Southeast Asia's Automotive Sector at Crossroads: Current Changes and Future Challenges—Introduction

The automotive industry is considered an important pillar of the global economy. It is a capital- and knowledge-intensive industry, with extensive linkages with other input sectors such as steel, iron, aluminium, glass, plastics, carpeting, textiles, computer chips, rubber, inter alia. Vehicle and parts producers form the core of the automotive industry and they, in turn, support a wide range of business segments, both upstream and downstream. These widespread linkages generate a considerable multiplier effect from the automotive sector to the rest of the economy, thereby contributing towards the growth and development of the automotive producing country. It is estimated that, globally, each direct auto job supports at least five other indirect jobs in the community in related manufacturing and services (OICA n.d.). In many automotive producing countries, a large share of the domestic production is exported, making the sector an important source of export revenues. In Japan, a leading automotive producer in East Asia, for example, the automotive sector contributes towards 8.3 per cent of the working population and 21 per cent of total exports (Lovells 2019). Intense competition among the top auto producers in the world also drives the Research and Development (R&D) spending in this sector in the race to roll out new models needed to maintain or increase their respective market shares. The technologies employed in the making of a car go beyond mere transportation needs such as safety features and fuel efficiency and include, among others, in-car entertainment and communication tools. These spur technological developments in related sectors to meet the changing consumer demand in the automotive sector.

Nevertheless, there are also mounting challenges related to automotive production and usage. Road accidents and safety continue to occupy the attention of vehicle safety design to reduce risk factors associated with road traffic injuries. Pollution and the impact of the use of fossil fuels on the environment are additional concerns as many countries begin to wage a war against pollution, leading to a progressive shift towards green initiatives and an increasing focus on sustainability. The automotive industry is thus an important component of the goal of attaining global sustainable development in the future, be it near or far.

The automotive sector, at the same time, is undergoing tremendous changes in terms of technology, consumer demand (with increasing customization), as well as sustainability concerns. Changes in technology, as exemplified by "CASE" (Connected, Autonomous, Shared and Electrified) (Teece 2018; Natsuda and Thoburn 2021) are key global trends that are spurring transformation in this sector.

Connected vehicles are vehicles that can communicate to each other through in-vehicle or aftermarket devices. The information shared may pertain to safety and other mobility aspects. Smart dashboards, as one-stop infotainment portals, are rapidly becoming part of core offerings of automobiles. Numerous technological advances—such as 4G, artificial intelligence, machine learning, telematics and Software as a Service (SaaS) platforms—have facilitated the development of connected vehicles.

Connected systems allow drivers to play a diminished role in driving. Autonomous (or self-driving) vehicles are able to sense the environment and moving safety with the aid of new technology and varying degrees of human input. There are six levels of automation in driving, each requiring varying degrees of driver assistance (with full automation achieved at the highest level). These driverless vehicles provide convenience by converting commuting time to personal or work time (Teece 2018). They can also facilitate better road safety by reducing some of the risks in human driving as well as by overcoming some challenges associated with ageing and disabilities that hinder driving capabilities. Tesla, notably, has invested heavily in the development of autonomous vehicles.

Consumer preferences have gradually shifted from car ownership to the notion of mobility. In fact, solutions that offer mobility are the top priority for modern-day consumers. In this regard, mobility solutions have expanded from traditional services such as taxis, car-rental and car-sharing services to ride-hailing services and flexible pay-per-use options. The increasing demand for more flexible and innovative services, together with sustainability concerns, has raised the substitutability between...