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Automotives In Indonesia

 

AUTOMOTIVES IN INDONESIA

INTRO

Indonesian love large-capacity car for their mobility

The Multi-purpose vehicle (MPV) leads the car market in Indonesia. Indonesians enjoy taking trips with the family or invite some friends, therefore a big car is required. The MPV can carry up to seven passengers, thus meets this request.

CATEGORY OVERVIEW

  • The automotive industry grows 5% in 2018 due to expanding exports and modest growth in the domestic market. Industry’s production value expands by 8% in 2018 to IDR 665.2 trillion. Industry forecast to see 10% CAGR over the period to 2023, with weaker demand in the domestic market expected to be offset by rising exports and investments into auto parts segment.
  • Indonesia exported 346,000 vehicles in 2018,  264,000 of which were completely built up (CBU), while 82,000 others were completely knocked down (CKD). The total value of vehicles exports stood at USD 4 billion, plus USD 2.6 billion from component exports.
  • In the vehicle market, the vehicle market remained positive throughout the second half of 2018
  • New vehicle sales in Indonesia increased by 3.5% to 87,846 units in December 2018 compared with 84,880 units in the same month of the previous year, according to wholesale data compiled by Association of Indonesian Automotive Industries (Gaikindo).
  • Full-year vehicle sales increased by 6.6% to 1,151,291 last year compared with 1,079,534 units in 2017, boosted by an almost 18% rise in commercial vehicle sales to 276,631 units from 235,310 units in the previous year – driven by continued strong investment in infrastructure and private construction projects. Passenger vehicle sales were up by just 3.6% at 874,660 units from 844,224 units.
  • The increasing demand for luxury sports cars is continuously attracting luxury car companies to bring new products into Indonesia.
  • According to ASEAN Automotive Federation, Indonesian vehicle market sales is one-third of total vehicle sales in ASEAN (more than 3 million in 2017).
  • No restriction in car’s age in Indonesia leading to growing demand in the used car market.
    • Indonesia’s developing used car market is gradually becoming more structured due to the greater availability of flexible financing terms, standardized and authorized dealership channels and better transparency of information.
    • Independent dealers continue to drive the used car market due to their widespread presence throughout Indonesia, flexible negotiation for prices, lower margins, quick turnover and a wider variety of car age available.
    • In recent times, more Indonesians are finding internet-based stores to be a boon in their increasingly busy daily lives. With rising internet penetration, consumers are slowly shifting away from the traditional methods of shopping. The advent of online auto classified portals such as Carmudi, OLX, and Mobil88 have streamlined the used car industry in the country. There is more transparency in the market and buyers have a wide variety of brands and models to choose from the convenience of their home.

 

  • Looking at vehicle’s type, Passenger Vehicle (PV) dominate the market with close to 8-% market share compared to Commercial Vehicles (CV). Within PV, Multi-Purpose Vehicle is leading, followed by Low-Cost Green Car (LCGC).
    • Indonesians love the multipurpose vehicle (MPV), known as "people carriers", as these vehicles are bigger and taller than the family car. Indonesians enjoy taking trips with the family (and/or invite some friends) and therefore a big car is required. The MPV can carry up to seven passengers and thus meets this request.

 

  • 2-wheelers industry shows modest signs of recovery in 2018, supported by sales growth in the domestic market. Industry projected to post 7% CAGR over 2016-2021 due to the recovering volume of domestic 2-wheeler sales, higher exports and launch of electric scooter production.
  • Booming of online transportation creating a new business opportunity for vehicles owners. Used vehicles (car or motorcycle) are preferable to be used for online transportation.

 

 

COMPETITIVE LANDSCAPE

  • Japanese Original Equipment Manufacturer (OEM) dominate the market due to its key competitive advantage, as follows:
  • Localization. Most Japanese brands have local plans, allowing for about 30% cheaper taxes than CBU units imported. Products and model specifications fit local needs, such as focusing on small engine cars to capitalize on favorable tax policies for fuel-efficient vehicles.
  • Geographical coverage. Wide-spread distribution network allows for convenient servicing and spare parts availability.
  • Government support. Trade agreements resulting in lower import duties for Japanese companies.
  • In the vehicle market, Toyota dominates the market with almost 30% market share in 2018. Daihatsu comes at second place competing closely with Honda (18% and 17%). Mitsubishi (12%) and Suzuki (10%) are following afterward. 
    • Toyota is one of the complete manufacturers ranging from sedans, city cars, MPV, SUV, pickup. Toyota brands lead in most vehicles type: Toyota Kijang Innova (MPV), Toyota Avanza (low MPV), Toyota Alphard (upper MPV), Toyota Agya (LCGC). Toyota’s ability to maintain its strong position in each vehicle segment is attributed to its lower price points in comparison to other Japanese OEMs.
    • Daihatsu. The largest sales contribution coming from the low-cost green car (LCGC) model Daihatsu Sigra. Other contributors to Daihatsu’s sales volume come from Gran Max and Xenia.
    • Honda has become a strong competitor in Indonesia, particularly with Mobilio and Jazz models (both are MPVs) as well as the Honda Brio Satya in the LCGC category. In the SUV segment, its BR-V and HR-V have become the vehicle of consumers' choice.
    • Mitsubishi relies on Xpander as a contributor to its sales volume. New Nissan Livina is also potential to strongly contribute to sales of Mitsubishi.
    • Suzuki Ertiga is a key brand contributing to Suzuki’s sales.   
    • Chinese carmaker, Wuling Motors, introduced Confero S (low MPV) in 2017 and recently officially launched new Almaz (SUV).
    • European brands targeting premium customer segments through more luxurious cars, for example, BMW, Mercedes, and Porsche.

