What’s Next for Southeast Asia’s Automotive Industry in 2025?
Southeast Asia’s automotive industry has experienced significant growth in the past decade. This was evident when Thailand ranked among the world’s top 10 automotive producers in 2012, with annual production exceeding 2.45 million vehicles (Techakanont, 2017). Indonesia also showcased its potential, with vehicle production surpassing 1 million units in the same year (Rachman, 2012). Additionally, notable national automotive brands such as Proton and Perodua in Malaysia, as well as Vinfast from Vietnam, have made their mark in the industry. Proton and Perodua have been active for over two decades in Malaysia, while Vinfast, despite being relatively new, has expanded internationally and is now establishing a manufacturing base in the United States (Tempo, 2024). However, the industry’s future does not look as promising today. The COVID-19 pandemic drastically impacted all sectors, including the automotive industry. In April 2020, during the initial global lockdown, there was a significant drop in four-wheeled vehicle production across Southeast Asia. Thailand and Indonesia were severely affected, with production plummeting by approximately 80% compared to the same period the previous year (Thailand Automotive Institute, 2020). This bleak scenario was compounded by ongoing global economic uncertainty in the aftermath of the pandemic. Challenges such as the prolonged Russia-Ukraine conflict, rising energy costs during the post-pandemic recovery period, and escalating trade tensions between the United States and China, including unilateral tariff impositions by the U.S., further strained the industry. These tensions have exerted substantial pressure on the sector. As Chinese industries adapted their strategies to focus on markets outside the U.S., Southeast Asia saw a surge in the presence of Chinese electric vehicles (EVs) (Bhaumik, 2023). Additionally, the U.S.’s unilateral tariff policies did little to aid the industry’s recovery in Southeast Asia. Thailand, for instance, faced direct repercussions due to its significant export of automotive components to the U.S. (Board & Mahmud, 2025). It is important to note that the automotive industry has extensive ripple effects due to its interconnected supply chain. While assembly units are the ones that are visible to public consumers, the industry is supported by thousands of suppliers that provide components such as steel for vehicle frames, plastics for accessories, copper and cables for electrical systems, and semiconductors for embedded electronics (Dicken, 2011). Thus, any slowdown in the automotive industry impacts various related sectors in Southeast Asia, where most components are locally sourced (Hsiao, 2024), further amplifying economic challenges. The slowdown in Southeast Asia’s automotive industry is evident in several countries. Nissan decided to close its assembly plant in Indonesia in 2020, effectively ceasing sales under the Datsun brand (Tempo, 2020). By 2024, other manufacturers like Subaru and Suzuki followed suit, halting their operations in Thailand and Malaysia (Marus, 2024). Honda also announced the deactivation of one assembly plant in Thailand in 2025 due to declining production output (Leussink, 2024). In response, Southeast Asian countries have actively implemented measures to sustain their automotive industries. One notable strategy involves promoting the development of EV production bases. In 2019, Thailand introduced incentives for investments in EV-related industries, including battery manufacturing and assembly of motorcycles, cars, buses, and trucks (Thailand Board of Investment, 2019). Indonesia issued similar policies through Presidential Regulation No. 55 of 2019, which provided incentives for EV component and assembly industries and tax breaks for EV ownership (Presiden Republik Indonesia, 2019). Malaysia unveiled its fourth National Automotive Policy (NAP 2020) in 2020, focusing on EV industry development and envisioning Malaysia as a regional production hub (Malaysia Ministry of Trade and Industry, 2020). Vietnam also rolled out EV-related incentives in 2023, complementing consumer EV ownership benefits that had been in place since 2022 (Ha & Phung, 2023). Amid these dynamics, Southeast Asia’s automotive industry continues to adapt to domestic, regional, and global conditions. Adaptation encompasses adopting new automotive technologies and devising strategies to endure and grow amidst economic and political uncertainties. As noted by Board and Mahmud, Southeast Asia’s automotive industry is less dependent on markets in developed countries like the U.S. or