For decades, Indonesia has been the colossus of Southeast Asia’s automotive industry. With a population of 280 million, it was the natural heavyweight — churning out sales figures that dwarfed its smaller neighbours. Malaysia, with barely 34 million people, seemed destined to play catch-up. And yet, in the second quarter of 2025, something remarkable happened. Malaysia, the perennial underdog, surged ahead to become ASEAN’s largest car market.
The numbers are striking. According to recent data, Malaysia’s car sales have not only surpassed Indonesia’s, but have done so in a year when economic headwinds should have made consumers more cautious. Thailand, once the unchallenged “Detroit of Asia,” managed sales of 707,055 units — just one percent down on last year, a stabilisation after long decline. But it is Malaysia’s ascent that has caught the region’s attention, upending long-held assumptions about economic scale and market leadership.
This is not just about who sells more cars. It’s about how a smaller nation, by combining strong domestic brands, savvy partnerships, and an embrace of new technologies, can seize the initiative in an industry long dominated by size and inertia.
Malaysia’s Winning Edge: National Brands and EV Momentum
Malaysia’s automotive success story rests squarely on the shoulders of its two national marques: Perodua and Proton. In the first half of 2025, the pair claimed a staggering 63 percent of the market. The Perodua Alza and Proton Saga led the pack, holding their own against international contenders like Toyota’s Vios and Honda’s City. This dominance is not mere nostalgia. Both brands have evolved through strategic alliances — Perodua with Toyota’s subsidiary Daihatsu, and Proton with China’s Geely, which owns a 49.9 percent stake. The partnerships have brought world-class engineering and design into Malaysian factories, while allowing the brands to retain the national identity that makes them so beloved.
Crucially, government policy has been an unspoken partner in this success. Perodua and Proton enjoy the kind of quiet, indirect backing that comes when industries are seen as symbols of national development. This has given them space to innovate — particularly in the fast-growing electric and hybrid vehicle segments.
The numbers tell their own story. In the first half of 2025, electric vehicle sales in Malaysia surged by 91 percent year-on-year, reaching 12,733 units. Hybrid sales grew by 12 percent, totalling 17,480 units. Tax breaks, expanding charging networks, and an increasingly diverse range of models — from budget-friendly compacts to luxury SUVs — have made electrification more than just an urban elite fad. It is becoming part of Malaysia’s automotive mainstream.
Indonesia’s Slowdown and Thailand’s Recovery Amid Japanese Retreat
Indonesia, by contrast, finds itself struggling with an uncomfortable reality: size alone does not guarantee growth. In June 2025, car sales plunged 21 percent, the steepest drop since March 2024. For the second quarter as a whole, sales fell by 12 percent. Bank Danamon’s economists point to two key culprits: weakening middle-class purchasing power and tighter consumer credit. The figures from Indonesia’s Central Statistics Agency are sobering. The middle class — the backbone of consumer demand — has shrunk from 21.4 percent of the population in 2019 to just 17.1 percent in 2024. When the middle class contracts, the pain ripples far beyond the showroom floor, hitting every sector that depends on discretionary spending.
Thailand’s story is different. Though sales dipped slightly, the country’s vehicle production has risen for the first time in 21 months. The driver of this recovery is electric — quite literally. Bangkok has thrown its weight behind becoming ASEAN’s EV manufacturing hub, wooing Chinese firms like BYD and Great Wall Motors. The bet is bold: that the future of the Thai auto industry lies not in its proud history of Japanese assembly lines, but in positioning itself as a key player in the regional EV supply chain.
And looming over all of this is the slow retreat of Japanese automakers. For decades, they were the unassailable kings of ASEAN’s roads. But competition from Chinese brands — quicker to embrace electric technology and aggressive in pricing — has eroded that dominance. Mitsubishi, Nissan, and even Toyota are quietly scaling back in some markets, ceding ground to local champions, Chinese entrants, and increasingly, South Korean contenders.
The implications are profound. ASEAN’s automotive hierarchy is being rewritten. Malaysia’s rise shows that industrial policy, coupled with strategic alliances and timely technological adoption, can trump sheer population size. Indonesia’s malaise is a cautionary tale about the fragility of middle-class growth. Thailand’s EV gamble is a reminder that industries can be remade if governments are willing to take calculated risks. And the Japanese retreat is proof that even the most dominant players must adapt — or watch the market drive off without them.
What happens next will depend on whether these countries can read the road ahead. For now, Malaysia is in the driver’s seat, steering ASEAN’s car market into a new era — one defined not by old loyalties, but by speed, agility, and the willingness to change gear when the moment demands it.
