From May 15 to 22, the Overseas Investment and Trade Branch of the Automobile and Motorcycle Accessories Industry Chamber of the All-China Federation of Industry and Commerce and the Auto Parts Circle jointly organized an in-depth business investigation of the auto parts industry in Malaysia and Indonesia. This business investigation was all-round and multi-dimensional. We participated in the auto parts exhibitions of the two countries, visited the industry associations of the two countries, connected with major dealer groups of the two countries, conducted in-depth market research, and negotiated with Chinese companies that have invested… The whole eight days were non-stop and benefited a lot. Combined with the actual research situation of the two countries, we have sorted out the relevant information on the export of Chinese auto parts products for reference by industry colleagues.
How many opportunities are there in these two countries
(I) Malaysia
The total population of Malaysia is about 34.3 million. The population aged 0-14 is 7.7 million, accounting for 23.2%; the population aged 15-64 is 23 million, accounting for 69.3%, and the population over 65 is only 2.5 million, accounting for 7.5%. Overall, Malaysia is a young society. The Chinese are the second largest ethnic group in Malaysia, accounting for about 23% of the total population.
Malaysia’s car ownership is at a relatively high level in Southeast Asia. Malaysia’s car ownership has reached 18 million, and the car ownership per thousand people has reached 528, which is much higher than China’s current level; the number of motorcycles is about 10 million. Malaysian cars are mainly occupied by local brands, Japanese brands and German brands. The local brand Perodua has long ranked first in car sales, with sales of 235,700 units in 2023, of which Axia, Bezza and Myvi accounted for the largest sales. Proton ranked second, with sales of 100,100 units in 2023, and its main selling models are Persona and Saga.
In recent years, Chinese automobile companies have accelerated their layout in Malaysia. In July 2022, Great Wall Motors used its production capacity in Thailand to radiate the Malaysian market and established a Malaysian subsidiary in Malaysia. In October of the same year, BYD announced its layout in the Malaysian passenger car market and planned to achieve localized production. At present, the Chinese brands selling in Malaysia mainly include Geely, Changan, BAIC, King Long, Dongfeng, Jiangling, etc.
Japanese brands occupy a high market share in Malaysia, and the annual sales of models such as Honda City, Toyota Vios, Vitz (Yaris) are all over 10,000. Many Japanese manufacturers including Toyota, Honda, Nissan, Mitsubishi, Isuzu, Hino, etc. have invested in and built factories in Malaysia to achieve localized production.
In addition, in addition to the above brands, many multinational automakers such as Mazda, Volkswagen, BMW, Mercedes-Benz, Kia, etc. have achieved localized production. Global well-known parts manufacturers such as ZF, Delphi, Continental, Bosch, Japan Kayaku, PD Kawamura, Akashi Machinery Industry and Denso also use Malaysia as their production base for radiating other ASEAN countries.
(II) Indonesia
Indonesia is the fourth most populous country in the world, with a total population of approximately 277 million as of 2023. In 2022, the proportion of people aged 65 and above in Indonesia is 6.9%, and the proportion of people aged 0-14 is 25.2%, which is a multi-child society. According to the head of the relevant investment department of Indonesia, the average age of Indonesia is 26-27 years old, and its youthfulness is surprising.
In 2021, Indonesia’s automobile production has returned to the million level, reaching 1.12 million vehicles, and in 2023, Indonesia’s automobile production has reached 1.4 million vehicles. With the recovery of Indonesia’s national economy, the increase in per capita income and the strong support of the Indonesian government for the automobile industry, especially new energy vehicles, Indonesia’s automobile industry is expected to develop further rapidly. In 2023, Indonesia’s automobile ownership will be 24.6 million (but its motorcycle ownership will be 112 million), an average of 89 vehicles per thousand people, which is temporarily at a relatively low level in the world. Indonesia’s per capita automobile ownership still has a lot of room for growth. With the continuous increase in per capita income, Indonesia is about to enter a stage of mass popularization of automobiles, and has the basic conditions for a large market for automobile production and sales.
