Indonesia's Car Sales Plummet – Electric Rays of Hope

Indonesia's automotive market is facing a challenging phase. In August 2024, new car sales recorded a 14% decline to 76,304 units, compared to 88,876 units in the previous year. This information is based on data compiled by the automotive industry association Gaikindo. After strong rebounds in the previous two years from pandemic-related declines, the market sentiment has noticeably weakened this year. Consumer purchasing power continues to be constrained by rising living costs, resulting in a decrease in significant purchases. Additionally, Bank Indonesia continues to raise its benchmark interest rate to control inflation and support the national currency, the Rupiah. The benchmark interest rate now stands at 6.25%, compared to 3.5% two years ago. From January to August 2024, vehicle sales decreased by 17% to a total of 560,619 units compared to 675,287 units in the same period of the previous year. Sales of passenger cars declined by 16% to 435,823 units, while sales of commercial vehicles plummeted by 21% to 124,796 units. The industry leader Toyota reported a 17% decline to 182,917 units, while its subsidiary Daihatsu saw sales fall by 15% to 113,173 units. Honda reported a dramatic drop of 37% to 61,394 units, Mitsubishi sold 48,383 vehicles (-7%), and Suzuki slid by 19% to 43,808 units. Total vehicle production fell by 18% to 779,235 units, while exports of completely built units decreased by 11% to 298,691 units. However, there is a bright spot: sales of battery electric vehicles (BEVs) nearly tripled in the first eight months of the year to 23,330 units, mainly driven by Chinese models. The best seller was the Wuling Binguo small car with 3,876 deliveries so far this year, followed by 1,655 Air BEVs from the same manufacturer. BYD, which only started selling in June, delivered 6,461 BEVs, while Chery sold 3,485 Omoda E5s. Hyundai and SAIC Motor also reported notable sales figures. In July, Hyundai began selling its locally produced Kona Electric, whose batteries are manufactured in a joint venture with LG Energy Solution. GAC Aion recently presented the Y Plus BEV through the local distributor Indomobil. To stimulate demand and attract investment, the government plans for a total of 50,000 BEV sales in 2024. Already, the sales tax reduction has been extended until the end of 2024, and the suspension of import duties on BEVs has been extended until the end of 2025, provided companies invest in local production. The Chinese manufacturer Hozon Auto began local assembly of its Neta V-II BEV in August. Further plans include exporting to the entire region and increasing the local content share to 60%. BYD and Vietnam's VinFast also have plans to build BEV production facilities.