The automotive industry in Indonesia faced notable challenges in 2024, wiht a noticeable decline in both car production and sales. According to data from the Association of Indonesian Automotive Industries (Gaikindo), domestic production of four-wheeled vehicles from January to November 2024 stood at 1.09 million units,marking a 15.5% drop compared to the same period in 2023,which saw 1.29 million units produced.
Sales figures also reflected this downward trend.Wholesale car sales, which represent transactions between manufacturers and dealers, totaled 865,723 units in 2024, a 13.9% decrease from the previous year’s 1,005,802 units. Retail sales, or purchases made by consumers from dealers, fared slightly better but still declined by 10.9%, reaching 889,680 units. Despite this, the industry managed to surpass Gaikindo’s revised target of 850,000 units, down from an initial goal of 1.1 million units.
Gaikindo Chairman Jongkie Sugiarto attributed the sluggish performance to a combination of economic and political factors. “The automotive market, notably for four-wheeled vehicles, struggled throughout 2024,” he noted. Consequently, the association has yet to set a sales target for 2025, opting to wait for clearer economic indicators.
Economist Josua Pardede of Bank Permata highlighted several key reasons behind the downturn.”First, the public and businesses tend to delay purchasing durable goods, including vehicles, during election years,” he explained. “Second, high interest rates have made vehicle financing more expensive, discouraging potential buyers.”
“Post-election recovery in car sales will depend on economic stability and the new goverment’s fiscal policy.”
Pardede also pointed to declining real incomes due to inflation and economic uncertainty, which have pressured spending on non-essential goods. Additionally, the normalization of commodity prices has further impacted consumer confidence. These factors collectively created a challenging habitat for the automotive sector in 2024.
Looking ahead, industry experts remain cautiously optimistic. The potential for recovery hinges on improved economic conditions and supportive government policies. As Pardede emphasized, the interplay between fiscal measures and market stability will be critical in determining the trajectory of car sales in the coming years.
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The automotive industry in Indonesia is navigating a challenging landscape as economic factors and policy changes impact vehicle sales and production. Earlier this year, the government introduced an additional motor vehicle tax levy under the Non-Metal Mineral and Rock Tax (MBLBB). while this move aims to bolster revenue, it could raise the cost of purchasing new vehicles, despite reductions in Motor Vehicle Tax (PKB) and Motor Vehicle Title Transfer Fee (BBNKB) rates under the financial Relations Law between the Central government and Regional Governments (HKPD).
Economic analyst Josua Pardede highlighted that the normalization of commodity prices and a slower decline in interest rates may further hinder growth. “Even with an estimated economic growth rate of around 5 percent, four-wheeled vehicle sales in 2025 are projected to slow down to approximately 872,000 units,” he explained. This slowdown reflects broader challenges in the automotive sector, including weakened demand and reduced manufacturing output.
The decline in automotive production could also diminish the transportation sector’s contribution to manufacturing GDP, which previously accounted for 13 percent of the total. Indicators such as the Purchasing Managers’ Index (PMI) and Net Weighted Balance (NWB) for the automotive sector have already signaled a significant slowdown in manufacturing activity. This trend is expected to persist as manufacturers scale back production in response to weaker demand.
Looking ahead, the recovery of car sales post-election will largely depend on economic stability and the fiscal policies of the new government. Josua emphasized that while the automotive industry remains a key driver of Indonesia’s economy, external pressures and internal policy adjustments could continue to pose challenges. As the sector adapts to these changes, stakeholders will need to navigate a complex environment to sustain growth and innovation.
The Indonesian automotive industry is navigating turbulent waters as production and sales face significant declines in 2024. According to data from the Association of Indonesian Automotive Industries (Gaikindo), domestic production of four-wheeled vehicles from January to November 2024 stood at 1.09 million units, marking a 15.5% drop compared to the same period in 2023, which saw 1.29 million units produced. Similarly, car sales from manufacturers to dealers plummeted by 13.9%, with 865,723 units sold in 2024 compared to 1,005,802 units in 2023.
This downturn has created ripple effects across the industry, particularly for local component suppliers who rely heavily on consistent production volumes. Reduced demand has led to underutilized production capacity, driving up fixed costs per unit and squeezing profitability for manufacturers. As Josua, an industry expert, pointed out, “Production capacity that is not optimal increases fixed costs per unit, which can affect the manufacturer’s profitability.”
Production capacity that is not optimal increases fixed costs per unit,which can affect the manufacturer’s profitability.
Despite these challenges, ther are glimmers of hope. Industry players are exploring opportunities to optimize vehicle exports to ASEAN countries, where demand remains more stable. Additionally, the government is being urged to introduce and extend incentives for electric vehicles (EVs) to mitigate the impact of open taxes and encourage a shift from fossil fuel-powered vehicles to cleaner alternatives.
