Indonesia Automotive Manufacturing Market Outlook to 2028

Indonesia Automotive Manufacturing Market Overview

• The Indonesia Automotive Manufacturing Market has experienced growth over the past few years, which was reflected in the global automotive market valued at USD 3.5 trillion in 2023. This growth is driven by several factors, including increased domestic demand, government initiatives, and foreign investments.
• The major players in the Indonesian automotive manufacturing market include Toyota Motor Corporation, Astra International, Honda Motor Co., Ltd., Suzuki Motor Corporation, and Mitsubishi Motors Corporation. These companies have established manufacturing facilities in the country and have a strong distribution network.
• In 2023, Toyota announced an additional investment of USD 1.8 billion in its Indonesian operations to expand its electric vehicle (EV) production capacity. This move aligns with the Indonesian government's push towards EV adoption and sustainable transportation.
• The southern region, including Java and Bali, dominated the market in 2023. This dominance is due to the concentration of manufacturing facilities, skilled labour, and robust infrastructure.

Indonesia Automotive Manufacturing Market Segmentation

Indonesia's automotive manufacturing market is segmented into vehicle type, component, and region.

• By Vehicle Type: The Indonesian automotive manufacturing market is segmented by vehicle type into passenger vehicles, commercial vehicles, and electric vehicles (EVs). In 2023 passenger vehicles, including sedans, SUVs, and hatchbacks, dominate the market due to the increasing preference for personal mobility and the availability of affordable models tailored for the Indonesian market.

• By Component: The market is segmented by component into engines, transmissions, and battery systems. In 2023 battery systems, particularly for EVs, accounted for the highest market share. The surge in EV production and the need for high-performance batteries have fueled the growth of this segment.

• By Region: The market segmentation by region includes North, South, East, and West. The southern region, including Jakarta and West Java, is the leading region in the automotive manufacturing market. Jakarta, being the capital city, has a well-established infrastructure and a large consumer base.

Indonesia Automotive Manufacturing Market Competitive Landscape

• Suzuki: Suzuki Motor Corporation increased its local content in vehicle production to 70% in 2023, up from 60% in 2022. This initiative involved an investment of USD 200 million in local supplier development and training programs. By enhancing local content, Suzuki aims to reduce production costs and improve supply chain resilience, supporting the growth of the domestic automotive industry.
• Nissan: Nissan Motor Co., Ltd. entered into a technological collaboration with an Indonesian tech startup named Nodeflux in 2023 to develop smart vehicle technologies. The partnership focuses on integrating IoT (Internet of Things) and AI (Artificial Intelligence) solutions into Nissan's vehicles, improving safety and driving experiences.

Indonesia Automotive Manufacturing Market Analysis

Indonesia Automotive Manufacturing Market Growth Drivers:

• Increase in Automotive Exports: Indonesia's automotive manufacturing industry has seen substantial growth in exports, driven by increased production capacities and favourable trade agreements. In 2022, Indonesia's automotive production reached 1,470,146 units, with exports accounting for a substantial portion of this output. The data indicates that automotive exports in 2022 were around 473,602 units.
• Rising Demand for Commercial Vehicles: The logistics and e-commerce sectors in Indonesia have expanded rapidly, driving the demand for commercial vehicles. In 2023, Indonesia's e-commerce revenue reached USD 40.5 billion, driving an increase in commercial vehicle sales to 433,000 units. This growth reflects the expanding logistics sector, fueled by rising demand for transportation and delivery services.
• Expansion of Automotive Financing Options: The availability of diverse and flexible automotive financing options has boosted vehicle sales in Indonesia. The total value of automotive loans issued in 2023 was more than USD 10 billion, reflecting the increasing reliance on financial support to purchase vehicles.

Indonesia Automotive Manufacturing Market Challenges:

• High Dependency on Imported Components: The Indonesian automotive industry faces a challenge due to its reliance on imported components. In 2023, the majority of the parts used in vehicle manufacturing were imported, leading to higher production costs. The import value for automotive parts was USD 6 billion, reflecting the industry's vulnerability to global supply chain disruptions and currency fluctuations.
• Infrastructure Bottlenecks: In 2023, logistics costs in Indonesia were estimated at USD 50 billion, with inefficient transport networks contributing to delays and increased operational costs. The World Bank reported that it takes an average of 12 days to transport goods across Indonesia, compared to 7 days in neighbouring countries. This inefficiency hampers the industry's ability to meet production and delivery timelines.

Indonesia Automotive Manufacturing Market Government Initiatives:

• Automotive Industry Roadmap: The government launched the Automotive Industry Roadmap in 2023, outlining strategic goals for the sector until 2030. The roadmap includes plans to increase local content in vehicle manufacturing to 80% by 2030 and to produce 600,000 EVs annually by 2025. This comprehensive plan aims to enhance the industry's competitiveness and align it with global standards, fostering sustainable growth.
• Development of Industrial Zones: To support the automotive industry, the government has focused on developing dedicated industrial zones. In 2023, the government allocated USD 1.2 billion for the development of new industrial zones in regions like West Java and Central Java. These zones offer tax incentives, improved infrastructure, and streamlined regulatory processes, attracting both domestic and foreign automotive manufacturers.

Indonesia Automotive Manufacturing Future Market Outlook

Indonesia's automotive manufacturing market is expected to grow in the coming years. The market is also likely to shift towards more organized with established players and online platforms expanding their reach.

Indonesia Automotive Manufacturing Future Market Trends:

• Adoption of Advanced Manufacturing Technologies: The adoption of advanced manufacturing technologies, such as automation, robotics, and AI, will transform the Indonesian automotive industry. By 2028, it is estimated that the majority of manufacturing processes will be automated, improving efficiency and reducing production costs.
• Growth of the Automotive Aftermarket: The automotive aftermarket, including parts and services, is anticipated to grow over the next five years. By 2028, the automotive aftermarket is expected to grow due to the increasing vehicle population and the demand for maintenance services. This growth in the aftermarket sector will create new business opportunities and contribute to the overall development of the automotive industry.