The low cost green cars (LCGC) policy is set to be a game changer for the Indonesian automotive market, according to the analysts at Frost & Sullivan.
Indonesia, with its large population (200m) and low level of car ownership, is seen as an automotive market with high future growth potential.
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Ms. Silka Yosa, Consulting Analyst, Automotive & Transportation Practice, Asia Pacific at Frost & Sullivan said that a year after the announcement of the LCGC program, overall industry volume has increased.
Ms. Yosa said the low carbon emission (LCE) program with its focus on LCGC has so far proved to be successful, driving growth of the overall market by an average of 17% per month.
“While the program covers many green technologies, it has excluded EVs. Compared to similar programs in Thailand and Malaysia, the LCE program is aimed primarily at boosting local demand and increasing motorization while promoting greener technologies,” she added.
Ms. Yosa also said that luxury tax incentives in the LCE program and specific low pricing benchmark for LCGC benefit the domestic market rather than exports.
She added that currently, five vehicle models are offered under the program. There is a possibility that current participants might launch more models, she said.
“The LCGC segment volume is strongly market-driven due to the affordable and fuel-efficient traits. High support from the government through regulations, and industry readiness has led this segment to grow tremendously,” she said.
Ms. Yosa said that the alternative fuel based segment such as NGV and Biofuel are currently constrained by the government’s support in terms of regulations and fuel infrastructure. With strong support, this segment could have a high growth potential, she added.
She also said that high technology-based segments (advanced engines and hybrids) are primarily driven by the supply side (the automakers). “However, any penetration action will require large investment and commitment, as market demand will only grow slowly while becoming familiar with the new technology,” Ms. Yosa added.
