Indonesia grapples with rising interest rates as electric vehicle revolution gathers momentum: Fitch Ratings
Oct 30, 2023
Jakarta [Indonesia], October 30 : Indonesia's four-wheeled vehicle (4W) sales are expected to be affected by rising interest rates, with Fitch Ratings forecasting a slowdown in 2023 and 2024.
Despite this, the electric vehicle (EV) market continues to gain traction.
The report suggests that 4W sales in 2023 will hover around 1 million units, slightly below the 2022 figures of 1,048,040 units, with a similar outlook for 2024.
The recent interest rate hikes by Bank Indonesia will lead to increased financing costs for consumers, hampering car purchases, particularly as around 70 per cent of these purchases are credit-financed.
The nine-month wholesale sales data until September 2023 stood at 755,173 4W vehicles, similar to the same period in 2022.
However, the pace of demand growth has slowed following the surge in sales seen during the third quarter of 2022 (3Q22)- second quarter of 2023 (2Q23) due to the release of pent-up demand after the COVID-19 pandemic.
Japanese automakers are expected to face increased competition from Korean and Chinese brands that have introduced new models and expanded manufacturing capacity in Indonesia.
PT Astra International, the distributor of Japanese brands, including Toyota, Daihatsu, and Isuzu, maintained its market leadership.
The Chinese and Korean brands dominate the electric vehicle segment, accounting for 86 per cent of battery electric vehicle sales in September 2023.
EV penetration is projected to continue growing in 2024 as affordable EV models become more widespread, accompanied by improvements in the EV infrastructure.
The launch of hybrid models has driven the increase in EV penetration, reaching 5.9 per cent by the end of September 2023, up from 2.0 per cent in 2022.
During 3Q23, 4W EV sales reached 22,343 units, with the majority in the hybrid electric vehicle segment, representing 76.9 per cent of total EV sales in 9M23.
While rising interest rates may hinder traditional vehicle sales, Indonesia's electric vehicle market continues to gather momentum, offering a glimpse of a greener automotive future for the country.
