Energy volatility due to the ongoing war in the Middle East is doing more than rattling global markets – it could rewrite the rules of the road in Southeast Asia. Since the fighting began in late February, oil prices have risen sharply and exhibited significant volatility. These recurring energy crises are a structural consequence of the reliance on fossil fuels, especially in regions like Southeast Asia, which imports 60 percent of its oil from the Middle East. 

For decades, legacy automakers have dominated Southeast Asia with gasoline-powered cars. With rising fossil fuel prices, operating these vehicles has become a financial burden for local drivers. If established brands do not pivot to electric vehicles (EVs) immediately, they risk losing market share to a new generation of EV competitors across the region.

The EV transition was already underway before the latest eruption of violence in the Middle East – and it’s most visible in Indonesia, Southeast Asia’s largest economy. According to Greenpeace East Asia, battery-electric vehicle (BEV) sales there rose from just 5 units in 2020 to more than 103,000 by 2025. Leveraging massive nickel reserves, Indonesia is transforming from a passive consumer to a central hub in the global EV supply chain.

Meanwhile, as the country looks toward a greener horizon, the brands that once defined Indonesia’s automotive landscape are losing their grip. Between 2024 and 2025, sales of traditional internal combustion engine (ICE) vehicles in Indonesia plunged by nearly 20 percent, while BEV sales surged by 138.8 percent during the same period.

The most dramatic “fall from grace” belongs to Hyundai, the world’s third-largest automaker. In 2023, the Korean company was the best-selling automaker in the Indonesian BEV scene, with a 44.4 percent market share. By 2025, that share had declined to a mere 1.8 percent, ranking only seventh. Hyundai is not alone. According to Greenpeace East Asia, 11 of 15 legacy automakers in Indonesia, particularly ICE-focused giants such as Toyota, Honda, and Mazda, also recorded steep year-on-year declines in total sales over the past two years.  

Meanwhile, automakers that prioritize EVs or focus exclusively on BEVs are quickly expanding their market presence. Chinese EV brand BYD – which sold zero units in Indonesia just two years ago – now commands almost half of the country’s overall vehicle sales market with a 45.3 percent share, displacing traditional strongholds like Suzuki to become a top-four automaker overall. BEV-only automakers like VinFast and GAC became the ninth- and tenth-largest automakers by overall vehicle sales in Indonesia in 2025, displacing traditional powers such as BMW and Mazda.

This transformation is not unique to Indonesia. From Thailand to Vietnam, EV manufacturers are aggressively filling the vacuum left by legacy automakers that have hesitated to commit to the region’s electric future. 

One reason for the decline of legacy automakers is their slow and reluctant BEV strategy in Southeast Asia. For years, they treated the region primarily as a market for ICE vehicles, directing electrification efforts only to markets with strict regulations while largely neglecting others. Hyundai has set ambitious ICE phase-out targets for Europe and the United States, but has remained conspicuously silent about Southeast Asia. 

That “wait-and-see” approach is already being challenged by market realities. In 2025, Indonesia’s EV sector grew 49 percent year on year, accounting for 18 percent of total sales – above the ASEAN average of 17 percent – according to PwC Indonesia in a November report. Even more impressive, that growth came despite a general malaise in car sales as the broader economy slowed. In an era of $100-a-barrel oil prices and heightened geopolitical risk, consumers see BEVs as an escape from volatile global oil markets – and thus the cheaper option.

The irony is that legacy automakers had every tool necessary to win this market. Hyundai has already invested in local production plants in Indonesia and announced battery partnerships with LG Energy Solution in the country. Additionally, a January 2026 regulatory change ended the tax exemptions that previously favored imported Chinese cars, giving companies that manufacture locally an advantage. However, among all the cars Hyundai sold in Indonesia, fewer than 1 in 10 are electric. Such policy advantages will mean little if legacy automakers lack the will to use them.

What’s more concerning is that legacy automakers’ slow progress in BEV expansion in Southeast Asia can be more than a business risk; it can be a direct contributor to the climate crisis. Despite a 2045 carbon neutrality pledge, Hyundai’s total tailpipe emissions rose from 109 million tonnes of CO2-equivalent in 2022 to over 114 million in 2024. As an automaker that places a high emphasis on sustainability, Hyundai has a responsibility to reduce its emissions, especially in climate-vulnerable regions like Southeast Asia.

Southeast Asian governments are already taking action. The Indonesian government has set a target of 2 million electric cars on the road by 2030. Reaching this goal requires that more than 60 percent of all new car sales be electric starting this year. Other governments in Southeast Asia are also setting similar targets to protect their economies from energy shocks and urban air pollution. 

Legacy brands should view Hyundai’s rapid market-share loss in Indonesia as a warning for their strategies across Southeast Asia: brand loyalty and established dominance are no longer reliable shields in a market that is rapidly pivoting to electric vehicles. Automakers should not assume that decades of customer loyalty will protect them in this race. As consumers seek to reduce their exposure to future oil price shocks, EVs are already a viable alternative – and drivers are more willing to consider new brands than legacy automakers expect.

If legacy automakers like Hyundai continue focusing on gasoline engines while rivals offer affordable electric alternatives, they risk becoming irrelevant in one of the world’s fastest-growing markets. The Iran war–driven oil shock is only a catalyst – the market has already moved on. The remaining question for legacy leaders is whether they will adapt or be left in the rearview mirror.