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Latest Reports Automotive
Ever since the second half of 2023 car sales in Indonesia have been quite disappointing. While in recent years Indonesia had become used to seeing more than one million cars being sold across the country per year (excluding the COVID-19 crisis period), sales now seem to have stabilized around 850,000 units per year in the 2024-2025 period.
Like with most sectors, the automotive sector of Indonesia received a wave of fresh air as most of the COVID-19-related social and business restrictions were scrapped by the government at the end of 2022. And, when the government also scrapped the vaccine-booster requirement for traveling into, and across, the country in June 2023 we can argue that the COVID-19 crisis is truly over.
On 7 August 2023 Indonesia Investments released the July 2023 edition of its monthly report, zooming in on various economic, political and social matters that were relevant in the month of July 2023.
Over the past years we have mentioned on several occasions that the electric vehicle is the automotive industry’s future thanks to three key inter-related circumstances: (1) recent rapid technological developments that allow the electric vehicle battery to be more energy efficient, (2) the world’s eagerness to move away from fossil fuels toward renewable energy, and (3) rising political support for the development of an efficient and conducive regulatory ecosystem for the electric vehicle industry.
Indonesian Investment Minister and Head of the Investment Coordinating Board (or BKPM) Bahlil Lahadalia confirmed that the groundbreaking ceremony for a new electric vehicle battery plant, which is developed by state-owned Indonesia Battery Corporation (IBC) and South Korea’s LG, will be held in late-July or August 2021 in Bekasi (West Java).
At its latest monetary policy meeting, completed on 18 February 2021, Indonesia’s central bank (Bank Indonesia) decided to cut its benchmark interest rate (the seven-day reverse repurchase rate) by 25 basis points (bps) to 3.50 percent, a historically low level for Southeast Asia’s largest economy. Also the deposit facility and lending facility rates were cut by 25 bps to 2.75 percent and 4.25 percent, respectively.
Astra International, one of the biggest companies that is listed on the Indonesia Stock Exchange (in terms of market capitalization), targets to boost its market share in Indonesia's automotive industry to 50 percent before the end of the year.
Although Astra International, one of Indonesia's biggest diversified conglomerates, has been affected by subdued car sales in Indonesia in recent years, the company remains comfortably within the top ten of biggest listed companies in terms of market capitalization on the Indonesia Stock Exchange.
Astra International, one of the largest diversified conglomerates in Indonesia, has always been one of investors' favorite blue chip stocks. Although the automotive sector contributes around half to the company's total revenue, Astra International is usually regarded the barometer of the Indonesian economy because the company is engaged in most key sectors of the economy. Thus, if the company is doing well, so is the Indonesian economy.
Terminal operator Indonesia Kendaraan Terminal (better known as IPC Car Terminal) plans to conduct an initial public offering (IPO) on the Indonesia Stock Exchange in mid-July 2018. The company, which is owned by state-owned port operator Pelindo II, handles the movement of cargo containers for shipments related to the automotive industry at its terminal in Jakarta's Tanjung Priok harbor.
Latest Columns Automotive
While one month ago we read (in Indonesian media) that Indonesian President Joko Widodo vowed no increase in prices of subsidized fuels before the end of 2022, the situation suddenly changed. Based on reports in Indonesian media in the second half of August 2022 there were growing signs that the government was busy preparing a significant increase in prices of subsidized fuels (involving Pertalite and Pertamax gasoline fuels as well as automotive diesel oil) to safeguard a healthy budget balance for the government.
At its latest monetary policy meeting, which ended on 18 February 2021, the central bank of Indonesia (Bank Indonesia) decided to cut its benchmark interest rate (BI 7-Day Reverse Repo Rate), again, by 25 basis points (bps) to 3.50 percent, touching a historically low level.
The automotive industry is among the hardest-hit industries amid the coronavirus (COVID-19) crisis. In May 2020, when social and business restrictions were still very strict in places like Jakarta, car sales (wholesales; from the factories to the dealers) plunged 95.8 percent year-on-year (y/y) to 3,551 cars. Meanwhile, retail car sales dropped 96.1 percent (y/y) to 17,083 vehicles in May 2020. Never before had the Association of Indonesian Automotive Manufacturers (or Gaikindo) recorded such weak car sales figures.
Indonesia may file a complaint at the World Trade Organization (WTO) over Vietnam's recent decision to tighten regulations related to car imports. Through Decree No. 116/2017/ND-CP on Overseas Vehicle Type Approval (VTA) (which has been in effect since 1 January 2018), Vietnam requires car exporters to obtain VTA certification first (from authorities in the exporting nation) before being allowed to export cars into Vietnam. This VTA details incoming vehicles' quality, safety and environmental protection.
The biggest problem for western car-makers is the dominant position of Japan in Indonesia's automotive market. Japan has been dominating the Indonesian car market since the 1970s and there are no signs that this situation will change in the short or long term.
After Ford Motor Indonesia, the local unit of American car manufacturer Ford Motor Company, exited Indonesia earlier this year as the company found it too difficult to compete with Japanese counterparts on the Indonesian market, Ford found a new way to make sure its components and after sales services can be delivered in Southeast Asia's largest economy.
The government of Indonesia eyes rapid growth of car exports in the two decades ahead. By the year 2035 the government targets to see car shipments from Indonesia rise to 1.5 million vehicles (from around 200,000 exported units in 2016). By that year, exported vehicles should contribute 37.5 percent of total Indonesian car sales.
A new player in Indonesia's automotive industry - backed by big carmakers from China and the USA - is eager to compete for market share in Indonesia. On Tuesday (11/07) SGMW Motor Indonesia inaugurated its first manufacturing facility in Cikarang (West Java). This local company is a joint venture between (1) SAIC Motor Corporation Ltd, a Chinese state-owned automotive design and manufacturing company headquartered in Shanghai, (2) General Motors Company (GM), a US multinational automotive corporation headquartered in Detroit, and (3) Liuzhou Wuling Automobile Industry Co Ltd, a China-based car manufacturer.
Indonesia's automotive industry is centered around Bekasi, Karawang and Purwakarta in West Java. In this area various big global car-makers invested in industrial estates as well as car and component manufacturing plants. Therefore, it has become the production base of Indonesia's automotive sector (including motorcycles) and can be labelled the "Detroit of Indonesia". Detroit (Michigan, USA) is the birthplace of the US automotive industry and is home to car giants General Motor, Chrysler, and Ford.
The decision of Indonesia's central bank (Bank Indonesia), last week, to cut its key interest rate (BI rate) by 0.25 percent to 7.00 percent and to cut the reserve-requirement ratio for commercial banks' rupiah deposits by 1 percent to 6.5 percent is a decision that should boost household consumption in Indonesia in 2016, improve people's purchasing power, give rise to a stronger automotive and property sector, and boost liquidity at local banks (hence providing room for an acceleration of credit growth in Southeast Asia's largest economy).
Associated businesses Automotive
