The automotive sector in Indonesia has become a significant contributor to the country’s economy. According to the Indonesian Automotive Industry Association (GAIKINDO), the automotive industry contributed around 3.7% to the country’s gross domestic product (GDP) in 2020. This article will delve into the most important segments, areas, and trends of the automotive industry in Indonesia, as well as highlight some interesting statistics.
The most important segments in the automotive sector in Indonesia:
1. Passenger Cars
Passenger cars are one of the largest segments of the automotive industry in Indonesia. According to GAIKINDO, passenger cars accounted for 85.3% of total vehicle production in the country in 2020. This segment is dominated by Japanese car manufacturers such as Toyota, Honda, and Daihatsu. In addition, European car manufacturers such as BMW, Mercedes-Benz, and Volkswagen have also established a strong presence in the market.
2. Commercial Vehicles.
Commercial vehicles are another important segment in the Indonesian automotive industry. This segment includes trucks, buses, and vans used for the transportation of goods and people. GAIKINDO reported that commercial vehicle production in Indonesia increased by 22.9% in 2020 compared to the previous year. The Indonesian government’s infrastructure development plans have played a significant role in driving the demand for commercial vehicles.
3) Motorcycle
The motorcycle segment is a significant contributor to the automotive industry in Indonesia. According to the Ministry of Industry, the production of motorcycles in the country increased by 8.6% in 2020 compared to the previous year. This segment is dominated by local brands such as Honda, Yamaha, and Suzuki, which together accounted for more than 95% of the domestic market share in 2020.
4. Automotive Component Industry.
The automotive component industry is another critical area of the Indonesian automotive sector. The country has become an important manufacturing hub for automotive components, including tires, batteries, and electronic components. In 2020, the automotive component industry contributed around USD 12 billion to the country’s economy, according to the Indonesian Ministry of Industry.
5. Automotive Aftermarket
The automotive aftermarket refers to the maintenance and repair of vehicles after they have been sold. This segment includes automotive service providers, parts and accessories manufacturers, and retailers. The automotive aftermarket in Indonesia has witnessed significant growth in recent years, driven by the increasing number of vehicles on the road. According to a report by Grand View Research, the automotive aftermarket in Indonesia is expected to grow at a compound annual growth rate (CAGR) of 9.7% between 2021 and 2028.
6. Electric Vehicles
Electric vehicles (EVs) are an emerging segment of the Indonesian automotive industry. The country has set an ambitious target of having 20% of all vehicles sold in the country to be electric by 2025. The Indonesian government has announced various incentives for the development and adoption of EVs, including tax breaks, subsidies, and reduced import duties on EV components.
Exports and Imports
Indonesia is becoming an important player in the global automotive industry, with both exports and imports contributing significantly to the country’s economy. In 2020, Indonesia exported 215,285 units of vehicles, valued at around US$3.7 billion. The main export destinations were Thailand, the Philippines, Vietnam, and Australia.
On the other hand, Indonesia imported 325,009 units of vehicles, valued at around US$5.7 billion. The main import sources were Thailand, Japan, China, and South Korea. The majority of imported vehicles were passenger cars, accounting for 90% of the total imports.
Regulations
The Indonesian government has implemented various regulations to support the development of the automotive industry in the country. One of the most important regulations is the Low-Cost Green Car (LCGC) program, which was launched in 2013 to encourage the production of affordable and fuel-efficient cars. The program has been successful, with LCGC sales reaching 217,588 units in 2020.
Another regulation is Government Regulation No. 41/2020 on the Limitation of Motor Vehicle Ownership, which aims to reduce traffic congestion in Jakarta by limiting the number of cars that can be registered in the city. The regulation has been controversial, with some arguing that it will negatively impact the automotive industry in Indonesia.
Challenges
Despite the growth of the automotive industry in Indonesia, there are still some challenges that need to be addressed. One of the main challenges is the lack of skilled workers, especially in the area of engineering. This has resulted in a shortage of qualified engineers and technicians, which has affected the quality of the products.
Another challenge is the infrastructure, especially in terms of transportation and logistics. The road network in Indonesia is still underdeveloped, and transportation costs are relatively high compared to other countries in the region. This has made it difficult for companies to transport their products efficiently and cost-effectively.
Interesting Statistics:
• According to GAIKINDO, total vehicle production in Indonesia increased by 7.8% in 2020 compared to the previous year.
• Indonesia is the largest automotive market in Southeast Asia, with a domestic market of over 1 million vehicles per year.
• The total sales of passenger cars in Indonesia reached 532,027 units in 2020, according to data from the Association of Indonesian Automotive Industries (Gaikindo).
• According to Frost & Sullivan, the Indonesian automotive component industry is expected to grow at a CAGR of 6.4% between 2020 and 2025.
• The motorcycle segment is the largest in the Indonesian automotive industry, accounting for more than 70% of total vehicle sales in the country.
• The Indonesian automotive industry employs over 1.3 million people.
• Toyota was the best-selling brand in Indonesia in 2020, with over 227,000 units sold.
• The Indonesian government has set a target of producing over 2 million electric vehicles by 2025.