Europe, except Thailand, which has a higher export volume relative to its domestic market. Strengthening intra-ASEAN markets and expanding to untapped Southern markets are crucial (Board & Mahmud, 2025). This approach is further complemented by domestic market initiatives offering tax incentives to boost EV adoption, ensuring the sustainability of local automotive industries. Additionally, it is essential to recognize that the automotive industry is not solely about assembly units but also involves the broader supplier network. As various automotive principals establish assembly bases in the region, this encourages the development of local automotive component industries. Governments across Southeast Asia are leveraging this opportunity by offering incentives for advanced technology investments and vehicle assembly processes, both conventional and electric, to maintain industry stability and performance. Despite facing various global challenges, Southeast Asia’s automotive industry has shown resilience through its distinctive strategies and characteristics. Governments in the region are continually advancing industry capabilities through incentives for technological development and modern vehicle assembly methods, ensuring relevance in the future. Such efforts are complemented by consumer incentives aimed at boosting domestic market adoption. Additionally, ASEAN governments can enhance regional cooperation to expand the scope of the automotive market, which has traditionally been limited. By diversifying markets, Southeast Asia’s automotive industry can not only survive but also thrive, positioning itself as a regional or even global production hub. References Bhaumik, T. (2023). The US-China Trade War: Impacts On Chinese And American Automotive Firms In Terms Of Market Performance, Financial Performance, And Global Competitiveness. The National High School Journal of Science. Board, J., & Mahmud, A. H. (2025, April 4). Trump’s 25% auto tariffs: Price cuts and ‘safe mode’ – how Southeast Asia players might ride out turbulence. from Channel News Asia: https://www.channelnewsasia.com/asia/trump-tariffs-automotive-car-trade-thailand-southeast-asia-5044141 Dicken, P. (2011). Global Shift: The Changing Contours of the World Economy (6th ed.). New York: The Guilford Press. Ha, T., & Phung, T. (2023, 4). Incentives proposed for EV manufacturers, buyers in Vietnam. from Vietnam News: https://news.tuoitre.vn/incentives-proposed-for-ev-manufacturers-buyers-in-vietnam-10374795.htm Hsiao, J. (2024, Jan./Feb.). Overview of Automotive and Components Production and Sales in ASEAN. Fastener World(204), pp. 231-235.
Indonesia’s Foreign Policy in Shaping Indo-Pacific Geostrategy Through RCEP
The difficulty of reaching agreements through the World Trade Organization (WTO) has led world leaders to seek alternative means of trade cooperation, such as Regional Trade Agreements (RTA). Thomas Oatley (2012) views RTA as a more promising way to negotiate and implement trade agreements. RTA is a way to enhance a country’s market access with a crucial trading partner, indicating a strong commitment to economic reform to attract foreign investors. RTA aims to bolster bargaining power as a group in multilateral trade negotiations and it is easier to establish than global trade agreements, which involve a larger number of countries with diverse interests. While operating on a regional scale, RTAs can have implications for global trade governance (Oatley, 2023). Starting in 2000, world leaders, including the Indo-Pacific region, have considered various frameworks for establishing RTA. One result of this thinking is the Regional Comprehensive Economic Partnership Agreement (RCEP). RCEP was initiated by Indonesia as the chairman of ASEAN in 2011. RCEP involving 10 ASEAN member countries (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam) and 6 non-ASEAN countries which already have a Free Trade Agreement with ASEAN (Australia, China, India, Japan, New Zealand, and South Korea) (Oba, 2016). However, India decided to withdraw from RCEP in 2019. Despite the delays and hurdles in the ratification process due to the Covid-19 pandemic, RCEP came into force for Indonesia on 2 January 2023, coinciding with the start of Indonesia’s ASEAN Chairmanship. RCEP encompassed various aspects such as trade in goods and services, investment, economic and technical cooperation, intellectual property, competition, dispute resolution, e-commerce, and support for small and medium enterprises in ASEAN member States and ASEAN trade partners (ASEAN, 2023). RCEP AND ITS VAST POTENTIAL Beyond trade, the Indo-Pacific has emerged as a concrete area