Indonesia’s automotive sector is at a crossroads. While electric vehicle (EV) sales are rising sharply, most of the growth comes from imports, leaving domestic manufacturers struggling. The Ministry of Industry (Kemenperin) warns that without targeted incentives, the backbone of the national automotive industry could weaken further.
Key Facts & Background
- Official Statement: Kemenperin spokesperson Febri Hendri Antoni Arif emphasized the urgent need for incentives to support the automotive ecosystem from upstream to downstream.
- EV Sales Surge: Between October–January 2025, EV sales rose significantly compared to the same period last year.
- Import Dominance: Of 69,146 EV units sold in 2025, 73% were imported (CBU), meaning value-added and job creation occurred abroad.
- Domestic Decline: Locally produced vehicles, which traditionally dominate Indonesia’s automotive market, saw sharp declines in sales.
- Industry Misconception: Kemenperin stressed that exhibitions and events do not reflect industry strength; true indicators are production and sales data.
- Gaikindo Data:
- Wholesale sales (factory to dealer) Jan–Oct 2025: 634,844 units, down 10.6% from 711,064 units in 2024.
- Retail sales (dealer to consumer) Jan–Oct 2025: 660,659 units, down 9.6% from 731,113 units in 2024.
- Production Decline: Domestic vehicle production fell to 957,293 units in 2025, down from 996,741 units in 2024.
- Segment Losses:
- Entry-level vehicles (< Rp200 million): down 40%.
- Low segment (Rp200–400 million): down 36%.
- Commercial vehicles: down 23%.
- Policy Direction: Proposed incentives will likely target middle- to lower-income consumers and be based on local content value (TKDN).
- Consumer Impact: Incentives are expected to lower vehicle prices, improve market sentiment, and sustain purchasing power, especially for first-time buyers.
Strategic Insights
The surge in EV sales highlights Indonesia’s growing appetite for sustainable mobility. However, the dominance of imports raises concerns about industrial leakage—where economic benefits flow abroad rather than strengthening local supply chains. Without policy intervention, Indonesia risks becoming a consumption market rather than a production hub in the global EV transition.
Kemenperin’s call for incentives reflects the urgency of stabilizing domestic production. Entry-level and low-segment vehicles, which cater to middle-class consumers, are the backbone of Indonesia’s automotive industry. Their steep decline threatens employment, supply chain resilience, and long-term competitiveness. Incentives could bridge affordability gaps, stimulate demand, and protect jobs.
The ministry’s insistence on using production and sales data rather than exhibition frequency as benchmarks underscores a critical point: optics do not equal strength. True industry health lies in sustained demand, efficient production, and robust domestic value creation. Policymakers and stakeholders must resist superficial indicators and focus on structural realities.
Indonesia’s automotive industry faces dual pressures: global EV competition and domestic demand contraction. To remain competitive, the country must strengthen local manufacturing capacity, encourage investment in EV production, and align incentives with TKDN requirements. This approach ensures that growth in EV adoption translates into domestic jobs, technology transfer, and industrial upgrading.