The Indonesia passenger car market was valued at $15.62 billion in 2020, and is projected to reach $23.33 billion by 2030, registering a CAGR of 4.2% from 2021 to 2030.
Passenger vehicles are motor vehicles with at least four wheels to transport passengers and their luggage. They serve many benefits, including mobility, safety over two-wheelers, convenience, and independence from sharing or public transport. These vehicles can be for personal or commercial use such as ridesharing, fleet management, and others. The passenger cars are classified based on a vehicle's total interior passenger, cargo volumes and body type, including hatchback, sedan, coupe, crossover, multi-purpose vehicles, sports utility vehicle, wagon, convertible, and others.
Factors, such as significant increase in foreign direct investment (FDI) in Indonesia’s automotive industry, high demand for multi-purpose vehicles (MPVs) & special utility vehicles (SUVs), and introduction of the Low-Cost Green Car (LCGC) initiative are expected to drive the market growth. However, increasing prices of passenger cars and improvement of public transportation hinder the market growth. Further, increasing efforts toward adoption and development of electric & hybrid and booming domestic auto industry are some of the factors that are expected to offer lucrative opportunities for the market growth.
The Indonesia passenger car market is segmented on the basis of propulsion, body type, and weight. Based on propulsion, it is bifurcated into internal combustion engine and electric & hybrid. By body type, it is divided into sedan, hatchback, SUV, and others. On the basis of weight, it is categorized into less than 3000 pound, 3001 to 5000 pound, and more than 5001 pound.
The key players operating in the Indonesia passenger car market are BMW AG, DFSK Motors, Honda Motor Co., Ltd., Isuzu Motors Limited, Mazda, Mitsubishi Motors Corporation, Nissan Motor, Suzuki Motor Corporation, Toyota Motor Corporation, and Wuling Motor (SGMW Motors).
Significant increase in foreign direct investment (FDI) in Indonesia’s automotive industry
Indonesia is the second-largest car manufacturing nation in Southeast Asia. However, Indonesia is primarily dependent on foreign direct investment, particularly from Japan, for the establishment of onshore car manufacturing facilities. Attracted by low per capita-car ownership, low labor costs, and a rapidly expanding middle class, various global car-makers have decided to invest heavily to expand car production capacity in Indonesia. Several Japanese automakers, including Toyota, Nissan, Honda, and Suzuki have revealed their plans for further investment in Indonesia. For instance, in 2019, Toyota group announced to invest $2 billion (Rp 28.3 trillion) in Indonesia’s automotive sector. Further, Honda also presented its plan to invest $360 million in Indonesia for development of new cars in Indonesia market. Furthermore, Indonesia is focusing on developing the electric car industry in the country. Currently, Indonesian government introduced several new policies regulating electric vehicles. This policy is to attract global investors to invest in Indonesia. For instance, the government announced 0% sales tax on luxury goods (PPnBM) for electric cars. In addition, Indonesia has also formed the Indonesia Battery Corporation (IBC), which was built by 4 BUMN for the development of electric vehicle battery cells in Indonesia. Moreover, Indonesia has the largest reserves of nickel resources in the world as a raw material for the battery industry and the development of electric cars is one of the main factors boosting the foreign direct investment (FDI) for electric car manufacturing in Indonesia. Such factors collectively drive the growth of the passenger car market in Indonesia.
By Propulsion
Electric & hybrid vehicles is projected as the most lucrative segments
Introduction of the Low-Cost Green Car (LCGC) initiative
Low-Cost Green Car (LCGC) is an Indonesian automobile initiative, which exempts low-cost and energy-efficient cars from luxury sales tax to ensure affordable, fuel-efficient car. The government offered tax incentives to those car manufacturers who meet requirements of the government's fuel efficiency targets. This was meant to encourage the motorcycle owners/public transportation users to be able to afford their first cars and to reduce fuel subsidy. These LCGC cars generally had a price tag of around $7,500 to $10,500 (Rp 100 million to 140 million); hence, they became attractive for the country's large and expanding middle class segment. With the implementation of the ASEAN Economic Community, the Indonesian government also aims to make Indonesia the regional hub for the production of LCGCs. Considering the nation's per capita GDP is still below $4,000, affordability is generally the most important factor for Indonesian consumers when buying a car. Owing to affordability of LCGC, it has become a very popular vehicle in Indonesia and contributes nearly 25% to total domestic car sales. Furthermore, various automakers operating in the country are also introducing LCGC cars in the Indonesia market due to consumers' shift to LCGC. For instance, in August 2018, Honda Motor introduced All-New Honda Brio as a Low-Cost Green Car (LCGC) category vehicle in Indonesia. Therefore, introduction of the Low-Cost Green Car (LCGC) initiative significantly increases the demand for passenger cars primarily in low & middle-class population category, which, in turn, drives the market growth.
Improvement of public transportation
Increase in government investments in public transport infrastructure, especially in major provinces, such as West Java, East Java, Central Java, North Sumatra, Banten, and others, restricts the growth of the passenger car market. The development of public transportation services, such as metro trains, monorails, and local bus transport services, is expected to affect the sales of passenger, as they provide cheaper ways of transport when compared with private cars and also save overall vehicle ownership cost. For instance, Indonesian government is creating efficient, affordable, and green public transport networks in the main urban areas by building more bus rapid transit, light rail or heavy rail systems, and investing in energy-efficient, low-emission public transport vehicles. Governments are further restricting private car use through the implementation of fees in heavily-congested areas to increase the adoption of public transportation in the country. Therefore, improvement of public transportation is expected to hamper the growth of the passenger car market in the country.
