Chinese Automakers Disrupt Japan’s Stronghold in the ASEAN Market — What Strategies Should Japanese Manufacturers Pursue?

　In the past, Japan, the U.S., and European automakers held dominant market shares in China, having spent decades establishing local R&D and manufacturing operations. However, the current market landscape has shifted dramatically.

　Looking at Western automakers: in 2024, General Motors recorded a special loss of up to USD 5.6 billion (approximately JPY 840 billion) due to poor performance in China, including plant closures. Volkswagen saw its 2024 vehicle sales in China drop by over 25% compared to 2021. Japanese manufacturers are also struggling. Toyota's sales declined by 7.7% year-on-year in 2024, while Honda’s plunged by 30.7%.

　In contrast, Chinese automakers that grew rapidly in their domestic market are now aggressively expanding overseas. As of 2023, China surpassed Japan to become the world’s largest vehicle exporter. In 2024, Chinese vehicle exports continued their explosive growth, increasing by 23.8% year-on-year. (See Figure 1)

　Leading the charge is BYD, which now sells new energy vehicles (NEVs), including EVs, in 88 countries and regions. As of August 2024, BYD had exported over 510,000 units in total. Following closely behind, second-tier players such as Geely, NIO (Shanghai NIO), and Great Wall Motor are also accelerating the establishment of overseas production and sales hubs.
What’s less widely known is that this overseas expansion by Chinese automakers is not merely opportunistic—it’s driven by necessity. Rather than being driven by sheer optimism, many of these firms are increasingly concerned about the future sustainability of their businesses.

　The main reason: their aggressive capital investment strategies have led to serious overcapacity. Domestic demand alone is no longer sufficient to maintain acceptable plant utilization levels. China's EV market growth is slowing, with domestic sales in 2023 rising just 6.0% year-on-year. The EV segment, in particular, is facing a production glut: in 2023, China had production capacity for 13.46 million EVs, but utilization hovered at just 57%.
This excess capacity extends to components as well. For example, lithium-ion battery production in China is estimated to be 3.3 times higher than domestic demand, and 1.5 times global demand.

　Furthermore, China’s domestic EV market is becoming increasingly dominated by a single player—BYD. For other automakers, survival now hinges on securing a foothold in overseas markets.