Chinese Automakers Enter Indonesia’s Auto Market: A New Competitive Landscape
Chinese automakers are increasingly expanding in Indonesia, offering competitive EVs that challenge longstanding Japanese and Korean brands. Despite issues in the local sales market and the dominance of imports, government incentives and evolving consumer preferences are reshaping the automotive landscape. Strategic challenges persist, particularly concerning local production and perceptions of Chinese vehicles.
In recent years, Chinese carmakers have significantly entered the Indonesian market, offering affordable and feature-laden electric vehicles (EVs) that challenge the dominance of Japanese and South Korean brands. Despite a decrease in overall car sales in Indonesia, the allure of the market is bolstered by tax breaks for imported vehicles and intense competition in China. This sudden escalation in market rivalry has led to aggressive price reductions, with SAIC Motor reporting a 10% price drop in December 2022 to boost sales.
According to Goldman Sachs, Chinese EV manufacturers have an annual production capacity of around 20 million units, with only 11 million sold domestically last year. China’s automotive exports have seen tremendous growth, with shipments to Indonesia doubled in value over recent years, reaching approximately USD 3.2 billion. Several brands, alongside early arrivals like Wuling and DFSK, have now established a presence in Indonesia, including notable entrants like Great Wall Motors, BYD, Chery, and Geely.
In early 2023, several manufacturers such as Changan and Xpeng announced their entry into the Indonesian market, with some establishing factories locally. However, a significant number of these vehicles continue to enter the market as completely built-up (CBU) imports. Analyst Koketso Tsoai points out that these brands are successfully attracting Indonesian consumers through competitive pricing and high-tech offerings, leading to a gain in market share at the expense of established players.
The Indonesian government’s incentives, including tax reductions for EVs, have further enhanced the appeal of the local market, as indicated by Redseer partner Roshan Raj. Despite Chinese EVs creating an incremental demand, he suggests that broader economic challenges might hinder an immediate boost in overall new car sales. Data indicate that Chinese manufacturers’ market share in Indonesia climbed to 6.4% in 2022 from 3.4% in 2021, while Japanese brands’ market share decreased significantly.
There are concerns within the industry, particularly from Hyundai, which has witnessed its competitiveness affected due to an influx of Chinese imports. Hyundai’s local operations have reportedly suffered an approximate 30% reduction in production since 2022. Officials have urged foreign car manufacturers to invest more in local production rather than relying solely on imports, aiming to enhance domestic manufacturing capabilities.
Experts, such as Yannes Martinus Pasaribu from ITB, emphasize that while Chinese automotive firms have plans for establishing local manufacturing and supply chains, substantial challenges remain. These include providing adequate dealership coverage and addressing consumer perceptions of Chinese brands, which need improvement for long-term success.
The incursion of Chinese car manufacturers into Indonesia is reshaping the automotive landscape by introducing competitively priced, technologically advanced electric vehicles. Government incentives and the urgent need to diversify markets are driving this trend. However, existing challenges such as consumer perception and infrastructure require strategic solutions for sustained growth. The automotive sector must adapt to these developments to foster a robust market environment that benefits both foreign and domestic players.
Original Source: www.thestar.com.my