“Furthermore,the government needs to strengthen incentives for electric vehicles to accelerate the transition to more enduring transportation,” josua emphasized. Potential measures include extending the relaxation of luxury Goods Sales Tax (PPnBM) and promoting affordable vehicle credit financing schemes to stimulate demand.
The automotive sector’s struggles are not isolated. Industries linked to steel, plastics, and rubber are also feeling the pinch, raising concerns about potential workforce reductions. Though, with strategic government policies and a focus on sustainable transportation solutions, the industry could regain its footing and pave the way for a more resilient future.
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The automotive industry faced a challenging year in 2024, with retail car sales dropping by 10.9% to 889,680 units compared to the previous year. Despite this decline, the figures still surpassed the revised target of 850,000 units set by Gaikindo, the Indonesian Automotive Industry Association.Initially, the association had aimed for 1.1 million units, but sluggish market conditions forced a downward adjustment.
Gaikindo Chairman I Jongkie Sugiarto acknowledged the downturn, attributing it to a combination of economic and political factors. “The automotive market, particularly for four-wheeled vehicles, struggled throughout 2024,” he stated. As for 2025, the association has yet to set a definitive sales target, reflecting ongoing uncertainty in the sector.
Josua Pardede, an economist at Bank Permata, highlighted several reasons behind the decline in car production and sales. ”The election year played a significant role,” he explained. “Both consumers and businesses delayed purchasing durable goods, including vehicles, due to political uncertainty.” Additionally, rising interest rates made vehicle financing more expensive, further dampening demand.
“Post-election recovery in car sales will depend on economic stability and the new government’s fiscal policy.”
Other contributing factors included a decline in real income caused by inflation and economic instability, which pressured spending on non-essential goods.The normalization of commodity prices also reduced disposable income for many households.Moreover,manufacturers scaled back production due to weak demand,leading to lower capacity utilization in 2024.
Looking ahead to 2025, josua Pardede remains cautious. “The recovery in car sales will hinge on economic stability and the fiscal policies introduced by the new government,” he noted. While some optimism exists, the road to recovery appears fraught with challenges, including lingering economic uncertainties and shifting consumer priorities.
The Indonesian government recently introduced an additional motor vehicle tax levy under the Non-Metal Mineral and Rock Tax (MBLBB).While this move aims to bolster revenue, industry experts like Josua suggest it could raise the overall cost of purchasing new vehicles. This comes despite reductions in Motor Vehicle Tax (PKB) and Motor Vehicle Title Transfer Fee (BBNKB) rates outlined in the Financial Relations Law between the Central Government and Regional Governments (HKPD).
Economic factors such as the stabilization of commodity prices and a slower-than-expected decline in interest rates may further challenge the automotive sector.”Even with economic growth projected to remain steady at around 5 percent, four-wheeled vehicle sales in 2025 are expected to dip to approximately 872,000 units,” Josua noted.
The automotive industry’s declining output could also impact the transportation sector’s contribution to manufacturing GDP, which previously accounted for 13 percent of total manufacturing GDP. Indicators like the Purchasing managers’ Index (PMI) and Net Weighted balance (NWB) for the automotive sector have already signaled a notable slowdown in manufacturing activity.
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Navigating Challenges in the Automotive Industry: Opportunities and Strategies
The automotive sector is facing significant challenges due to weakened demand, which has led to reduced production levels.this downturn is putting immense pressure on local component suppliers, who are responsible for providing the bulk of raw materials needed for manufacturing. When production capacity isn’t optimized, fixed costs per unit rise, directly impacting a manufacturer’s bottom line. This ripple effect extends to related industries, such as steel, plastics, and rubber, which are closely tied to automotive production. The result? A heightened risk of workforce reductions across the board.
“Production capacity that is not optimal increases fixed costs per unit,which can affect the manufacturer’s profitability.”
despite these hurdles, there’s a silver lining. Industry experts suggest that automotive players can pivot their focus toward exporting vehicles to ASEAN countries, where demand remains relatively stable. this strategy could help mitigate some of the financial strain caused by sluggish domestic markets.
Another promising avenue lies in the growing interest in electric vehicles (EVs). governments are being urged to bolster incentives for EV adoption, which could help offset the negative effects of open taxes. Such measures would not only encourage a shift from fossil fuel-powered vehicles to cleaner alternatives but also promote sustainable transportation solutions. Additionally, extending tax relaxations, such as those on Luxury Goods Sales Tax (PPnBM), and introducing affordable vehicle financing schemes could further stimulate the market.
“furthermore, the government needs to strengthen incentives for electric vehicles to accelerate the transition to more sustainable transportation,” saeid Josua.
while the automotive industry is navigating turbulent waters, strategic shifts toward export markets and sustainable transportation solutions offer a path forward.By leveraging government incentives and optimizing production capacities,manufacturers can weather the storm and emerge stronger in the long run.