for regional cooperation across various fields. Increased RTA will certainly help in reshaping policies in the region. Such advantages place the Indo-Pacific as the foremost channel for economic collaboration. It is important for Indonesia to place itself as the pivotal country to expand markets and integrate Indonesia’s economy into the Regional Value Chain and Global Value Chain through RCEP (Gultom, 2020). Especially, RCEP serves as the umbrella for ASEAN’s economic collaboration with partner countries which creates a favorable economic climate in the region. It has the potential to create spill-over effects that can enhance Indonesia’s efforts in achieving its interests (Springer, 2021). Collectively, RCEP represents a significant market. It covers 30.2% of the total world GDP and 30% of the world’s population, with 27% of global trade and 29% of world FDI. This vast potential suggests that RCEP could offer substantial opportunities for its member countries. RCEP is expected to attract more foreign direct investment to Indonesia from both local and foreign sources. Because of its vast market with great potential, Indonesia sees RCEP as a productive framework to thrive. It is more than just a trade agreement, it is a comprehensive economic cooperation pact that enhances security, regional political stability, and reinforces ASEAN’s centrality in Southeast Asia and the Indo-Pacific (Maulana, 2021). INDONESIA’S FOREIGN POLICY IN UTILIZING RCEP Various geopolitical debates surround the running of RCEP especially when Indo-Pacific Economic Framework for Prosperity (IPEF) was initiated not long after. Amid the economic tensions between the US, which is part of the IPEF, and China as a member of RCEP, both partnerships in the Indo-Pacific region are seen as a battlefield and competition arena for major powers to expand their influence. However, Indonesia emphasized that RCEP does not stand as a competitor, but rather RCEP as a balancing act (Kavanagh & Cuéllar, 2024). Therefore, the further path of RCEP must be cautious given that the US and China each have partnerships in Indo-Pacific. Indonesia and member countries need to pay close details to prevent new tensions and ensure it can serve as a mediator by establishing a free and open order based on the principles of the rule of law. RCEP is a great opportunity for Indonesia to lead the middle power in geostrategy. Beside as the initiator, Indonesia is also a key coordinator in the RCEP negotiations with unwavering commitment to prioritizing collective regional development to sustain trade, coupled with domestic reforms aimed at eliminating trade barriers, particularly within the RCEP framework (Patunru & Aprilianti, 2020). As a pivotal member of ASEAN, Indonesia also holds the potential to contribute significantly to maintaining geopolitical stability and collaboration in bridging differences and adherence to principles. Indonesia encourages the participation of ASEAN to become a bridge between large and small countries in discussing the emerging Indo-Pacific strategic concept. Indonesia wants RCEP to reflect the value of its initiator, which allows members to have their opinion and enter the partnership formally on their terms. Not to forget that RCEP is an ASEAN-driven initiative and with barriers being lifted, ASEAN member states have the opportunity to diversify their trading partners, thereby bridging any country (Sandrina & Prastyono, 2024). Being a member of RCEP is a step towards implementing Indonesia’s foreign policy in promoting regional stability and advancing shared interests over time. Compared to others, Indonesia’s policy in the Indo-Pacific region is more inclusive, less overtly geopolitical, and places a stronger emphasis on collaboration. Indonesia’s commitment and participation in RCEP is by promoting free and active foreign policy with an orientation towards national interests and world peace. This foreign policy is not transactional, rather it is rooted in principles and long-term strategic objectives. Through this foreign policy, Indonesia wants to include all actors without isolating any particular player and maintaining the principle of neutrality by fostering peaceful economic relations with both the US and China (Agastia, 2020). In particular to free and active foreign policy, Indonesia will show neutrality by not favoring any particular actor and will cooperate with every country. And as a developing country, Indonesia will have the potential to bridge other developing countries with major powers. There is no reference to how the RCEP should proceed or develop, especially its unprecedented size and member composition.
