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Source: Global Times

[Global Times special correspondents in Indonesia and South Korea Li Peisong Mang Jiuchen Global Times reporters Li Meng and Li Hao] Editor's note: The 11-day Indonesia International Motor Show kicked off on the 18th. In order to compete for the largest automobile market in Southeast Asia, Chinese, Japanese and Korean automakers have all unveiled their most competitive electric vehicle models. For many Japanese and Korean auto brands that have already felt the "new energy offensive" of Chinese automakers in the Thai market, the Indonesian market cannot be lost. The rich nickel ore resources and huge consumer population have given Japanese and Korean companies opportunities.

Japanese companies have not yet set up electric vehicle factories in the area

The Nihon Keizai Shimbun reported on the 26th that in the past 20 years, Japan's share in ASEAN trade has been halved, while China's share has nearly tripled. Today, low-carbon industries are increasingly valued by ASEAN countries. Under the new development model, the advantages accumulated by Japanese companies in many fields over the years are threatened. For example, Japanese cars have always occupied a high market share in Southeast Asia, but recently Chinese electric vehicles (EVs) have become increasingly popular.

According to the Asian Economic News of Japan, Japanese car brands account for 90% of the new car market in Indonesia, and at least 10 Chinese car brands appeared at this Indonesia International Auto Show, including GAC Aion and Beijing Automotive Group, which mainly displayed and sold electric vehicles. The report believes that Japanese automakers have ushered in a strong opponent in Indonesia. According to the Nihon Keizai Shimbun, Indonesia has always been the base camp of Japanese automakers. According to the data of the Indonesian Automotive Manufacturers Association, including its subsidiaries, Toyota Motor accounted for more than 50% of Indonesia's auto sales in the first half of 2024, with Honda and Mitsubishi ranking second and third respectively.

In response to the development and expansion of Chinese automakers in Indonesia, Japanese automakers have a sense of crisis and are trying to maintain their presence in the Indonesian market with their latest hybrid vehicles. At this auto show, Toyota Motor showcased its latest Prius hybrid. Japanese automakers believe that hybrid vehicles are still attractive to Indonesian consumers because local charging infrastructure is not yet popular. According to the Nihon Keizai Shimbun, there are currently only about 1,400 charging stations in Indonesia, and charging stations outside cities are particularly scarce. A survey conducted in Indonesia by Environmental Insight, a research company based in Singapore, showed that 42% of respondents said that "few charging stations" prevented them from buying electric vehicles. However, there are still Japanese automakers betting on the potential of the electric vehicle market. 17 Honda's subsidiary in Indonesia, Honda Vision Motors, released the "e:N1" electric vehicle and revealed that the car will be available in Indonesia in 2025.

Xu Liping, a researcher at the Institute of Asia-Pacific and Global Strategy of the Chinese Academy of Social Sciences, told the Global Times that Indonesia has a large population. With the continuous development of the economy, the size of the middle class continues to increase, providing a driving force for the continued growth of the automobile market. In recent years, Indonesia has made significant progress in infrastructure construction, further promoting the development of the automobile market. Indonesia is also actively promoting the development of the new energy industry and has rich nickel resources, which has important comparative advantages for the processing and refining of key materials required for new energy vehicles. Overall, Indonesia is becoming the focus of competition among global automakers.

Previously, Japanese auto executives said they would increase their electric vehicle product lineup in Indonesia and consider local production. However, Japanese automakers have been slow to shift to electric vehicle production and have not yet established any electric vehicle production base in Indonesia.

Korean companies layout upstream and downstream of the industrial chain

Compared with the cautiousness of Japanese automakers in Indonesia's electric vehicle industry chain, Korean companies are vigorously entering every link of the local new energy vehicle industry chain.

According to South Korea's Daily Economy on the 23rd, Hyundai Motor of South Korea established the "Hyundai EV Charging Alliance" with six local private charging companies during the Indonesian Auto Show. Local companies participating in the alliance operate nearly 700 electric vehicle charging infrastructures in 429 locations in Indonesia, accounting for the majority of Indonesia's private electric vehicle charging facilities. The alliance is conceived that companies from both countries will embrace the electric vehicle ecosystem such as charging facilities at the same time in the value chain from batteries to vehicle manufacturing.

According to reports, after the establishment of the consortium, customers who buy Korean electric vehicles in Indonesia no longer need to register for membership and settlement methods of each company's application separately, and can use charging facilities through the "My Hyundai" application. Among global vehicle companies, Hyundai Motor is the first company to form such a charging consortium in Indonesia. Hyundai Motor also launched a "EV Charging Service" activity for one year, with 50 kWh of free charging per month. At the same time, it provides free slow chargers and operates ultra-high-speed charging facilities in local large shopping malls to strengthen infrastructure investment.

