Toward the ASEAN–Japan Next-Generation Vehicle Industry Masterplan
Alloysius Joko Purwanto (left) is an energy economist with the Economic Research Institute for ASEAN and East Asia (ERIA); Yasushi Ueki is an ERIA research fellow.
#opinion
Countries in the Association of Southeast Asian Nations (ASEAN) are shifting into a higher gear in the global race for electric vehicle (EV) manufacturing. Several ASEAN member states (AMS) are moving beyond their traditional roles as importers or assemblers to become full-fledged vehicle producers.
In early December 2025, Malaysia’s largest automaker, Perodua, unveiled its first domestically developed EV model, the QV-E. This milestone made Perodua the second national EV brand in ASEAN, following Viet Nam’s VinFast, which launched its locally produced VF e34 in late 2021.
Indonesia, meanwhile, is following a pathway similar to Thailand’s, developing domestic EV manufacturing capacity with strong support from foreign investment. Under a policy introduced in February 2024, battery electric vehicle (BEV) importers were granted import duty waivers until December 31, 2025. Between February 2024 and December 2025, according to data from Gaikindo, Indonesia imported 125,769 BEVs — accounting for 47% of total car imports during that period. From 1 January 2026, these importers are required to transition into producers, manufacturing domestically the same number of BEVs they imported under the waiver scheme.
Supported by incentive programmes across the region, BEV sales in ASEAN are projected to reach around 12%–17% of total vehicle sales in 2025 — well above GlobalData’s reported figures of 5% in 2023 and 6% in 2024.
Despite this growing momentum on the demand side, ASEAN’s automotive sector faces three major transition-related challenges.
First, a survey conducted by the Economic Research Institute for ASEAN and East Asia (ERIA) indicates that automotive suppliers and original equipment manufacturers (OEMs) remain hesitant to commit further investment in technological transformation. The main reasons are policy uncertainty and unclear market outlooks, which undermine long-term planning.
Second, overall vehicle sales in ASEAN have stagnated for more than a decade. Since 2012, combined annual sales have never exceeded 3.4 million units. This stagnation worsened in 2023 and 2024, with particularly sharp contractions in Indonesia and Thailand.
Third, the region’s trade competitiveness remains fragmented. Compared with India and China, ASEAN’s automotive industry is less integrated and unevenly developed, limiting economies of scale. Trade data from 2013 to 2023 shows Thailand functioning as the region’s de facto automotive hub. Indonesia and the Philippines have strengths in basic metals, while Singapore, Malaysia and the Philippines are competitive in electrical machinery. This pattern highlights fragmentation along the regional value chain, while China and India — benefiting from larger production scales — continue to exert strong competitive pressure on ASEAN.
To address these challenges, ERIA has been developing the ASEAN–Japan Next-Generation Vehicle Industry Masterplan, in response to the ASEAN–Japan Co-Creation Initiative announced by former Japanese Prime Minister Kishida at the ASEAN–Japan Summit in December 2023.
At the most recent ASEAN Economic Ministers (AEM)–Japan Ministry of Economy, Trade and Industry (METI) consultation in Kuala Lumpur, a key finding from this study emphasised that ASEAN must pursue diverse and flexible pathways to maintain its strategic role in the global automotive supply chain.
These pathways are anchored in five vision pillars: establishing ASEAN as a competitive export hub for internal combustion engine (ICE) and hybrid electric vehicles (HEVs); fostering an advanced, cost-competitive, and integrated automotive supply chain; gradually integrating into the plug-in and battery electric vehicle (xEV) component supply chain; decarbonising automotive production and logistics; and developing innovative mobility services tailored to ASEAN markets.
To realise this vision, the masterplan proposes a strategic framework structured around three core areas of work.
First, during the 2025–2035 period, ASEAN should prioritise meeting strong regional demand for ICE and HEVs, supported by the expansion of sustainable biofuels. This approach must remain aligned with national and regional decarbonisation targets. At the same time, ASEAN governments should fully support the development of the xEV industry and market. Beyond 2035, greater emphasis should be placed on low-emission HEVs — enabled by wider use of biofuels and e-fuels — and on the maturation of regional xEV industries, positioning ASEAN as an integrated component of the global xEV supply chain. Policy predictability and targeted fiscal incentives for sustainable biofuel and e-fuel ecosystems will be critical.
Second, the ASEAN automotive industry must undergo transformation along three dimensions: decarbonisation, digitalisation and servitisation. By embedding decarbonisation and digitalisation into their core business strategies, firms can shift from conventional product sales towards bundled mobility solutions or “outcome-as-a-service” models. This transformation spans three phases: strengthening renewable energy supply security upstream; aligning industry practices with global decarbonisation standards midstream; and developing downstream systems such as regional vehicle inspection regimes, OEM-led maintenance services, and diversified vehicle ownership options bundled with services. Key policy actions include investing in green and digital human capital, developing green industrial parks, and establishing regulatory frameworks that support open innovation.
Finally, deeper regional collaboration is essential to enhance ASEAN’s collective market size, harmonise policy directions, and improve connectivity across member states. Such collaboration would allow countries to specialise in complementary roles — ranging from export hubs and manufacturing bases to supporting and technology-driven mobility hubs — thereby amplifying regional competitiveness.
Partnership with Japan remains central to this effort. Collaboration with Japanese firms can strengthen ASEAN’s industrial capabilities and expand its capacity for parts production and exports across multiple powertrains. ERIA’s study identifies eight priority co-creation areas: development of sustainable biofuel and e-fuel economies; human resource development; commonisation of automotive regulations; recycling and circularity frameworks; data and information standardisation; green energy industrial parks; and enhanced support for the ASEAN Single Window.
Together, these collaborative initiatives offer a coherent and actionable pathway to advance the ASEAN–Japan Co-Creation Initiative. They reaffirm Japan’s role as a long-standing and forward-looking partner, while translating strategic alignment into tangible progress for ASEAN’s next-generation automotive industry.
Alloysius Joko Purwanto is an energy economist with the Economic Research Institute for ASEAN and East Asia (ERIA); Yasushi Ueki is an ERIA research fellow. The views and opinions expressed are their own.
-Phnom Penh Post-
———————