Navigating the Future: UNHCR Strategies in Addressing the Rohingya Refugees Crisis in Indonesia
Hundreds of Rohingyas have landed on the coast of Weh Island, Sabang, Aceh. They landed at Batu Hitam Beach, Jurong Keuramat, Gampong Ie Meule. They consisted of adults and children, both men and women. These Rohingyas want to be treated as refugees even though according to the Immigration Act, their presence is illegal as they did not use valid travel documents and did not enter through immigration checkpoints. The Acehnese people around the coast are also busy rejecting the presence of the Rohingyas and asking them to return to their place of origin in Myanmar. The wave of Rohingya arrivals to Indonesia through Aceh began in 2015. In the first wave of arrivals, they received assistance from Acehnese fishermen. The Rohingyas seek a livelihood in Indonesia and some of them often lead to social conflicts with the people of Aceh and Indonesia in general. Before coming to Indonesia, they targeted Malaysia as a place to earn a better living. In Malaysia, the Rohingya migrants were able to find work because a number of Malaysian companies needed manual laborers with competitive salaries. However, the Malaysian people and government have not wanted the Rohingya migrants from Myanmar to come for the past few years. The reason is that the Rohingyas often create social conflicts with local residents and criminal acts committed by some of the Rohingyas. However, the Malaysian people and government have not wanted the Rohingya migrants from Myanmar to come for the past few years. The reason is that the Rohingyas often create social conflicts with local residents and criminal acts committed by some of the Rohingyas. Actually, the presence of Rohingyas is not Indonesia’s business. Indonesia should not treat the Rohingya as refugees since it is not a party to the 1951 Refugees Convention. If the Rohingyas are to be treated as refugees, this is a matter for UNHCR, and Indonesia should only assist wherever possible given that the Rohingyas are currently in Indonesia. The extent of Indonesia’s assistance is stipulated in Presidential Regulation No. 125/2016 on the Handling of Refugees from Abroad. Introduction Fleeing from ethnic persecution committed by the Myanmar military junta and local Buddhist extremists in the Rakhine State, thousands of Muslim Rohingya traversed hundreds of kilometers of dense forests and embarked on perilous voyages across the Bay of Bengal to seek refuge in Bangladesh. Currently, over 960,000 individuals have sought refuge in Bangladesh, with the majority residing in Cox’s Bazar, the site of the largest refugee camp globally (Rohingya Refugee Crisis Explained, n.d.). Facing uncertainty about their future in Cox’s Bazar, thousands of them have risked their lives to cross vast, treacherous seas in crowded, dilapidated boats with the hope of resettling in another country. They are willing to take such a risk, hoping to join many of their undocumented community members in economically developed neighbouring countries, notably Malaysia (MMC, 2021) . Over the last decade, waves of Rohingya boat people have managed to reach the coastal shores of Aceh, a province of Indonesia located in the northern tip of the Malacca Straits. Initially, the Acehnese and provincial government accepted and welcomed the arrival of the Rohingya refugees, believing that these refugees would only stay in the country temporarily. UNHCR said that since November 2023, 1.200 Rohingya have landed in Aceh. UNHCR noted that the total number of refugees in Aceh so far has reached 1.608, including 140 people who stayed in the past year (BBC, 2024). The facilities and assistance provided by the Indonesian government to Rohingya refugees in Aceh are shelter, food assistance, health care, clean water assistance, sanitation, psychosocial support, and other basic assistance (Darnela and Nugroho, 2017). With this, Rohingya refugees are greatly helped to fulfill their needs. Although the Indonesian government will still prioritize the interests of the local community (Kompas, 2023). Nonetheless, the presence of Rohingya refugees currently triggers intense debate among the Indonesians. The arrival of Rohingya refugees in Aceh was rejected by the people of Aceh. The people of Aceh have their own reasons for refusing to give refuge to the Rohingya immigrants. The reason is that Rohingya migrants are said to give a bad impression to the community. Rohingya refugees give the impression of bad behaviour and actions and are not in accordance with the customs and norms of village regulations. In addition, they are also unable to maintain cleanliness and do not heed Islamic law and customs among the community. The Ministry of Foreign Affairs said Indonesia does not have a regulatory obligation to accommodate refugees. This was done on humanitarian grounds (Rahayu, Anam, and Dewanto, 2023). Significant numbers of Acehnese refuse to accept these refugees, claiming that they often cause trouble. Many of these refugees were embroiled in petty theft, throwing people’s aid into the sea, leaving refugee camps, disobeying local community norms and customs, and abusing underage children (Tusriyanto et al, 2023). UNHCR has predicted that a wave of Rohingya refugees will soon enter Indonesian waters. There are several actions that UNHCR has taken so far in dealing with Rohingya refugees in Indonesia. Apart from fulfilling humanitarian needs, they also provide protection to the people from Myanmar. Many Rohingya refugees need food, water, shelter, education and health assistance. UNHCR also plays a role in facing challenges in the form of potential friction between refugees and the people in Indonesia. UNHCR also registers refugees, provides protection and legal assistance, and prevents gender-based violence. In addition, UNHCR also ensures the provision of adequate shelter, health care and sanitation, supports education and skills development, finds livelihood opportunities, and distributes aid. They claim to be involved in several dialogs to ensure a voluntary and safe return process. UNHCR plays a role in monitoring and finding solutions to problems, in addition to being an initiator, facilitator, and determinant. This is the role that UNHCR plays in handling refugees in Indonesia. UNHCR’s Compassionate Response to the Rohingya Refugees Crisis The UNHCR and its partners are currently providing active assistance in addressing the humanitarian and protection requirements of Rohingya