Due to the supply of vehicle types and the number of family members, the 7-seat MPV model has dominated the Indonesian passenger car market for a long time, accounting for about 35% of the market share; in recent years, relying on the advantages of styling, configuration, comfort, etc., SUV models have gradually gained market share and become the most growing segment at present.
Indonesia has no well-known domestic cars. The Indonesian automobile market is also dominated by Japanese brands. Japanese car companies have long been operating in the Indonesian market with cost, brand and sales advantages, basically accounting for more than 90% of the market, and the remaining 10% is Korean, American, European and Chinese car brands.
SAIC-GM-Wuling is the earliest Chinese car company operating in Indonesia. We conducted on-site research in the SAIC Industrial Park, which brings together 13 supporting parts factories. The current annual production and sales volume is about 25,000 vehicles (mainly fuel vehicles). Next are SAIC, Dongfeng, Chery and Geely. Among them, Wuling and Dongfeng are produced locally; Chery and Geely are exported locally; SAIC exports through the Thai factory.
BYD has emerged as a dark horse. In a short period of time after entering the Indonesian market, its sales have been very good. Currently, it sells about 3,000 vehicles per month, and it has been determined to start production in Indonesia.
(III) Comparison of the auto parts industry in the two countries
From the perspective of the auto parts industry, due to the large number of cars, Malaysia’s auto parts industry is developed and the system is complete. Many Malaysian dealers and manufacturers have already covered the sales network in neighboring countries. Indonesia is an emerging market, and the industrial structure needs to be improved.
There is an advantage in doing auto parts business in Malaysia. Basically, the bosses are all Chinese, there is no language barrier, and most of the payments can be made with Alipay. We went to an auto parts park for a “cold call”. Knowing that we are auto parts colleagues from China, they were very warm and received us. Basically, they answered all questions.
But Indonesia is different. Although the auto parts sales are mainly Chinese, most of them are fourth-sixth generation Chinese. Most of them have difficulty communicating in Chinese. Payment can only be made with Indonesian rupiah or credit card. Moreover, due to historical reasons, the real auto parts bosses are hidden behind the scenes. The store is full of clerks, and it is difficult to get the boss’s contact information.
There are various translation software or tools, and communication is not the main problem. I personally think that what really matters is the market and products. Malaysia is a mature market, and it is difficult to enter without advantageous products (services); Indonesia is an emerging market with huge potential, but because the entire automobile and after-sales market is monopolized by Japanese companies, it is difficult to enter. But I believe that once a good incision is found to enter, the market with a population of nearly 300 million has a very broad space. Many Chinese companies are very optimistic about the Indonesian market.
From product export to industry export
Made in China, sold to the world. It really lives up to its name. In the auto parts exhibitions in the two countries I participated in this visit, more than 80% of the exhibitors were Chinese companies. This is a mixed blessing.
What is good is the status of Chinese auto parts and the improvement of the industrial chain. But at the same time, what is worrying is that China’s auto parts industry is large but not strong, and most companies are engaged in fierce competition in low-end products, which has spread from domestic to foreign countries.
The most critical issue at present is that Chinese auto parts products are still at the stage of exporting products. There is nothing wrong with selling products, but auto parts products are different from others and must be supported by perfect after-sales service. Otherwise, it is just OEM or bulk orders, and the bulk of the profits are not in their own hands, and there is no guarantee of control over the channels.
Japanese and Korean car companies go overseas in another mode, that is, they go overseas in groups, from manufacturing to assembly, from sales to after-sales service, and even financial institutions are deeply bound to provide corresponding services. Everyone jointly develops new markets, and even holds internal meetings to discuss pricing and profit distribution systems. On the one hand, this can provide a full range of services and guarantees, and on the other hand, it also guarantees a reasonable profit margin. For example, the Indonesian Auto Parts Association that we visited this time, of their hundreds of member companies, two-thirds of them have Japanese backgrounds. This means that Japanese companies have a very strong dominance in Indonesia and can even influence government decisions. Chinese car companies have not really opened up the Indonesian market, and are currently only working hard in the low-end car (economy) market.
