Why are Western Automakers Targeting Indonesia?

Indonesia's automobile market appeals to international automakers, with Japanese brands including Toyota, Daihatsu, and Mitsubishi predominating. Although there are fewer European models available, Citroen, which Stellantis own, is nevertheless establishing its brand in the fourth most populated nation in the globe. Why then do Western automakers place more and more emphasis on this developing market?
The island country is home to several automotive manufacturing facilities, many of which are run by Asian businesses. About 889,700 passenger automobiles were produced in Indonesia in 2021, an increase from 551,000 the year before. Southeast Asia has one of the biggest automobile marketplaces with the largest economy in the area.
Given that there are only 40 automobiles per 1,000 people, according to recently released statistics by market and consumer analytics company Statista, Indonesia's population of about 275 million underscores its potential for expansion. Indonesia is a desirable target for multinational businesses wanting to increase their market share since it has a lower rate of automobile ownership than its surrounding nations. Agus Gumiwang Kartasasmita, the country's industry minister, stated earlier this year that the low rate of vehicle ownership might provide clear benefits to automakers. He stated:
“Because we will also accommodate it with regulations that would encourage the investment, Indonesia has a very large potential for car manufacturers to invest there”.
The government is boosting its investments in the larger automotive industry as well as road infrastructure, which is not an easy undertaking given that Indonesia is home to almost 17,000 islands. It is also eager to attract foreign investment, not least to expand the market for electric automobiles (EVs).
Given the rising number of new car sales and the large demand potential, it looks like the appropriate time for Citroen to join Indonesia's automotive industry. Compared to market leader Toyota, which sold about 295,770 automobiles there in 2021, European automakers like BMW, Mercedes-Benz, and Peugeot only sell a small number of vehicles. However, Citroen is prepared to tackle the challenge of strengthening its brand in Indonesia. A representative for Citroen stated:
“Every company has unique goals and marketing plans to succeed. We conducted a thorough market analysis beforehand, and using the results, we chose the appropriate items to satisfy the needs of the majority of Indonesian customers. We are certain that Citroen's rich legacy, enticing design, exceptional comfort, and cutting-edge technology will propel this brand to success in Indonesia”.
In 2023, Citroen intends to introduce its first models in Indonesia. The firm first offered the C5 Aircross, the new C3, and the -C4 in the model mix, which also included an SUV, a compact car, and an electric vehicle. The initial model offer from Citroen is not a coincidence. In Indonesia, family-friendly automobiles, many of which are fuelled by fossil fuels, are among the best-selling models. However, given that Indonesia has some of the worst air pollutions in the world, the government is also eager to expand the percentage of electric cars on the road.
In order to further spark enthusiasm among the populace and boost EV sales in the nation, Indonesia plans to implement game-changing EV incentives in 2023. Budi Karya Sumadi, Indonesia's transport minister, told Bloomberg that the country wants to subsidize the purchase of EVs by 2023 to make them more affordable. Popular EV vehicles that are now available for purchase in Indonesia include the Hyundai Ioniq5, Nissan Leaf, Lexus UX300e, Toyota C+pod, and Wuling Air EV from China.
Indonesia is also playing a crucial role in the worldwide shift to electric vehicles (EVs), serving as the world's top producer of nickel and a major supplier of cobalt and copper ores. The conflict in Ukraine and COVID-19 limitations in China have both disrupted supply chains, making Indonesia an advantageous place to secure and diversify supplies.
The government is purportedly courting Western companies like Tesla to establish a production plant in the country in an effort to establish the nation as an EV manufacturing powerhouse, however, this has not yet been confirmed. Ford and partners have also agreed to establish a nickel chemical extraction plant with the mining company Vale Indonesia.
The president of Indonesia, Joko Widodo, is eager to entice investment from European automakers. He said that the nation is the "perfect production site" for automakers in a Handelsblatt interview. Widodo stressed that well-known German companies like Mercedes-Benz, BMW, and Volkswagen may relocate their EV supply chains, including nickel processing plants and EV battery manufacturing facilities, to Indonesia.
In order to create an ecosystem for electric vehicles, the nation wants to go beyond being a source of raw resources. Although there are still hundreds of charge stations and few completely electric automobiles on the road, the Indonesian government has developed an electrification strategy. By 2030, it hopes to create more than 600,000 four-wheeled EVs locally.
Although the EV market in Indonesia is still in its infancy, its development potential cannot be discounted. Western automakers must consider the nation's young population, its abundant resources, and the trend of urbanization as well as the government's initiatives to promote electrification and provide benefits to international businesses.
Although Citroen's presence in Indonesia may not completely disrupt the market, it does show that momentum is growing and that Indonesia is rapidly gaining interest from other countries in the car industry.

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