Indonesia Tire Market Outlook to 2030

Indonesia Tire Market Overview

• Indonesia Tire Market has shown significant growth as the market size reached $3.85 Bn in 2023. This growth is driven by the rising automotive industry, an increase in vehicle production, and growing demand for replacement tires due to expanding vehicle fleets and increasing road infrastructure development.
• Indonesian tire market is led by major players like PT Gajah Tunggal Tbk, PT Multistrada Arah Sarana Tbk, Michelin Indonesia, Bridgestone Tire Indonesia, and Goodyear Indonesia. These companies excel due to their extensive product ranges, strong distribution networks, and continuous innovations.
• In 2022, Michelin has completed the acquisition of Royal Lestari Utama (RLU), a sustainable rubber project in Indonesia. Previously holding a 49% stake, Michelin now owns 100% of the venture, which aims to produce sustainable natural rubber across 88,000 hectares in Sumatra and Borneo.

 Indonesia Tire Current Market Analysis

• In 2022, Indonesia produced around 1.34 million vehicles, making it the 17th largest automotive market in the world. This growth significantly drives the demand for both OEM and replacement tires. The expanding middle class and increased consumer spending power further fuel the automotive and tire industries in the region.
• One of the major challenges facing the Indonesia tire market is the volatility in raw material prices, particularly natural rubber and synthetic rubber. In 2023, the price of natural rubber fluctuated between USD 1.50 and USD 1.80 per kilogram, impacting the profit margins of tire manufacturers.
• Java remains the dominant region in the tire market, accounting for half of the total demand in 2023. The region's well-established automotive industry, coupled with a large consumer base, makes it the primary market for tire manufacturers.

Indonesia Tire Market Segmentation

The Indonesia Tire Market can be segmented based on several factors:

By Tire Type: Indonesia Tire Market is segmented by Tire Type into Passenger Car Tires, Commercial Vehicles Tires & Two-Wheeler Tires. In 2023, Passenger Car Tires reign as the most dominant sub-segment, holding a substantial market share due to the extensive number of passenger vehicles in Indonesia, with radial tires being the preferred choice for their better performance and fuel efficiency.

By End User: Indonesia Tire Market is segmented by Distribution Channel into OEMs and Aftermarkets. In 2023, Aftermarket emerges as the most dominant sub-segment, commanding a larger portion of the market share, due to the high turnover of replacement tires needed from extensive vehicle use, facilitated by a well-established network of dealerships, retail stores, and online sales channels. 

By Region: Indonesia Tire Market is segmented by region into North, South, East & West regions. In 2023, the East region leads due to its industrial activities and manufacturing hubs, contributing significantly to the overall market growth. This region also benefits from well-developed infrastructure and strategic investments in automotive manufacturing.

Indonesia Tire Market Competitive Landscape

• Gajah Tunggal: In 2023, Gajah Tunggal Tbk participated in the 30th GAIKINDO Indonesia International Auto Show, showcasing its diverse brand portfolio including GT Radial, Giti, Gajah Tunggal, IRC tire, and Zeneos, highlighting their commitment to innovation and quality in the tire industry.
• Bridgestone Corp: In 2022, Bridgestone Corporation announced plans to invest $26.7 million in its natural rubber plantations in Indonesia by 2030. This investment aims to enhance productivity and sustainability of the plantations, aligning with the company's broader goals of circular economy and carbon neutrality.
• Michelin: In 2022, Michelin buys 51% of Royal Lestari Utama (RLU), a pilot project developing sustainable rubber tree plantations in Indonesia. The project aims to create sustainable natural rubber production over a wide area in Sumatra and Borneo, while also improving the livelihoods of local communities.

Indonesia Tire Industry Analysis

Indonesia Tire Market Growth Drivers:

• Rising Vehicle Production and Sales: Vehicle sales reached over 1 million units in 2023, which was a 4% increase from 2022. This surge in automotive production and sales necessitates a higher demand for both OEM and replacement tires, contributing to market growth. The increase in vehicle ownership also spurs growth in related sectors such as automotive services and aftermarket parts.
• Growth in E-commerce and Logistics: In 2023, there were 58.3 million e-commerce users in Indonesia, a 48% increase from 2022. This growth in online shopping increases the demand for efficient and reliable logistics, subsequently boosting the tire market. The expansion of the logistics sector also drives the need for commercial vehicles, further fueling the demand for tires.
• Increasing Adoption of Electric Vehicles (EVs): Till June 2023, there were 70,242 electric vehicles in Indonesia, reflecting a significant growth in the adoption of sustainable transportation solutions in the country. This shift towards EVs requires the development of specialized tires, driving innovation and growth in the tire market.

Indonesia Tire Market Challenges:

• Environmental Regulations and Compliance: Stricter environmental regulations related to emissions and waste management are imposing additional costs on tire manufacturers. The Indonesian Ministry of Environment and Forestry has set stringent guidelines for tire disposal and recycling, increasing compliance costs.
• Counterfeit and Low-Quality Tires: The presence of counterfeit and substandard tires in the market poses a significant challenge. These low-quality products not only endanger road safety but also undermine the market for genuine, high-quality tires, affecting the overall industry reputation.

Indonesia Tire Market Government Initiatives:

• National Industrial Policy on Tire Manufacturing: In 2023, the Indonesian government introduced a national policy to promote the tire manufacturing industry. The government allocated USD 200 million for this initiative, aiming to boost domestic production and reduce dependency on imports.
• Rural Road Development Program: The Asian Development Bank (ADB) and Islamic Development Bank are co-financing the "Regional Roads Development Project" in Indonesia to improve about 476 km of strategic national roads in four provinces. The project aims to strengthen national and regional connectivity, improve access to markets, job opportunities and social services.
• Skills Development Program: This program, with a budget of USD 50 million, focuses on training and upskilling workers in tire manufacturing technologies, quality control, and environmental sustainability practices. The initiative includes partnerships with technical institutes, vocational schools, and industry experts.

Indonesia Tire Future Market Outlook

The Indonesia Tire market is expected to grow exponentially by 2028, with significant growth anticipated due to the factors such as increasing adoption of electric vehicles, infrastructure development, and rising automotive production.

Future Trends

• Growth in Electric Vehicle Tires: Over the next five years, the demand for specialized tires for electric vehicles (EVs) is expected to rise significantly. The Indonesian government’s target of having 2 million EVs on the road by 2025 will drive innovation in tire manufacturing. Tire companies will focus on developing tires that offer lower rolling resistance and higher durability to cater to the unique requirements of EVs.
• Increased Adoption of Smart Tires: The market will witness a growing trend towards smart tires equipped with sensors that monitor tire pressure, temperature, and wear in real-time. These smart tires enhance vehicle safety and performance. By 2028, it is estimated that smart tire adoption will reach a significant proportion of the market, driven by advancements in tire technology and increasing consumer awareness.