 

  • In the 2-wheelers market, Honda remains dominating 2-wheeler producer and supplier in Indonesia with more than 70% market share. Yamaha comes in second place.
    • Honda and Yamaha maintain their dominant position by focusing on functionality and offer a low purchasing price and maintenance cost to attract price-sensitive consumers.

 

CONSUMER PURCHASE AND HABIT

  • A survey conducted by Daihatsu in 2018 revealed three key important factors in purchasing a car, which is efficiency, good value for money and the brand. 
  • In particular to MPV, the reasons behind the purchase of this type of car are due to its large capacity, fuel efficiency, good credit scheme offering, brand image, competitive price and attractive promotion.
  • Google Indonesia and TNS’s survey showed that 73% of car buyers are using a mobile phone on the journey of purchasing their car. Amongst them, 67% started with searching for information on Google.
  • Based on The Association of Indonesian Automotive Industries (Gaikindo) data, before Lebaran becomes the highest car purchase time in Indonesia. There is a significant 30% decrease during Lebaran period, then there is another increasing purchase before the New Year.
    • As Indonesian have a unique tradition of going back to hometown during Lebaran (mudik), they require a car to transport. This drives the increase in car purchase before Lebaran, mainly MPV type of car.
    • Similarly, motorcycle purchase is also increasing towards Lebaran for mudik purpose.

 

 

REFERENCES:

  1. Indonesia automotive industry outlook 2020, IPSOS 2016.
  2. “The archipelago economy: Unleashing Indonesia’s potential”, Obberman R, McKinsey Global Institute, 2012
  3. “Automotive Parts Industry in Indonesia”, IPSOS Business Consulting 2013
  4. https://www.indonesia-investments.com/business/industries-sectors/automotive-industry/item6047? , “Automotive Manufacturing Industry Indonesia”
  5. https://oxfordbusinessgroup.com/news/indonesia%E2%80%99s-auto-sector-expands-back-local-and-international-demand
  6. https://www.just-auto.com/news/indonesian-vehicle-market-up-7-in-2018_id186618.aspx
  7. https://www.thejakartapost.com/news/2019/02/13/indonesia-to-welcome-us900m-in-automotive-industry-minister.html
  8. https://www.euromonitor.com/luxury-cars-in-indonesia/report
  9. https://www.euromonitor.com/transport-equipment-in-indonesia/report
  10. https://www.euromonitor.com/motorcycles-bicycles-and-other-transport-equipment-in-indonesia-isic-359/report
  11. https://www.gaikindo.or.id/en/indonesias-car-market-tough-top-selling-brands-preparing-for-fresh-target-sales/
  12. https://jakpat.net/pdf/4207/perilaku-membeli-mobil
  13. http://www.tribunnews.com/otomotif/2018/12/04/tiga-alasan-yang-bikin-konsumen-berniat-beli-mobil
  14. https://beritagar.id/artikel/otogen/google-ungkap-kebiasaan-orang-indonesia-sebelum-beli-mobil
  15. https://cintamobil.com/jual-beli/apa-sebenarnya-yang-dicari-masyarakat-ketika-membeli-mobil-aid3913
  16. https://www.otomart.id/berita/penjualan-mobil-bekas-alami-peningkatan.html
  17. https://www.ipsos.com/sites/default/files/2016-09/Indonesia-growing-automotive-aftermarket-landscape.pdf
  18. https://www.asiaone.com/business/priceza-insight-japanese-cars-still-dominates-the-search-for-new-and-used-cars-in-indonesia
  19. www.caroline-id.com/blog/pasar-mobil-bekas-di-indonesia-semakin-diminati/amp/
  20. https://m.detik.com/oto/motor/d-3460816/ojek-online-bikin-industri-motor-bergairah
  21. https://www.100kpj.com/motonews/866-motor-bekas-rp12-jutaan-laris-manis-jelang-lebaran

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