Navigating Automotive Supply Chains in the Asia Pacific Region

The global automotive industry is undergoing significant transformations and the Asia Pacific (APAC) region is at the forefront of these changes. This white paper aims to provide valuable insights into the current state of the automotive supply chain in the APAC region, highlight key trends and challenges and offer strategic recommendations for global shippers—from original equipment manufacturers (OEMs) to tiered and aftermarket suppliers.

The state of the automotive industry in the Asia Pacific

Today’s geopolitical landscape, marked by trade tensions and shifting alliances, have exposed the vulnerabilities of traditional automotive supply chains, prompting a strategic realignment in the Asia-Pacific region.

Fuelled by surging consumer demand across emerging economies and accelerated by technological advancements in automation and connectivity, the Asia-Pacific automotive supply chain is a battleground for efficiency and innovation.

Many companies in the automotive industry are prioritising resilience, diversifying sourcing beyond single-country dependencies and investing heavily in regional production hubs. Understanding the nuances of each market, from China's established manufacturing base to the emerging economies of Southeast Asia, is paramount to succeed in such a competitive market.

Trends affecting global automotive supply chains

The trends affecting automotive shippers today are not isolated incidents, but rather are interconnected forces reshaping the region's manufacturing landscape and creating both challenges and opportunities for industry players.

Geopolitical shifts & tariff impacts

China's position as the world's leading automotive manufacturer, producing over 32% of global vehicles¹, is facing new pressures. Historically, the nation's competitive advantage was partly due to its lower labour costs. However, with annual increases averaging 6-8% since 2021², with high-skilled roles (e.g., R&D, advanced technicians) topping 10+%³, manufacturers are actively seeking alternative production hubs.

This shift is further amplified by escalating trade tensions. Recent U.S. tariffs imposed on automotive imports from China, Canada and Mexico have introduced significant instability, driving up production costs and necessitating strategic adjustments.

In response, the "China+1" strategy is gaining traction. Companies are diversifying their supply chains by establishing or expanding operations in Southeast Asia and other regions to mitigate risks associated with tariffs and trade restrictions. This strategic diversification is not just a reactive measure; it's a proactive step toward building more resilient and adaptable supply chains, opening new avenues for shippers and logistics providers.

Electric vehicle adoption & regional collaboration

The APAC region is quickly solidifying its position as a global electric vehicle (EV) powerhouse, with Southeast Asia at the forefront of this revolution. Projections indicate by 2025, 30% of the vehicles in the APAC region will be electric,⁴ a testament to the region's commitment to sustainable transportation.

This ambitious transition is fuelled by robust government support, exemplified by initiatives like Thailand's EV 3.5 programme and various incentives across Oceania. These policies are not only attracting substantial investments from global automotive players but also contributing to the projected revenue growth of 1.4% through 2028-2029, to reach an estimated $185.6 billion.⁵ While evolving tariffs may reshape trade flows, APAC’s focus on regional supply chains, localised production and market diversification contribute to its status as an EV leader.

The collaborative spirit among nations in the region is fostering a conducive environment for EV adoption and manufacturing. Shared goals and strategic partnerships are accelerating the development of charging infrastructure, battery production and component sourcing, creating a cohesive ecosystem for the burgeoning EV market.

Reshaping manufacturing: Labour costs & relocation

The rising labour costs in China are not just a financial consideration; they are a catalyst for significant manufacturing relocation. Countries like Thailand, Indonesia and Vietnam are attracting substantial investment and transforming into key manufacturing hubs.

This relocation is not merely a transfer of production capacity; it's a strategic repositioning that leverages Southeast Asia's competitive labour costs, burgeoning infrastructure and strategic geographical location.

This shift is redefining the APAC region's role in the global automotive industry, moving beyond assembly to encompass the production of high-value components and the development of specialised manufacturing capabilities.

Understand regional automotive market dynamics

The APAC region’s automotive industry presents a complex mosaic of established powerhouses and quickly developing markets, each with unique strengths and challenges. Understanding these regional dynamics is crucial to navigate and capitalise on the sector's growth.

North Asia: Growing influence and technology

China's influence on global automotive supply chains remains undeniable. Holding over 65% of the world's power battery equipment production and 35% of vehicle displays, China's manufacturing ability is a cornerstone of the industry.⁶

However, logistical hurdles, with costs exceeding 14.4% of vehicle expenses⁷ (compared to 8% in Europe and the United States⁸ and 5% in Japan and South Korea⁹), pose significant challenges for shippers seeking efficiency and cost-effectiveness.

In contrast, South Korea leverages its technological edge, producing approximately 3.8 million vehicles in 2024.¹⁰ The nation's strategic investment of ₩14 trillion KRW ($11 billion USD) to bolster its supply chain, expand exports and spearhead next-generation technologies solidifies its position as an innovation leader.¹¹

Southeast Asia: Manufacturing ambitions

Driven by strategic government policies and abundant natural resources, Southeast Asia is emerging as a critical manufacturing hub, with Thailand leading the charge with 1.5 million vehicles produced in 2024.¹² With its EV 3.5 policy, Thailand has already attracted substantial investments from global giants like BYD, Great Wall Motor (GWM) and Tesla.

