Based on recent information, the ASEAN Light Vehicle (LV) market is estimated to drop by 6% year-on-year (YoY) to 3.11 million units for full-year 2024, due to double-digit sales declines in Indonesia and Thailand.
According to GAIKINDO, Indonesia’s LV sales fell by 14% YoY to 801k units in 2024, marking the lowest total since 2011, excluding the pandemic-hit 2020. Moreover, volumes declined from July 2023 until December 2024. This downward trend is the result of the financial sector tightening credit approvals, as the default rate has been rising. Additionally, interest rates remain high, although the central bank made a surprise interest rate cut in September. The policy interest rate currently stands at 6%, compared to 3.5% during the COVID-19 era.

A weak rupiah has raised the cost of manufacturing (Indonesia is a net importer of oil), and new vehicle prices have become out of reach for many consumers. Reportedly, an increasing number of customers are choosing to buy used vehicles. VAT increased from 10% in 2023 to 11% in 2024, which not only increased vehicle prices but also the cost of living, eroding purchasing power.
In addition, the pull-ahead demand from the luxury sales tax cut has been another contributing factor in recent years. The Indonesian government implemented lockdown measures in 2020, causing the market to drop sharply by 53% YoY to 495k units during that year. To support the automotive industry, the government announced temporary tax cut policies for two phases: March-December 2021 and January-September 2022. As such, Indonesia’s LV sales surged by 66% YoY in 2021 and by 16% YoY in 2022, but then slowed by 3% YoY in 2023 and by 14% YoY in 2024. Moreover, average annual sales between 2020-23 stood at 801k units, which is the same level as in 2024.
This implies that the negative impact of the pull-ahead effect should fade, and we expect some recovery in the market in 2025, following two consecutive years of decline. However, the recovery is likely to be modest, with volumes increasing by only 5% to 841k units. We are very cautious about the near-term sales outlook for several reasons: a) credit growth has been slowing, and credit conditions will likely remain strict; b) with the US Federal Reserve slowing the pace of its interest rate cuts, the rupiah is depreciating again, making further interest rate reductions by the Indonesian central bank difficult; and c) Trump’s protectionist trade policy could stagnate global trade. For example, higher US tariffs on China will have a knock-on effect on the Indonesian economy, as China is Indonesia’s largest export market.
A key development in this report is that the Indonesian government implemented a VAT increase from 11% to 12% for luxury goods, including vehicles, on January 1, 2025. Meanwhile, the government decided to continue the tax deduction on Battery Electric Vehicles (BEVs) that are locally built with a minimum local content of 40%. Thus, the tax for qualifying models will be 2%. Additionally, the tax benefit was extended to include Hybrid Electric Vehicles (HEVs), and qualifying models will be taxed at only 3%. However, the full details of the HEV policy will be announced by the end of January. This should offset the impact of the VAT hike to some degree.
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By GlobalDataOur sources indicate that Thailand’s LV sales dropped by 20% YoY in December 2024, marking the 19th consecutive month of decline. Sales in May 2023 marked the only positive monthly result between October 2022 and December 2024, and that was an increase of just 1% YoY. Consequently, volumes in the country plunged by 26% YoY in 2024 for the second consecutive year, following a 9% YoY decline in 2023.
Several factors contributed to the negative momentum in the Thai market:
- Household debt rose from 80% of GDP before the pandemic to 89% in Q3 2024, among the highest in the region. According to a local financial research firm, household debt, including informal loans, is estimated to be around 104% of GDP.
- Financial institutions tightened credit approvals due to the rising default rate in the auto sector.
- A weak economy – Thai GDP growth rates before the pandemic were around 3.5% in 2017-19, but were only 1.9% in 2023 and are estimated to be around 2.6% in 2024.
The Thai market is showing no signs of improvement. Financial institutions are not expected to ease lending conditions anytime soon amid the elevated level of household debt. This has led us to cut Thailand’s sales forecast for 2025-28. Volumes are now projected to increase by 7% to 604k units in 2025 and by 11% to 672k units in 2026, which is still lower than the pandemic period, which saw 782k units in 2020 and 744k units in 2021.
Moreover, a major risk arises from the Trump 2.0 policy as the US and China are Thailand’s two largest export markets. As such, Trump’s protectionist trade policy could significantly impact Thailand’s exports and, thus, the overall economy and new vehicle sales.



This article was first published on GlobalData’s dedicated research platform, the Automotive Intelligence Center.