The automotive sector in Indonesia has witnessed substantial growth and has become an integral component of the nation’s economy. Despite the hurdles posed by the shift to electric vehicles, the industry has made notable strides in the previous year. Following a GDP downturn in 2020, Indonesia’s economy has rebounded and is expected to sustain growth in the coming years. This expansion has had a positive impact on the automotive sector, with promising sales figures for cars. The increase in income, consumer credit rates, and competitive vehicle prices has rendered the industry highly competitive.
The automotive industry in Indonesia is not only flourishing in terms of car sales, but also significantly contributing to the country’s GDP. Furthermore, the auto parts industry is experiencing rapid growth, positioning Indonesia as the second-largest producer of light vehicles in the ASEAN region. The government’s Low-Cost Green Car (LCGC) programme has attracted investments from global automakers, further propelling the industry’s growth.
The market for vehicles in Indonesia is predominantly occupied by pickup trucks, with Japanese brands traditionally holding a prominent position. However, Korean and Chinese brands are making headway, signalling a shifting landscape in the country’s automotive sector.
Despite the favorable outlook, the transition to electric vehicles poses a significant challenge for manufacturers and consumers alike. Electric vehicles account for less than 1% of the market, and there are several barriers to their widespread adoption. Pricing, infrastructure, and consumer preferences are key obstacles that need to be overcome to facilitate the transition to electric vehicles.
The Indonesian government has been advocating for the adoption of electric vehicles, setting a target to produce approximately 600,000 electric vehicles by 2030. However, it is evident that there are several practical challenges, such as pricing and usage preferences, that are impeding the popularisation of electric vehicles.
The automotive industry in Indonesia holds the potential to continue propelling economic growth, generating employment opportunities, and fostering innovation. However, addressing the challenges associated with the adoption of electric vehicles will be crucial for sustained progress in the sector.
In conclusion, the automotive industry in Indonesia has exhibited remarkable growth in recent years, contributing significantly to the country’s economic development. While the transition to electric vehicles presents challenges, it also offers opportunities for further advancement. It is imperative for the industry to address these challenges to ensure its continued growth and competitiveness in the global market.
Authored by Joseph Kristofel
Executive Director Strategy 3
Ipsos in Indonesia