Indonesia's automotive industry is navigating a period of cautious optimism as it heads into 2025. After a challenging 2024 marked by a decline in sales, the sector is expected to slowly bounce back. The industry's outlook is influenced by various factors, including government incentives for electric vehicles (EVs), rising interest in green technology, and ongoing infrastructure investments. Despite a weaker economic environment, the sector's potential for growth remains strong, fueled by increasing domestic demand, expanding exports, and continued foreign investments in manufacturing and EV infrastructure. 

Current Market Conditions 

Indonesia’s automotive industry has held the position of Southeast Asia’s leader for over a century, significantly contributing to the nation’s economy. After a drop in sales during the COVID-19 pandemic, the sector rebounded in 2022, surpassing one million units sold. However, 2024 presented a more challenging outlook, with the Indonesian Automotive Industry Association (GAIKINDO) revising its sales target downward from 1.1 million to 850,000 units. 

The industry ended 2024 with 865,723 units sold wholesale, reflecting a 13.9% year-on-year decline. This downturn was primarily due to several interrelated factors, such as weakened consumer purchasing power, evolving consumer preferences, and rising interest rates, all of which impacted sales performance throughout the year. 

As Indonesia enters 2025, the automotive industry is exhibiting signs of steady recovery, despite slower sales in January. Compared to 2024, the sales figures suggest a more stable performance, with slight month-to-month variations but a general trend toward recovery. 

Indonesia’s Automotive Sales Volume Comparison 

 January - April 2024 vs 2025

Source: Marklines, GAIKINDO 

Indonesian consumers are increasingly turning toward environmentally friendly and fuel-efficient vehicles, a trend that is particularly visible in the rising sales of hybrid electric vehicles (HEVs) and battery electric vehicles (BEVs), even as the broader market experiences a slowdown. Hybrid vehicles have demonstrated especially strong performance, largely driven by trusted brands like Toyota and Suzuki, which have built a solid reputation in this segment. 

This shift in consumer behavior stems from several factors, including rising fuel prices, growing concerns over pollution, and a younger, eco-conscious population entering the market. Government-backed financial incentives have further accelerated EV adoption. For electric vehicles and buses with at least 40% local content (TKDN), buyers receive a VAT discount of 10%, reducing the effective VAT to just 2%. Vehicles with 20-40% local content receive a 5% discount, lowering VAT to 7%. These tax breaks, along with a national goal to make 30% of all vehicles electric by 2035, are driving both consumer interest and industry direction. 

At the same time, brands such as BYD, Wuling, and Chery are gaining market share by offering competitively priced EVs and launching aggressive marketing campaigns aimed at younger and first-time buyers. This growing competition is helping accelerate EV adoption and creating a more dynamic market landscape. 

Whole Sales of BEV, HEV, and PHEV by Brands in Indonesia 

January – April 2025

Source: GAIKINDO 

Surge in EV Investments 

In the past few years, Indonesia's automotive sector has witnessed a significant surge in investments, particularly in the electric vehicle (EV) industry, as global automakers expand their footprint in the country. Notable investments include BYD's USD 1.3 billion EV manufacturing plant in Subang, West Java, which will have an annual production capacity of 150,000 units and create around 18,000 jobs.  

Additionally, a joint venture between Hyundai and LG Energy Solution has established Indonesia's first battery cell manufacturing facility in Karawang with a USD 1.1 billion investment. This facility is expected to support Hyundai and Kia's EV production, with most of its output directed for export to South Korea and India. Furthermore, Suzuki has committed IDR 5 trillion (approximately USD 305 million) to enhance its manufacturing capabilities. 

The Indonesian government has played a key role in attracting these investments through a series of incentives, including tax exemptions on luxury taxes for EVs and reductions in import duties. With global manufacturers such as BYD, Hyundai, and Ford expanding their presence, Indonesia is positioning itself as a key hub for EV manufacturing in Southeast Asia, benefiting from its strategic location and supportive policies aimed at green mobility and industrial growth. 

Looking Forward: A Promising Outlook for 2025 

Although the automotive sector still faces short-term headwinds, including high interest rates and persistent uncertainty in global markets, Indonesia’s long-term prospects remain encouraging. Continued growth in the sales of hybrid and electric vehicles, supported by a steady rollout of public charging stations and targeted government subsidies, is expected to drive a slow but steady recovery. VAT reductions for EVs and local content (TKDN) requirements are also encouraging automakers to localize production, aligning with the government's push to develop a fully integrated EV ecosystem. 

Market analysts anticipate that the industry could reach wholesale sales of between 900,000 and 950,000 units in 2025, assuming economic conditions remain stable and there are no major spikes in fuel prices. Consumer confidence appears to be gradually returning, and the auto sector is well-positioned to benefit from rising middle-class incomes and urbanization trends.