South Korean companies are also actively developing the upstream of the industrial chain. Nickel is a key material for producing electric vehicle batteries. As one of the countries with the largest nickel reserves and the world's largest nickel producer, Indonesia is striving to use its resource endowment to become an important market and production center for electric vehicles. Indonesia's goal is to have electric vehicles account for 20% of total domestic vehicle sales by 2025 and to produce 600,000 electric vehicles domestically by 2030.

In early July, the first power battery factory in Indonesia and Southeast Asia, jointly built by South Korea's Hyundai Motor and LG Energy, was officially put into production in West Java, Indonesia. The factory has an annual production capacity of 10 GWh and can provide batteries for 150,000 electric vehicles. It is reported that the factory will form a supporting role with the local South Korean Hyundai Motor factory to launch an "Indonesian-made" electric SUV. Indonesian President Joko Widodo said that Indonesia will become a key player in the global electric vehicle supply chain. Indonesian government officials said that the factory will help Indonesia become the first Southeast Asian country with a full ecosystem for electric vehicles.

It is reported that South Korea's Hyundai and LG plan to invest $11 billion in Indonesia to build a full electric vehicle industry chain. Hyundai Motor Chairman Chung Eui-sun said that he will rely on Indonesia's rich nickel, iron and other mineral resources to build a million-level Indonesian electric vehicle market and set a benchmark for the entire Southeast Asian electric vehicle market. Currently, the second phase of the factory is in the works, with an additional investment of $2 billion and an additional annual production capacity of 20 GWh, which is twice the current annual capacity. Analysts believe that South Korea has made Indonesia its electric vehicle production center in Southeast Asia, with an annual production capacity of 250,000 vehicles.

Expert: Chinese companies should work together to improve competitiveness

In recent years, more and more Chinese electric vehicle manufacturers have launched their flagship products in the Indonesian market and invested heavily in local production lines. According to the Indonesian website Beritasatu, "Chinese-made electric vehicles are becoming more and more popular in Indonesia. A survey shows that 66% of consumers have a positive attitude towards them, mainly because Chinese electric vehicles are affordable, innovative in function and comfortable."

As the first Chinese automaker to enter the Indonesian market and build a factory there, SAIC-GM-Wuling has taken the top spot in Indonesia's new energy vehicle market. Wuling's market manager in Indonesia told the Global Times that as early as 2015, Wuling joined forces with 16 domestic upstream parts suppliers to go to Indonesia, investing US$1 billion. In just two years, it built a vehicle manufacturing plant and parts park, as well as a production base with an annual production capacity of 120,000 vehicles. It currently has about 150 sales and service outlets. From January to June 2024, Wuling sold a total of 11,447 vehicles, including 5,969 new energy vehicles.

In the second half of 2024, Indonesia will also welcome more Chinese electric vehicle production capacity to land locally. In January this year, five Chinese automakers including BYD entered the Indonesian passenger car market. The Global Times reporter learned that BYD will build a $1 billion factory on 1.08 square kilometers of land in West Java Province. The factory will start construction in August and is expected to be put into operation in January 2026. In addition, new domestic car-making forces such as Nezha Auto will also start production in Indonesia.

Fu Yuwu, Honorary Chairman of the China Society of Automotive Engineers, told the Global Times that China's auto industry's expansion into ASEAN is an important international market strategy. In the past, this market was mainly occupied by Japanese and Korean cars. However, with the rapid development of China's auto industry, especially the progress in the field of new energy vehicles, our pace of internationalization has significantly accelerated, and we must rely on better products, services and brand power to win the market.

Recently, many Chinese automakers have launched a price offensive in the Southeast Asian market, sparking some controversy. According to Thai media reports, Chinese automakers have started a price war in Thailand, and the war is getting more intense. Many Chinese new energy vehicles have experienced several price cuts since they were launched last year, and are now more than 20% cheaper than the original price. Some automakers have also launched a limited-time cashback discount for car purchases in the summer. This has caused some consumers who have already purchased cars to feel that they have been "backstabbed by the price" and refused to repay their car loans, resulting in an increase in the overall loan interest rate for Chinese new energy vehicles.

"All overseas automakers should work together to improve the image and competitiveness of Chinese cars in the international market. In the same market, Chinese automakers should avoid vicious competition, which will not only damage the brand image, but also may affect the overall development of China's auto industry." Fu Yuwu analyzed that Japanese and Korean auto brands have a deep market foundation and brand influence in the ASEAN market, and these brands have 40 to 50 years of overseas market experience. As latecomers, Chinese automakers have a short time of industrial internationalization, and their brand awareness and market influence need to be improved.

Fu Yuwu told reporters that some practices of Japanese and Korean automakers in developing markets in Asia are worth learning from for Chinese companies. For example, when entering the Chinese market, Japanese automakers such as Toyota exported their corporate culture by establishing training centers. Chinese companies should not only study local cultural customs, but also assume social responsibilities and adapt to the needs of local consumers.