Chinese Automakers Expand in Indonesia Amid Competitive Landscape
Chinese automotive manufacturers are increasingly entering the Indonesian market with affordable electric vehicles that challenge the dominance of established brands. With government incentives and competitive pricing, they are gaining market share despite overall declines in sales. However, economic challenges and perceptions towards Chinese brands may impede their immediate growth efforts.
In recent years, Chinese automotive manufacturers have expanded their presence in Indonesia, introducing affordable electric vehicles (EVs) that challenge the established dominance of Japanese and South Korean brands within the market. Despite a decline in new car sales, the allure of Indonesia’s tax incentives has attracted these automakers, which are facing stiff competition at home due to rapid capacity growth.
SAIC Motor’s 2023 report elucidated the intense competition and ongoing price wars within the Indonesian market. The pressure led to an average price reduction of 10% in December, aimed at pushing sales for the year-end targets. This fierce rivalry resulted in SAIC Motor losing its position as the top seller to BYD, as spare capacity and reliance on exports persist as significant hurdles for Chinese manufacturers.
According to Goldman Sachs, Chinese EV producers have the capability to manufacture around 20 million vehicles annually. However, only approximately 11 million were sold domestically last year. From 2021 to 2024, China’s auto exports surged, making China the largest car exporter globally, with Indonesian imports rising in value to $3.2 billion.
Following the arrival of Wuling and DFSK before the pandemic, other brands such as Great Wall Motors, BYD, and Chery have now entered the market. Recent entries include Changan, Honri, and Xpeng, some of which are establishing manufacturing plants in Indonesia, while others continue to rely on completely built-up (CBU) imports.
Analyst Koketso Tsoai remarked that competitive pricing combined with innovative, tech-forward vehicles has proven successful for brands like Wuling, allowing them to take market share from firms like Hyundai. Government incentives, such as VAT reductions and import duty exemptions for EVs, have further buoyed Indonesia’s appeal to Chinese makers.
Redseer Southeast Asia’s Roshan Raj indicated that the necessity to diversify from China’s competitive market, alongside governmental incentives and a low vehicle ownership rate in Indonesia, are driving Chinese interest. Nevertheless, he warned that broader market conditions might impede significant sales growth this year following a 13.9% decline in sales last year.
The Indonesian Automotive Manufacturers Association reported that Chinese carmakers have boosted their market share from 3.4% in 2021 to 6.4% in 2022, while Japanese automakers experienced a drop from 95% to 89.3%. Hyundai’s EV push peaked at a 3.5% market share in 2023, but subsequently fell to 2.6% in the following year.
Concerns over the influx of EV imports were voiced by Deputy Chairman Lamhot Sinaga, who suggested that such trends challenge local manufacturers like Hyundai. He emphasized the need for foreign firms to invest in local production instead of solely relying on imports. Meanwhile, Industry Minister Agus Gumiwang Kartasasmita reiterated the importance of supporting domestic production and local supply chains.
Yannes Martinus Pasaribu from the Bandung Institute of Technology acknowledged that while Chinese automakers may have a long-term strategy for establishing manufacturing in Indonesia, challenges remain, especially in dealership reach and consumer perceptions toward Chinese vehicles.
Overall, while the entrance of Chinese brands into Indonesia’s automotive market offers competitive pricing and innovative technology, significant challenges persist regarding market perception, local manufacturing engagement, and economic headwinds affecting sales activity.
The expansion of Chinese automakers in Indonesia signifies a shift in the automotive landscape as they compete with established Japanese and South Korean brands. Despite the potential for growth through affordable and feature-rich electric vehicles, challenges such as reliance on imports, market perception, and economic conditions may hinder immediate sales increases. Ongoing investments in local manufacturing and supply chains could reshape the competitive dynamics in the long term.
Original Source: www.thestar.com.my
