Both Malaysia and Indonesia have far thinner auto trade links with the US, with the countries’ total vehicle parts exports to the US worth US$86.3 million and US$73.8 million respectively in 2023, according to the UN trade figures.
While not all Southeast Asian countries may face dramatic economic impacts following the introduction of the new tariffs, the ripple effects could mean their automotive industries will face new market dynamics.
For example, Archanun feels that South Korean carmakers – considered relatively smaller global players that still produce most of their cars locally – will try to “divert” their car sales from the US to countries like Thailand.
“That seems to be in line with what we observed in Thailand, where Korean carmakers like Kia or Hyundai are participating in a price war intensively,” he said, noting that sticker prices on some models were slashed by nearly 25 per cent.
It is worth noting that ahead of the tariff deadline, Hyundai had announced it would invest US$21 billion in the US by building a new steel plant in Louisiana. Whether that move reaped any concessions with the Trump administration is unclear.
Likewise, larger Original Equipment Manufacturers (OEM) – global carmakers such as Toyota that Southeast Asian countries largely serve as local parts suppliers – will also be looking for alternative opportunities given that their vehicles are likely to be priced out of the US market, Patarapong said.
The solution may end up largely being within Southeast Asia itself, he suggested, contending that the impact of trade barriers to the US could in time be supplemented by a rise in intra-ASEAN trade, coupled with more investments within the broader ASEAN+6 group, which includes China, Japan, South Korea, Australia, New Zealand and India.
“I think (the industry in Southeast Asia) can weather the storm to some extent,” he said. “In the long term, we think it may not be so bad.”
He expected more investment from countries such as China in the regional automotive industry because it wants “to rely more on the regional value chain rather than the US market”.
“For Japan, I think they will not withdraw their investments very easily, because right now they need to make sure that their investment is something controllable and ASEAN is like a backyard of Japan.
“You can also see more and more investment by the Korean automotive sector in ASEAN too, especially Vietnam and Indonesia. That’s going to increase over time,” he said.
Hyundai has invested US$415 million in Vietnam and employs about 2,300 people, with annual revenues of around US$2.6 billion.
International businesses serving the auto industry with presence in Southeast Asia, like Desoutter Industrial Tools, are already trying to chart a course where they no longer have dependence on the American market.
But they are “hesitating” about where and when to invest given the pace and unpredictability of Trump’s policy-making, according to Glenn Heed, the global business manager for the motor vehicle industry at Desoutter, which provides automotive assembly tools and process control technologies to major carmakers around the world. It has operations in Thailand, Malaysia, Indonesia and Vietnam.
“The economy is breaking or slowing down just because of the uncertainty,” Heed said. “Of course, I’m worried. But this affects everyone. It’s how agile you are. What kind of decisions are you taking? I do think it’ll be like this for a long time, so we are trying to change the way we see the world,” he said.
Importantly, he sees the “possibility to increase partnerships with neighbours and other parts of the world”, and drive the rise of “local for local” production.
“Over a long time, I think it could be a positive thing for the rest of the world.”
But Archanun cautioned that a self-serving strategy in Southeast Asia alone could not fill the gap for companies losing out on American business.
He forecasted that demand for durable goods like vehicles would drop in the months to come given the broader economic shocks expected following the tariffs introduced to countries all around the world.
That could lead to strong competition among automakers facing constrained consumer demand in this region.
“The cake will be smaller. They will have to fight very fiercely in this market,” he said.
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