in Malaysia, but 30% in Thailand as the country is pushing electrification forward with government initiatives. Malaysia’s strong ties to oil and gas mean its push towards BEVs is slower than in Thailand or Singapore.
Volkswagen sees opportunity in this diversity. Regions with high hybrid demand and more moderate electric-vehicle growth allow the group to leverage internal combustion and hybrid portfolios rather than be bound to full electrification strategies developed for China or Europe.
Localisation as a solution
“Most of our cars are imported as CBUs, especially for Audi,” Lehmann explains. “But we have started also to produce Audis now locally and we are trying to push down the production cost.”
She explains that having been in the market since 2005, the OEM has become familiar with the market demand trends and has been able to adapt. “We started local production in 2012, starting with small cars with the Jettas, Polos, Passats, and then saw that the local cars are just more price competitive in these segments. So, let's go to a more premium approach. We have then come up with this accessible premium strategy and now more and more [we are] going into premium, because we see that these are the segments that are accessible for us in these markets,” she explains. “If we produce for only one small market like Malaysia or Indonesia or Thailand, locally we have not enough volume and we don't have enough flexibility.”
She says that the answer lies in sourcing: “We want to look more into the region, not only to China, but also to all Southeast Asian countries for our sourcing and for our car models.”
Customs and regulatory barriers in ASEAN
Complex customs requirements remain a roadblock, with supply chain delays triggered by things as simple as invoice terminology. If something is worded differently, for example a bolt names as a 12-inch bolt, customs can interpret it as a completely different part and block its shipment. “This cannot happen,” she says. “We need efficient processes with a one and only identifiable part number and we need the customs import processes to be efficient and not acting as a barrier to entry.”
Regulatory fragmentation is a further complication. Each country maintains different localisation targets, tax bands and technical eligibility rules for internal-combustion, hybrid and electric vehicles. In some cases, approvals are valid for only a year, undermining confidence in long-term planning. “It's really nearly impossible to make plans that are reliable and that we can trust to last a little bit longer than one year,” she says. “We have to have regulations hopefully that are standardised not only for one country but for all of the ASEAN countries. Let's fight for that together.”
Meeting regional-value-content requirements adds another layer of difficulty. In ASEAN, every module of a vehicle must meet its own localisation threshold, so one underperforming supplier can derail a full vehicle. Lehmann says the answer to this lies in deeper localisation and sourcing reform.
Volkswagen is investing in the region through 2029 to expand supplier networks and reduce inefficient material loops. The group is consolidating regional demand, establishing aftersales warehouses and developing data-centre capabilities in Singapore and Malaysia.
Partnerships are central to the strategy. The group is working with a battery partner to support regional expansion and strengthen battery-related localisation. Shared sourcing across ASEAN is another priority. Lehmann highlights tyres as an example: Malaysia is a natural rubber hub, yet tyre producers have been relocating. Volkswagen aims to anchor sourcing for the entire region, not one country at a time. “Let’s bring them in from Indonesia, wherever the production is, but with the quality standards needed for the whole region,” she adds.
Approval systems and government interactions can also be unified to support a broader regional footprint.
Volkswagen has long regarded China as its second home, and that experience shapes its ASEAN strategy. The group is comfortable working with Chinese suppliers and sees China as a core source for new, connected vehicles.
The aim is a supply chain that uses trade agreements effectively, supports scalable manufacturing and reduces cost through regionalised sourcing. ASEAN’s fragmented customs systems, varying import duties and differing localisation rules remain structural challenges, but Lehmann believes they can be addressed through industry alignment, supplier engagement and deeper local presence.
“We have to be local in some of the countries, not with everything but with what the country needs,” she says. The region’s heterogeneity is a constraint, but also a route to resilience and opportunity. For Volkswagen, the next phase in ASEAN will be built on logistics integration, trade-agreement optimisation and a more regional, less country-by-country operating model.
