Japanese Manufacturers Start Leaving China, Focusing on India Over Indonesia

KatadataOTO – Although the Chinese automotive market is still the largest in the world, Japanese manufacturers are starting to shift their focus away from the country. Intense competition and the proliferation of electric vehicles are touted as the reasons why they are starting to shift investment to other markets.

Unfortunately, their choice is not Indonesia, but India. That market is considered to have great potential for cars from Japanese manufacturers to grow in the future.

According to Reuters, Toyota, Honda, and Suzuki have spent billions of dollars to build various facilities in the country. This move shows the importance of the Indian market for them in the future.

Looking back, the annual Japanese investment in India's transportation sector, including car manufacturers, has increased sevenfold between 2021 and 2024. Last year alone, the value reached 294 billion yen or the equivalent of 31.9 trillion IDR.

Photo : Reuters

Meanwhile, in the same period, Japanese corporate investment in China's transportation sector decreased by 83 percent. It was recorded that Japanese companies only invested 46 billion yen last year.

This decision is inseparable from the many advantages offered by India, especially from a business perspective. In that country, labor costs are relatively low, and electric car manufacturers from the Land of the Bamboo Curtain (China) have not yet entered, making it easier for them to grow.

In addition, India also provides various incentives and is improving the quality of manufactured goods. This makes its industry's appeal increasingly grow.

Meanwhile in China, there is currently a rampant price war among electric car manufacturers, making it difficult for them to make a profit. The situation is even exacerbated by the many manufacturers expanding to other regions like Southeast Asia.

“India is a good choice as a replacement for the Chinese market. For Japanese manufacturers, the conditions are favorable because they don't have to compete too hard,” said Julie Boote of Pelham Smithers Associates London, as reported by Reuters.

However, this step is not easy. Toyota even has to start with various strategies to be optimal in the Indian market.

One of them is collaborating with Japanese and Indian vendors to reduce costs, while still expanding the production of hybrid components. However, the supply of spare parts for this technology is considered limited.

Photo : Subaru Asia

“The Indian market is very important and will continue to grow in the future,” said Koji Sato, President of Toyota, some time ago.

Toyota also plans to launch 15 new models in India by the end of this decade. They also aim to achieve a market share of 10 percent before the end of the decade, up from the current 8 percent.