(Bloomberg) — On a recent Thursday morning in Hanoi, Chinese electric vehicle giant BYD Co. began the day with a showroom devoid of customers. Just a few kilometers away, a dealership for upstart Vietnamese EV maker VinFast Auto Ltd. was buzzing, with would-be buyers poring over new models.
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“We see an average of 20 customers every day during weekdays,” said Tran Trung Hieu, a VinFast salesman in black suit and tie. “That can double or triple on a weekend.”
BYD’s entrance into Vietnam, whose youthful population is keen to buy electric and hybrid cars, underscores both the opportunities and challenges Chinese companies face as they seek to push into Southeast Asia.
The region home to hundreds of millions of affluent consumers is an obvious landing point for Chinese automakers, which have been cut off from the US and placed at a competitive disadvantage in Europe due to tariffs.
But early gains have given way to some harsh realities.
While Southeast Asia’s upwardly mobile population may aspire to own EVs, still-pricey cars are beyond the reach of many. Access to a reliable electricity source isn’t always a given, and even if it were, EV charging infrastructure across many countries is spotty. In some places like Vietnam, consumers prefer more familiar brands.
Southeast Asia, which has around 5 million cars on its roads versus some 250 million motorcycles, is a far more complex market than China, said Ron Zheng, a partner at global consultancy Roland Berger GmbH. To crack the region, Chinese carmakers will need to navigate different cultures, languages and regulatory systems.
“There’s no doubt smart EVs will ultimately replace traditional internal combustion engine cars,” Zheng said. But it took China around five years of government-driven incentives before consumers started making the switch of their own volition, and “you can reference that time line to Southeast Asia, as well.”
Most of the region’s consumers are at least receptive to foreign brands — witness the historic popularity of Japanese automakers like Toyota Motor Corp. While their grip has weakened, Japanese companies, including Nissan Motor Co. and Honda Motor Co., accounted for about 68% of passenger car sales in Southeast Asia in 2023. According to Roland Berger forecasts, Chinese carmakers’ share should rise to around 13% by 2030, from 6% in 2023.
Country-by-country though, the numbers show it’ll be a long slog.
EV makers sold just 43,188 vehicles in Indonesia last year, for instance, a fraction of the around 860,000 passenger cars sold in total, according to industry association Gaikindo. At those levels, it’s hard to see how the government’s target of 2 million EVs on Indonesia’s roads by 2030 can be met.
“Maybe the rich are more aware about EVs, but not everyday people,” said Hairayani, a school teacher based in Jakarta who like many Indonesians only goes by one name. “Plus, there’s the price factor and the extra hassle of finding a charging station.” Hairayani said he doesn’t plan on moving away from his gas-powered car anytime soon.
In Thailand, where buyers benefit from a government subsidy of 100,000 baht ($3,000) per vehicle, EV sales dropped 9.3% to 66,732 units in 2024, short of the Electric Vehicle Association of Thailand’s target of 80,000. Thailand has the highest level of household debt in Southeast Asia, and many consumers are now subject to stricter bank loan approvals.
Things didn’t improve in January, when sales of battery-powered EVs slipped almost 8%, Federation of Thai Industries data show.
The situation for Chinese EV makers is even tougher in places where there are local incumbents, like Vietnam.
VinFast, with its expanding network of proprietary charging stations and an entry-level mini EV that costs around $11,700, is easily outselling Chinese rivals. Of the nearly 91,500 EVs sold in the country last year, more than 87,000 were VinFast models. Many of those sales were to VinFast-related parties, in particular the nation’s largest taxi service, Green and Smart Mobility JSC, which is 95%-owned by VinFast founder Pham Nhat Vuong.
Almost 70% of some 1,100 Vietnamese living in wealthier cities surveyed in July by KPMG said they’d be inclined to make the switch to either an electric or hybrid vehicle. That gives BYD and other Chinese automakers an opportunity to strengthen their toehold.
BYD has launched several models in Vietnam, with prices ranging from 659 million dong ($25,800) to as much as 1.36 billion dong. But winning over consumers will take some doing.
“It’s not practical to own a Chinese EV in Vietnam,” said Thinh Hanh, a 41-year old Hanoi resident who came to the VinFast showroom to look for a VF 6 model with his brother. Thinh has been driving a VF 9 since 2023 and likes the high level of personalization it provides. “There’s a lack of charging stations to suit Chinese cars.”
There’s also lingering reluctance to buy Chinese in light of historic tensions between the two Communist countries. “People are a bit concerned because this is a Chinese brand,” said Dong Hai, a salesman at Chery Automobile Co.’s showroom in Hanoi. Chery doesn’t have an EV on offer yet in Vietnam but plans to introduce one in the second quarter, he said.
Until consumer wariness fades and EV adoption gathers pace more broadly, Chinese companies are doing what they can to raise awareness.
Guangzhou Automobile Group Co.’s subsidiary GAC Aion has booked advertising space on the huge billboards that greet travelers coming into Bangkok from Suvarnabhumi International Airport, while BYD recently opened a showroom the size of a soccer field in downtown Jakarta.
Chinese automakers are also building production facilities across the region, like BYD’s $1.3 billion plant in Indonesia that’s expected to start operations in January next year. Chery meanwhile has plans to build an EV factory in Rayong, Thailand, that’s expected to commence production this year, with an annual output of 50,000 vehicles.
Southeast Asia will present “short-term turbulence” for Chinese EV makers, Roland Berger’s Zheng said. “The region will pose a pretty huge challenge in terms of actual operations, including logistics and mass production.”
–With assistance from Patpicha Tanakasempipat and Nguyen Xuan Quynh.
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