Chinese Automakers Expand Market Presence in Indonesia’s Automotive Sector

Chinese automakers are expanding their presence in Indonesia’s auto market by offering affordable electric vehicles, challenging Japanese and South Korean dominance. Despite a sales decline and market competition, government incentives and a low vehicle ownership rate make Indonesia an attractive option. Analysts predict that economic headwinds may hinder overall growth, despite rising Chinese market share.

Chinese automakers have been increasing their presence in Indonesia’s automotive market over the past three years by introducing affordable electric vehicles (EVs) that compete with established Japanese and South Korean brands. Despite a decline in new car sales within the country, Chinese manufacturers are attracted to Indonesia due to tax incentives on imported vehicles and tough competition in their domestic market.

SAIC Motor’s 2023 report emphasized the fierce competition in the automotive landscape, leading to significant price reductions, particularly for EVs, as manufacturers strive to meet sales targets. Last year, the company lost its leading position to BYD amid these pricing wars, highlighting the challenges of overcapacity faced by manufacturers reliant on exports.

According to Goldman Sachs, Chinese EV makers have a production capacity of approximately 20 million units annually, yet only about 11 million were sold in China last year. This discrepancy underscores the importance of export markets, with China’s automotive exports to Indonesia doubling to a value of USD 3.2 billion from 2021 to 2024.

In addition to previous entries like Wuling and DFSK, several new Chinese brands have announced their debut in Indonesia, such as Great Wall Motors, Neta, BYD, and others. While some have begun local assembly operations, many vehicles are still imported as completely built-up (CBU) units.

Analyst Koketso Tsoai from Fitch Solutions indicated that Chinese brands are successfully entering Indonesia by combining high-tech, feature-packed vehicles with competitive pricing. Benefits from government incentives—including tax discounts and exemptions on import duties for EVs—have further enhanced their appeal to Indonesian consumers.

Despite the positive indicators, Redseer Southeast Asia’s Roshan Raj noted that this influx of Chinese offerings may not significantly increase overall new car sales in Indonesia, which fell by 13.9 percent year-on-year to 865,000 units last year. Economic challenges continue to dampen market conditions, despite increasing demand for EVs.

Recent data from the Indonesian Automotive Manufacturers Association (Gaikindo) shows that Chinese carmakers have been steadily increasing their market share—from 3.4 percent in 2021 to 6.4 percent in the following year—while Japanese brands have seen a decline. The South Korean market player Hyundai has experienced fluctuations, briefly achieving a 3.5 percent market share in 2023 but dropping to 2.6 percent subsequently.

Concerns were expressed by Lamhot Sinaga, deputy chairman of Commission VII in the House of Representatives, regarding the impact of EV imports on local manufacturers like Hyundai. He advocated for a distinction between companies that invest in local production versus those relying on imports without contributing to the local economy.

During the Indonesia International Motor Show (IIMS) 2025, Industry Minister Agus Gumiwang Kartasasmita called on foreign manufacturers to prioritize local production rather than solely importing vehicles. He emphasized the importance of supporting local businesses and increasing local content in vehicle production.

Automotive analyst Yannes Martinus Pasaribu highlighted that while Chinese manufacturers are expected to establish local factories and supply chains in Indonesia, there remain hurdles, particularly regarding dealership networks and after-sales services, which are primarily concentrated in Java. Additionally, consumer perceptions of Chinese automotive brands have yet to fully shift positively.

The entry of Chinese automakers into Indonesia’s automotive market signifies a notable shift, as they leverage competitive pricing and government incentives to gain market share against established brands. While the influx of EVs from China demonstrates their growing influence, economic challenges persist that may hinder overall sales growth this year. The future of local automotive manufacturing, especially for Chinese brands, will depend on successfully addressing logistical challenges and changing consumer perceptions.

Original Source: www.thestar.com.my