New vehicle sales in Indonesia plunged by 26% to 69,619 units in January 2024 from 94,087 units a year earlier, according to member wholesale data compiled by local automotive industry association Gaikindo.

This was the seventh consecutive month of decline after a strong two year rebound from the pandemic low. A series of interest rate hikes by the central bank in the last eighteen months, from 3.5% to 6.0%, had dampened consumer demand particularly for large purchases. Economic growth remained sluggish at around 5% in the fourth quarter of 2023 with slower private consumption and investment offset by stronger exports and government spending compared with the previous quarter.

Sales of passenger vehicles declined by 20% to 56,007 units in January while commercial vehicle sales plunged by 43% to 13,612 units. Battery electric vehicle (BEV) sales amounted to 2,340 units, mostly Wuling models.

Toyota sales fell 28% to 20,988 units last month while Daihatsu deliveries were down 21% at 14,363 units, Honda 8,413 units (-47%), Mitsubishi 6,962 (-12%) and Suzuki 6,138 units (-7%).

Overall vehicle production fell 24% year on year to 100,953 units in January while exports of assembled vehicles plunged 33% to 29,505 units.

The government extended the sales tax exemption on BEVs with a minimum 40% local content until the end of 2024 to help drive up domestic demand to attract inward investment in the zero emission segment. It is encouraging purchases of BEVs by government departments and is also pushing for the development of charging networks, as it targets 2m BEVs in use by 2030.

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A number of Chinese brands entered the BEV market in the fourth quarter of last year, including Hozon with its Neta V model and Seres with the E502, while Wuling launched the locally-made Binguo. Other vehicle manufacturers selling BEVs in Indonesia include Toyota, BMW-Mini and Mercedes-Benz.

At this month’s 2024 Indonesian International Motor Show Vietnamese automaker VinFast announced plans to invest US$1.2bn to build a regional BEV plant in the country while Chinese automaker Chery Automobile also said it would export its vehicles to other markets in the region.

Mitsubishi launched its locally made battery-powered Minicab-MiEV model at the show while Hyundai said it would produce a new BEV model later this year using batteries produced at its local joint venture plant with LG Energy Solution. Segment leader Wuling added a new model to its line, the Cloud EV.