automotive

Automotive Sector Investment Magnet Still Strong When Car Sales Are Sluggish

Automotive industry players are optimistic about the investment climate in the automotive sector in the country despite being faced with sluggish vehicle sales this year. Just for information, based on data from the Association of Indonesian Automotive Industries (Gaikindo), cumulative car sales from January to April 2025 reached 256,368 units, divided into 202,724 passenger vehicles and 53,644 commercial vehicles. As a result, sales were recorded to have fallen 2.8% annually (yoy) from the January-April period last year, where sales still reached 264,014 units, divided into 207,500 passenger vehicles and 56,514 commercial vehicles. At the same time, the investment climate related to the automotive sector in the country is also being enlivened by negative sentiment, ranging from the back and forth of investment realization in several electric vehicle (EV) battery ecosystem companies, the upheaval of the relaxation of the domestic component level (TKDN), to negative issues regarding domestic business conduciveness. Secretary General of the Association of Indonesian Automotive Industries (Gaikindo) Kukuh Kumara emphasized that the sluggish domestic market does not immediately affect investor interest. "The Indonesian market in ASEAN is still number one. This is promising and is a special attraction for investors. Then, investment in the automotive sector must be viewed in the long term. The proof is, there are still many players coming here, right?" he said when contacted by Bisnis recently, quoted Saturday (5/17/2025). Most recently, the government is accelerating discussions on investment by CATL from China to provide electric vehicle batteries through its subsidiary CBL International Development which has formed a joint venture (JV) with IBC. In addition, Vietnamese electric vehicle manufacturer Vinfast has also agreed to build a factory in Subang with an investment value of up to IDR 4 trillion. Amidst Indonesia's still solid appeal as a production base for the electric vehicle ecosystem, Kukuh acknowledged that domestic vehicle sales are closely related to the national economic performance report, so the government's efforts to improve the fundamentals of economic growth are key to maintaining this appeal. For example, Kukuh mentioned that currently almost 10 million people who were previously middle class have been demoted due to being squeezed by the uncertainty of economic conditions. Moreover, the increase in car prices which reaches 7.5% per year cannot be matched by their income growth which is only around 3% per year. "So how to overcome the negative impacts due to macroeconomic conditions should be suppressed, so that the automotive industry recovers. Moreover, the middle class is a potential buyer of motor vehicles. Don't let their numbers continue to fall," he added. In addition to efforts to maintain the stability of economic conditions, Kukuh expects the government's consistent attitude in supporting the development of the motor vehicle and automotive component industry towards the latest technology that is more environmentally friendly. Starting from support for battery electric (BEV), hybrid (HEV) and plug-in hybrid (PHEV), as well as a clear attitude towards ethanol and biodiesel-based fuels. The point is, don't let Indonesia stagnate as a production base for old-technology cars. "Support for EVs and hybrids must be consistent in order to maintain investor interest. In addition, ICE [conventional combustion engine] cars can actually be more environmentally friendly through ethanol and biodiesel. This must be supported. Moreover, for the country, this can also reduce imports of diesel and gasoline," he said. Similarly, Executive Director of the Center for Strategic and International Studies (CSIS) Yose Rizal Damuri emphasized that the Indonesian automotive sector is still attractive to investors, as long as the government can maintain conduciveness and improve linkages in the global supply chain. "Efforts to attract investment related to the global supply chain must be strong, so that production movements with domestic supply chains also develop. The automotive industry in Indonesia has actually done this well, compared to other sectors," he said when met by Bisnis recently. Yose also agreed that Indonesia needs to take advantage of the momentum of the transition trend towards a green economy, including in the automotive ecosystem. This is because investment in this sector can flow rapidly if the government consistently creates policies that support sustainability. 

Tag: Automotive Industry Automotive Sector Gaikindo Vietnamese Electric