The Chinese auto parts industry is also facing the same problem. When developing international markets, they fight alone and are not systematic. Chinese auto parts products are cost-effective due to the strong supply chain system. When communicating with the Indonesian Auto Parts Association, local manufacturers clearly stated that they hope to provide accessories to BYD, but the price of their accessories production cannot be reduced to the price required by BYD.
However, due to the lack of guaranteed after-sales service, Chinese auto parts products exported overseas often encounter after-sales disputes and market boycotts. This gives some foreign counterparts with ulterior motives an excuse to incite public opinion that the quality of Chinese products is not good. We have discussed this issue in depth with local service providers. In fact, consumers (car owners) want a quick response. If individual products have quality problems, if they are replaced or handled in time, consumers will basically accept it. No one can guarantee that the product has no after-sales problems 100%, but some accessories are not sold in bulk. Due to the lack of replaceable replacement accessories, the repair and use of the car are delayed, which will raise the contradiction to the level of Chinese accessories quality issues.
Therefore, if we want to really get a share of the pie and truly master the market and channels, then some powerful companies must rise from simple product exports to industrial exports, that is, to compete at a deeper level, service is the most important. For example, multi-brand factories jointly form a group to establish overseas warehouses and jointly develop markets and channel construction; for example, deep joint ventures with local companies, division of labor and cooperation in technology, production, sales, and channels, rapid response, and vertical services are all effective methods (there are many models, and there must be corresponding changes in a specific country, which requires specific analysis).
Integration and respect are the kingly way
China’s rapid industrial development is obvious to all. Some people are a little overconfident, thinking of using China’s development experience and model to educate and change the status quo of other countries.
This thinking is very terrible.
When doing business in other countries, never show your sense of superiority. A country’s development over hundreds or thousands of years has formed its own culture and concepts for various reasons, which cannot be changed in a short time. You think Chinese people are hardworking, but it is possible that other Chinese people will think that you don’t know how to enjoy life. Therefore, to go overseas, you must first learn to integrate and respect.
Japan is a lesson for us. In the 1980s, with the rapid growth of the Japanese economy, Japanese cars and other products were exported to the United States in large quantities, and the market was flooded with Japanese products. The Japanese people’s self-confidence reached its peak. Against this backdrop, they made a major mistake: they bought the iconic building of the United States, the Rockefeller Center, with cash. The Americans were angry about this behavior and hurt their self-esteem, so they joined forces with Britain, France and other countries to put pressure on Japan. They forced Japan to sign the Plaza Accord and demanded that the yen appreciate. As the yen continued to appreciate, Japan’s exports were severely affected, which eventually led to the collapse of the Japanese economic myth. To this day, Japan’s economic development has not fully recovered to the level at that time.
On the other hand, China’s automobile and auto parts industries are also facing a critical period of layout in overseas countries. But it is obvious that under the premise of multiple factors, the international environment is becoming increasingly complex, trade protectionism and anti-globalization are on the rise. In addition to increasing tariff barriers, the United States and the European Union have also formed high-standard entry barriers through legislation to force the localization of the supply chain. The same is true for other countries. In order to develop their own economies and promote employment, they have limited the localization rate of bulk commodities such as automobiles, motorcycles, and electric two-wheeled and three-wheeled vehicles. This requires us to learn to integrate and respect when going overseas.
Chinese companies should layout from a global perspective, but they must learn to localize when landing. Strategy and tactics are two dimensions. As the saying goes, a good start is half the battle. This group visited the auto parts manufacturers of the two countries in a cooperative manner, which was widely recognized. They felt friendly mutual benefit and win-win, rather than stealing their business. Becoming friends or partners will bring more opportunities. The Chinese-funded enterprises in Indonesia that we visited this time, such as Yadea, Guoxuan High-tech, and Shuangying, all followed the localization strategy from technology development to team building, from production line construction to after-sales network, and took a solid step towards global development.
Post time: Jun-26-2025