By Type
Hatchback is projected as the most lucrative segments
Increasing efforts toward adoption and development of electric & hybrid vehicles
With growing environmental concerns, owing to rising exhaust emissions, government authorities and environmental associations across the country are tightening emission norms. As a result, the demand for sustainable and environment-friendly transportation, such as electric & hybrid, is increasing across the country. For instance, research by the University of Indonesia in September 2020 even showed over 70% of its public are keen to own an electric vehicle due to environmental issues. In addition, the Indonesian government has decided to take a critical role in supporting the creation of demand and acceptability of EVs, spurring collaborative R&D efforts, and enabling required infrastructure to boost the adoption of electric vehicles in the country. For instance, Indonesia has announced an ambitious plan to become a major player in the global EV market, and it has developed a $17 billion roadmap for this specific sector. This roadmap aims to adopt 2.1 million electric motorcycles and 400,000 electric cars of which 20% are locally manufactured by 2025. State-owned electricity giant PLN is also involved, its goal is to provide more than 31,000 new EV charging stations by 2030. Furthermore, key players operating in the country are significantly investing in electric vehicles as well as introducing the latest electric vehicle in the country. For instance, Toyota announced to invest $2 billion or electric vehicle (EV) production in Indonesia over the next five years. Toyota joins Hyundai, which is also committed to commence the production of EVs in Indonesia by 2022. The company plans to introduce 10 new electric models during the same period. Toyota launched Corolla Cross Hybrid Electric Vehicle (HEV) in the country. Such factors create lucrative growth opportunities for passenger cars in Indonesia.
Covid-19 Scenario Analysis
The COVID-19 crisis is creating uncertainty in the market, massive slowing of supply chain, falling business confidence, and increasing panic among the customer segments. Governments of different regions have already announced total lockdown and temporarily shutdown of industries, thereby adversely affecting the overall production and sales. Countries around the globe have posed stringent restrictions ranging from days to months of lockdown periods. Owing to this pandemic, many businesses are halted and are waiting for the market conditions to improve. The rapid spread of the virus had a significant impact on Indonesia’s automotive industry, which, in turns, affects the passenger car market, with a downturn in the demand for vehicles. For instance, the total sales of passenger cars in 2020 in Indonesia were just over 532,000 units, about half of the previous year. However, there have been improved sales of all types of electric vehicles and Low-Cost Green Car (LCGC) post-June 2020 as the lockdown lifted in most of the cities across countries. Particularly, the sales of battery electric vehicle & hybrid electric vehicles were dominant. For instance, 120 electric vehicles were sold there in 2020, about a tenth of the sales of hybrids while only 24 electric vehicles were sold in 2019.
By Weight
Less Than 3000 Pound is projected as the most lucrative segments
Key Benefits For Stakeholders
- This study presents analytical depiction of the Indonesia passenger car market analysis along with current trends and future estimations to depict imminent investment pockets.
- The overall Indonesia passenger car market opportunity is determined by understanding profitable trends to gain a stronger foothold.
- The report presents information related to the key drivers, restraints, and opportunities of the Indonesia passenger car market with a detailed impact analysis.
- The current Indonesia passenger car market is quantitatively analyzed from 2020 to 2030 to benchmark the financial competency.
- Porter’s five forces analysis illustrates the potency of the buyers and suppliers in the industry.
Indonesia Passenger Car Market Report Highlights
| Aspects | Details |
 By Propulsion |
|
 By Body Type |
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 By Weight |
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 Key Market Players | Isuzu Motors Limited, BMW AG, DFSK Motors, Nissan Motor, Honda Motor Co., Ltd., Mazda, Toyota Motor Corporation, Suzuki Motor Corporation, Mitsubishi Motors Corporation, Wuling Motor (SGMW Motors) |
Analyst Review
The Indonesia passenger car market is expected to witness remarkable growth in the future, significant increase in foreign direct investment (FDI) in Indonesia’s automotive industry, and high demand for multi-purpose vehicles (MPVs) & special utility vehicles (SUVs).
Further, exemption in vehicle taxes by governments is further driving the growth of the passenger car market in Indonesia. For instance, Association of Indonesian Automotive Manufacturers (Gaikindo) stated that the government's policy on luxury tax cut as incorporated in a finance ministerial regulation and an industry ministerial regulation on the tax on luxury goods sales has been proven effective as indicated by the increase in car sales in the country. According to Gaikindo, car sales were expected to be influenced by the effect of the policy on sales tax on luxury goods discount in the automotive sector by 100%.
Moreover, Fitch Solutions research stated that Indonesia provides attractive growth opportunities for new and existing automakers, scoring 73.2 out of 100 on its vehicle production growth indicator based on the firm’s five-year average forecast.
However, increase in prices of passenger cars and improvement of public transportation hinder the market growth. Further, increasing efforts toward the adoption and development of electric & hybrid cars and booming domestic auto industry are some of the factors that are expected to offer lucrative opportunities for the market growth.
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