ASEAN has significant automotive production bases in Indonesia, Malaysia, Thailand, and Vietnam. In addition, growth in GDP, urbanization, and road infrastructure accelerated the sales and adoption of private vehicles. The automotive industry in Indonesia remains a promising sector that contributes significantly to boosting the nation’s economic growth. According to the Minister of the Industry Republic of Indonesia, the automot1ive industry in Indonesia experienced extraordinary growth in 2021, with double-digit growth of 17.82 percent, with the production of 2.35 million vehicles a year.
Source: Automotive Associations, Nikkei Research
New car sales in Indonesia, Thailand, Malaysia, Vietnam, the Philippines, and Singapore totaled 2.79 million units last year, up 14 percent from 2020, led by a 67 percent jump in Indonesia. After only Thailand, Indonesia has become the second largest producer of motor vehicles within the SEAN. Low labor costs and a low motorization rate have opened the door to many car manufacturers, including Toyota, Nissan, and General Motors. However, the Indonesians preferred sturdy 4×2 vehicles. In recent years, Indonesia also started producing affordable energy-saving 4×2 cars.
Source: Automotive Industry Portal, MarkLines
In general, automotive production in 2020 experienced a significant decline to 690,176 units in total compared to the previous years. This is due to the global COVID-19 pandemic, which decreased productivity in most sectors. However, in the following year, this sector grew again quite rapidly, with a total production of 1,121,967 units, almost doubling the total of 2021, another strong industry year.
Source: Association of Indonesia Automotives Industries (GAIKINDO)
From 2019 to 2021, Indonesia’s automotive sector trade showed a surplus in all years. Globally, exports and imports experienced a decline in 2020, where the global pandemic caused restrictions and disruptions in business activities, hindering the global supply chain and affecting total production. However, in 2021, Indonesia’s exports and exports significantly increased, with a trade balance of USD 1.93 billion. Although 2021 showed the most vital trade activities of the last ten years, the trade balance surplus in 2021 was the lowest compared to 2019 and 2020, with a balance value of USD 2 billion and USD 1.95 billion, respectively.
Source: Statistics Indonesia
The investment in Indonesia keeps increasing from USD 754 million in 2019 to USD 1.5 billion in 2021. Although the number of projects was the smallest in 2021, the investment value scored the highest. This reflects the investors’ trust in the investment. According to BKPM, the most significant number of projects in this sector in 2019 – 2021 came from Japan, with a total of 2,657 projects valued at USD 1.29 billion. However, the investors who established the most significant investment value came from South Korea with USD 1.44 billion, or 103 projects.
Source: Ministry of Investment Republic Indonesia (BKPM)
Indonesia’s automotive sector is the primary growth driver of the manufacturing industry and the national economy as it contributes more than 4 percent of the national GDP. Its high-quality automotive products have led Indonesian automakers to penetrate Australia’s market. Such evidence has confirmed that the Indonesian automotive can and will penetrate the needs of its neighbors, too.
Article by: Asst. Prof. Suwan Juntiwasarakij, Ph.D. & MEGA Tech