For years, Chinese OEMs built vehicles in China and exported them to South-East Asia. Chinese automakers are now manufacturing vehicles within ASEAN for domestic sales, supply-chain localisation and potentially exports to other markets.

However, factories are being established faster than markets can absorb their output. According to the International Energy Agency's (IEA) Global EV Outlook 2026, Chinese BEV plants were operating at around 20% of capacity in Thailand and less than 15% in Indonesia.

Chinese brands continue to expand across ASEAN. In 2025, South-East Asia accounted for more than half of Chinese automakers' overseas manufacturing footprint, according to the IEA. Increased deliveries to the region were also considered one factor behind a 21% increase in China's finished-vehicle exports, which reached 7.1 million units in 2025, compared with 5.86 million in 2024.

Indonesia and Thailand have seen a significant increase in Chinese automotive businesses over the past five years, according to GlobalData's ASEAN Automotive team. Indonesia had three Chinese brands - MG, DongFeng and Wuling - in 2021, compared with 22 in 2026. Thailand similarly increased from three brands - MG, Haval and Ora - to 23 over the same period.

Chinese nearshoring expansion

The increase in investment reflects ASEAN market conditions and changes in China's automotive industry.

"China itself has become intensely capacity-rich and brutally competitive," said an executive of a consultancy firm.

Chinese automakers are seeking international growth, while globalisation is increasingly involving local production. "I describe this as a shift from 'exporting from China' toward 'producing in the market, for the market'. ASEAN is one of the first places where we can see that transition occurring at scale," the executive said.

Chinese automakers have established almost 1 million vehicles of annual manufacturing capacity across South-East Asia, more than half of their 1.7 million-unit overseas footprint, according to the IEA. However, utilisation remains below capacity.

"We have observed that almost all Chinese automakers are not meeting their sales targets, which has led to a reduction in their production plans," said an executive from a market research firm. Weak demand in some markets and the increasing number of Chinese automakers are affecting sales.

Russo said current overcapacity is partly the result of Chinese automakers establishing manufacturing capacity ahead of market demand, although this does not necessarily mean the investments were based on inaccurate forecasts or poor decisions. "I would not judge these investments solely on today's utilisation rates," Russo said, adding that some plants will face difficulties because too many brands are competing for limited near-term demand and that consolidation is inevitable.

Future demand

For Chinese OEMs, current utilisation rates do not necessarily determine the longer-term rationale for ASEAN production. Investments are intended to secure market access, meet localisation requirements and establish manufacturing bases that can expand as demand develops.

"Collectively, ASEAN will become an important production base for Chinese automakers," the consultancy executive said.

Indonesia and Thailand are attempting to address overcapacity through local-content and production regulations, an executive at an automotive market research firm 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," the executive said.

He 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 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," the executive said.

Domestic sales are only part of the strategy. If ASEAN becomes a larger production base, Chinese automakers could use it to supply markets outside 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," the consultancy executive said. Thailand already has an established automotive manufacturing and export ecosystem, while Indonesia offers the strategic advantage of being deeply integrated into the battery-material value chain.

Made in ASEAN, supplied by China

Nearshoring EV production is expected to reshape ASEAN's automotive logistics network. Finished vehicles exported from China could increasingly be replaced by batteries, components and production equipment moving into ASEAN, while locally assembled vehicles create regional and export flows.

"Initially, localisation does not necessarily mean localisation of the entire supply chain," the consultancy executive said. Vehicles may be assembled in Thailand or Indonesia while significant volumes of battery cells, electronics, powertrain components, intelligent-driving hardware and other high-value content continue 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," the executive added.

Over time, economic factors could drive further supply-chain localisation. Shipping large quantities of components indefinitely involves costs, inventory, working capital, tariffs, rules-of-origin requirements and supply-disruption risks. Once sufficient production volumes exist, major Chinese suppliers may establish operations near their OEM customers, as has occurred elsewhere in the automotive industry.

"This creates what I would call a China-centred but increasingly distributed supply chain," the executive said. "China remains the technology, engineering and industrial backbone, while manufacturing and supplier capacity progressively move closer to end markets."

However, ASEAN's role as an export base will depend on whether Chinese automakers can operate factories at costs that support exports beyond the region.

"Unlike Japanese carmakers, we do not anticipate significant export volumes from Chinese manufacturers' plants in Thailand and Indonesia," said a researcher at another market research firm. "Economies of scale are a crucial factor in production costs. The production cost in China is significantly lower than in ASEAN."

The researcher noted that GAC Thailand has reported that a Thai-built vehicle costs about 40% more than a Chinese-built vehicle. Government policies protecting domestic markets could also affect 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," the researcher stated.