Indonesia Car Market Outlook to 2030

Indonesia Car Market Overview

• The Indonesia car market is valued at 1 million units, reflecting the growing demand for vehicles driven by rising income levels, urbanization, and improvements in infrastructure. The market is supported by favorable government policies, such as tax incentives and subsidies for electric vehicles (EVs), as well as investments in automotive manufacturing by global and local players.

• The countrys increasing middle-class population and expanding urban centers, including Jakarta, Surabaya, and Bandung, have fueled car ownership rates, with a notable shift towards passenger cars and SUVs. Additionally, the demand for electric vehicles is growing, driven by environmental awareness and government-led initiatives aimed at reducing carbon emissions.
• The Indonesian government has introduced several policies to promote the automotive sector, including the Low-Cost Green Car (LCGC) program and subsidies for EV purchases. In 2024, the government also rolled out infrastructure projects for charging stations to support EV adoption, aiming to have at least 20% of the country's vehicles powered by electricity by 2030.

Indonesia Car Market Segmentation

• By Vehicle Type: The market is segmented into passenger cars, commercial vehicles, and electric vehicles. Passenger cars hold the largest share, driven by the increasing preference for personal vehicles due to rising disposable incomes. Electric vehicles are witnessing significant growth as consumers shift towards more environmentally friendly transportation options, supported by government incentives.

• By Fuel Type: The market is segmented into gasoline, diesel, and electric. Gasoline-powered vehicles dominate the market due to the affordability and availability of fuel. However, the electric vehicle segment is growing rapidly due to tax exemptions, reduced registration fees, and government policies promoting a cleaner automotive ecosystem.

Indonesia Car Market Competitive Landscape

The Indonesia car market is highly competitive, with both international and domestic players operating across various segments. Companies such as Toyota, Honda, Mitsubishi, and Suzuki dominate the market, with significant market share in the passenger car and SUV segments. The electric vehicle market is gaining traction, with companies like Tesla and Wuling Motors introducing new models tailored to the Indonesian market.

Indonesia Car Market Industry Analysis

Growth Drivers

• Rising Disposable Incomes: Indonesias economy is set to maintain growth momentum, with GDP expected to reach $1.54 trillion in 2024, driven by sectors such as manufacturing, construction, and services. Rising disposable incomes, which reached an annual average of $USD 11,500 per capita in 2023, have spurred consumer demand for automobiles, as middle-class households increasingly invest in vehicles. This trend is more prominent in urban regions such as Jakarta and Surabaya, where higher income levels and easier access to financial services have boosted car purchases. Data from the Indonesian Ministry of Finance supports this income rise.
• Urbanization and Infrastructure Development: By 2024, over 60% of Indonesias population is expected to live in urban areas, creating a greater demand for personal transportation. Major cities like Jakarta, Bandung, and Surabaya have witnessed rapid infrastructure development, with government investments in road expansions, tollways, and public transportation systems exceeding USD 30 billion since 2022. These projects are geared toward improving connectivity and reducing congestion, making car ownership more attractive to urban residents. The construction of new highways, including the Trans-Java Toll Road, is contributing to the increased demand for vehicles.
• Government Incentives for Electric Vehicles: The Indonesian government has implemented policies to support EV adoption, including tax incentives and subsidies. By 2024, the government aims to have 400,000 electric vehicles on the road, supported by reduced import duties and VAT exemptions. Government-backed financial support for local EV production, such as the USD 2.6 billion investment in battery production facilities in 2023, is expected to increase the availability and affordability of EVs. This policy also aligns with Indonesias commitment to reduce carbon emissions by 29% by 2030.

Market Challenges

• High Vehicle Costs: The high cost of cars, particularly electric vehicles, remains a challenge for many Indonesians. Import duties and taxes on foreign-made vehicles increase retail prices, limiting access to luxury and environmentally friendly options for lower-income households. Government incentives for electric vehicles are helping, but affordability remains a barrier for mass adoption. As a result, lower-income households face difficulties in affording new vehicles, limiting the markets overall growth.
• Limited Charging Infrastructure for EVs: Despite government efforts, the lack of widespread charging infrastructure in Indonesia poses a significant challenge to the growth of the electric vehicle market. The availability of charging stations is mostly concentrated in urban areas, making it difficult for EV owners to travel longer distances across the country. This insufficient infrastructure hampers the adoption of electric vehicles, especially in rural and suburban areas where long-range travel is common.

Indonesia Car Market Future Outlook

The Indonesia car market is projected to grow steadily through 2028, driven by rising income levels, government incentives for electric vehicles, and the expansion of urban centers. The market will also benefit from technological advancements in automotive manufacturing and infrastructure developments. Electric vehicles are expected to play a pivotal role in the future, with increasing consumer demand and government policies favoring the transition to greener transportation.

Future Market Opportunities

• Emergence of Electric Vehicles: Electric vehicle (EV) sales in Indonesia have seen steady growth, with over 18,000 units sold by mid-2024. The governments ongoing commitment to reducing emissions, combined with financial incentives for both manufacturers and buyers, presents significant opportunities for EV market expansion. Local production of batteries and electric components is also being incentivized through the USD 20 billion investment in the EV supply chain by 2023, aimed at reducing Indonesia's reliance on imports. The countrys substantial nickel reserves are an asset, supporting EV battery production.
• Growth of Ride-Hailing Services: Ride-hailing services in Indonesia have become a major source of vehicle demand. In 2023, the number of ride-hailing users surpassed 73.62 million, with services like Gojek and Grab expanding to more rural areas. These services have created new opportunities for car ownership among drivers looking for employment or supplementary income. The Indonesian government has supported the sector with regulations that formalize driver employment, ensuring minimum wages and vehicle safety standards, which further incentivizes the acquisition of cars for ride-hailing.