Indonesia, leveraging its vast nickel reserves, is also becoming a pivotal centre, not necessarily for manufacturing, but rather for battery production. Strategic government incentives and its prime geographical location are drawing major battery manufacturers to the country. 

Meanwhile, Malaysia, the third-largest automotive producer in Southeast Asia had a record total industry volume (TIV) of 816,747 units in 2024.¹³ The country is focusing on developing robust EV charging infrastructure, laying the groundwork for future EV adoption and growth.

Oceania: Post-pandemic shifts & aftermarket growth

Australia's automotive industry is undergoing a significant transformation, shaped by post-pandemic recovery and evolving consumer preferences. Imports, now generating $120.6 billion AUD ($74.42 billion USD) in revenue¹⁴, are driven by strong demand from the freight and commercial sectors. 

The surge in EV demand and fierce competition, fuelled by sustainability trends and new market entrants, is reshaping the market. As global car manufacturers recover from chip shortages, stabilised supplies are expected to meet pent-up demand, potentially ending the seller's market. This shift may prompt companies to lower prices to attract more consumers. Online platforms and changing purchasing habits are transforming how cars are bought, enabling consumers to compare prices and negotiate better deals.

However, the United States’ reciprocal tariffs could increase the cost of importing vehicles and parts from affected countries, potentially leading to higher consumer prices and supply chain disruptions.

The aftermarket sector in Australia is also experiencing robust growth. Consumers are increasingly opting for repairs and modifications, sustaining demand for parts and accessories. This trend, combined with rising imports from Japan, China, Thailand and South Korea, is contributing to the industry's overall stability. New tariffs could drive consumers to seek local alternatives or increase demand for domestic products. 

6 key strategic recommendations for shippers

• Diversify supply chains: Mitigate geopolitical risks by exploring alternative sourcing and production strategies across Southeast Asia and other regions.
• Leverage regional strengths: Take advantage of the growing EV market in the APAC region by working with local manufacturers and investing in EV infrastructure.
• Navigate regulatory changes: Monitor changes in tariff and emissions regulations to minimise cost increases and supply chain disruptions. Adapt sourcing strategies accordingly to maintain compliance and competitiveness.
• Invest in advanced technology: Boost efficiency, cut costs and enhance supply chain visibility by adopting automation, digitalisation, AI and IoT solutions.
• Prioritise aftermarket growth: Tap into rising aftermarket revenue in regions like Oceania by focusing on parts and accessories sales to meet evolving consumer demands.
• Find the right 3PL provider: Streamline operations, reduce costs and gain flexibility by working with a third party logistics provider (3PL) that offers expertise, global scale and scalable solutions.

Driving innovation in the APAC region’s evolving automotive supply chain

The APAC automotive landscape is a dynamic arena, where navigating geopolitical complexities, embracing the EV revolution and adapting to evolving manufacturing locations are paramount. Success hinges on more than just understanding these trends; it demands strategic relationship with logistics providers that possess deep regional expertise and a future-forward mindset.

In this environment, agility, resilience and data-driven decision-making are not mere buzzwords, but essential capabilities. Choosing the right provider—one with unmatched expertise, unrivalled scale and tailored solutions—will be the critical differentiator for companies seeking to thrive in this quickly transforming market.

1. Statista, “Automotive manufacturing industry in China: Statistics & facts,” 4 January 2024.
2. Baidu, “The average salary in the automotive industry is 158,000 yuan and joint ventures have won a round over independent ones,” 14 September 2024. 
3. Baidu, “Comparison of personnel and salaries of 7 companies: BYD recruits more people, GAC raises salaries and Ningwang offers good treatment,” 3 May 2024.
4. Bloomberg, “Electric Vehicle Outlook 2024,” 12 June 2024.
5. IbisWorld, “Automotive Industry in Australia: Market Research Report (2014-2029),” August 2024.
6. Knowledge Sourcing Intelligence, “How lithium-ion batteries are powering the electric vehicle revolution,” 12 August 2024.
7. China Nautaion Bureau of Statistics, “Statistical Communiqué of the People's Republic of China on National Economic and Social Development in 2024,” 28 February 2025.
8. Guancha, “NIST: U.S. Manufacturing Economy 2024 Annual Report,” 4 March 2025.
9. NetEase, “China's automotive logistics industry development forecast and investment analysis report from 2024 to 2029,” August 15,2023. 
10. ReportLinker, “South Korea Automotive Industry Outlook 2024-2028.” 
11. Economic Development Board, “South Korea to support auto component sector growth,” 31 May 2023.
12. The Nation, “NPLs lead to drop in vehicle sales, production in Thailand,” 24 December 2024.
13. The Star, “Malaysia’s auto industry hits record 816,747 units in 2024,” 21 January 2025.
14. IBISWorld, “Automotive Industry in Australia: Market Research Report (2014-2029),” August 2024.