Chinese Automakers Accelerate Into Indonesia, Challenging Market Giants

At the Indonesia International Motor Show (IIMS) 2025, held last month in Jakarta, a gleaming Sealion 7 electric vehicle (EV) from Chinese brand BYD drew crowds of curious onlookers. The scene encapsulated a broader shift in Indonesia’s automotive landscape, where Chinese carmakers are rapidly gaining ground, challenging the long-standing dominance of Japanese and South Korean brands with affordable, tech-laden EVs.

Over the past three years, Indonesia—South East Asia’s largest auto market—has witnessed a surge of Chinese automakers entering its showrooms. Brands like Wuling, DFSK, Great Wall Motors, Neta, BYD, BAIC, AION, Chery, and more recently Changan, Honri, Xpeng, Geely, and QJ Motor have rolled into the country, drawn by a combination of government incentives, a low vehicle ownership rate, and the need to diversify from an oversaturated domestic market in China. Their arrival has sparked a quiet revolution, with market share for Chinese brands doubling from 3.4% in 2021 to 6.4% last year, according to data from the Indonesian Automotive Manufacturers Association (Gaikindo).

This growth comes at the expense of traditional giants. Japanese brands, which once commanded 95% of the market, saw their share slip to 89.3% over the same period. South Korea’s Hyundai, a pioneer in locally produced EVs, also felt the heat, with its market share dropping from a peak of 3.5% in 2023 to 2.6% last year. The competitive pricing of Chinese EVs, often coupled with cutting-edge features, has reshaped consumer preferences in a market already grappling with declining new car sales—down 13.9% year-on-year to 865,000 units in 2024.

A Strategic Push Amid Domestic Pressures

The influx of Chinese automakers into Indonesia is not merely opportunistic; it is a calculated response to intense pressures at home. China’s EV industry, with a production capacity of around 20 million units annually, sold only 11 million domestically last year, as estimated by Goldman Sachs. This excess capacity, combined with fierce price wars—evidenced by a 10% average price cut in December 2024 alone—has pushed manufacturers to seek new markets. SAIC Motor, once China’s top car seller, lost its crown to BYD last year amid this cut-throat competition, as reported by the South China Morning Post.

Indonesia, with its population of over 270 million and a relatively low car ownership rate, presents a fertile ground for expansion. Between 2021 and 2024, China’s automotive exports to Indonesia doubled in value to US$3.2 billion, contributing to China’s rise as the world’s largest car exporter with 6 million units shipped globally last year. Many of these vehicles arrive as completely built-up (CBU) imports, though some brands, including Wuling and BYD, have either established or are planning local manufacturing facilities.

Government policies have further sweetened the deal. Indonesia offers tax breaks on imported vehicles, including exemptions on import duties for CBU EVs until the end of 2025, alongside discounts on value-added tax (VAT) and luxury goods tax for EVs with varying levels of local content. “Indonesia’s appeal is boosted by these incentives, which allow Chinese brands to offer high-tech, feature-rich vehicles at competitive prices,” said Koketso Tsoai, an analyst at Fitch Solutions’ BMI Research, in an interview with The Jakarta Post. Tsoai noted that brands like Wuling have effectively captured market share from established players such as Hyundai by aligning their product lineup with local consumer preferences.

Economic Headwinds and Local Concerns

Despite the buzz around Chinese EVs, the broader Indonesian auto market remains under strain. Economic challenges, including inflation and reduced consumer spending power, continue to dampen new car sales. Roshan Raj, a partner at Redseer Southeast Asia, acknowledged the incremental demand created by Chinese EV offerings but cautioned that it is unlikely to reverse the downward trend in overall sales for 2025. “Economic headwinds continue to impact the broader market,” he told The Jakarta Post.

The rapid rise of Chinese imports has also sparked concerns among local stakeholders. During a visit to Hyundai’s factory in February 2025, Lamhot Sinaga, deputy chairman of House of Representatives Commission VII, highlighted the adverse impact on Hyundai’s competitiveness. The company, which positioned itself as a pioneer of locally made EVs, has seen its plant utilization drop by 30% since 2022 due to the surge in imported EVs, mostly from China. “They shouldn’t be treated the same as companies that simply import their products without investing in local manufacturing,” Lamhot argued at the time.

Hyundai’s predicament underscores a broader tension between foreign imports and domestic production goals. At the opening of IIMS 2025, Industry Minister Agus Gumiwang Kartasasmita urged foreign automakers to invest in local production rather than relying solely on imports. “We remind manufacturers to strengthen domestic production, including meeting local content requirements (TKDN) to support small and medium enterprises,” he said, as quoted by Kompas.com.

Challenges on the Road Ahead

While Chinese automakers have a clear long-term strategy to establish manufacturing plants and build local supply chains in Indonesia, the journey is fraught with hurdles. Yannes Martinus Pasaribu, an automotive industry analyst at the Bandung Institute of Technology (ITB), pointed out that consumer perception of Chinese brands remains mixed. “Challenges persist, particularly with dealerships and after-sales services that are still concentrated on Java. Additionally, consumer trust in Chinese brands hasn’t fully turned positive,” he told The Jakarta Post.

Infrastructure limitations, such as the uneven distribution of EV charging stations outside major urban centres like Jakarta, could also slow adoption. Furthermore, while tax incentives have bolstered the appeal of Chinese EVs, their expiration at the end of 2025 may force manufacturers to accelerate localisation efforts or risk losing their competitive edge on price.

Beyond immediate market dynamics, the rise of Chinese automakers in Indonesia reflects a broader geopolitical undercurrent. China’s export-driven strategy aligns with its Belt and Road Initiative, which seeks to deepen economic ties across South East Asia. Indonesia, as a key regional hub, offers a testing ground for Chinese brands to refine their global outreach. If successful, their expansion here could serve as a blueprint for other emerging markets.

A Shifting Gear for Indonesia’s Auto Industry

The growing presence of Chinese automakers in Indonesia signals a transformative moment for the country’s auto industry. For consumers, the influx of affordable, feature-packed EVs offers greater choice and accessibility, particularly in a market hungry for sustainable transport options. However, for established players like Toyota, Honda, and Hyundai, the pressure is mounting to adapt to a new competitive reality shaped by price wars and technological innovation.

The Indonesian government faces a delicate balancing act: encouraging foreign investment and local production while safeguarding domestic interests against the tide of imports. How it navigates this challenge will likely determine whether Chinese brands can sustain their momentum or if traditional giants reclaim lost ground.

For now, the Sealion 7 on display at IIMS 2025 is more than just a car—it is a symbol of a market in flux, where innovation, economics, and policy converge to redefine the road ahead. As Chinese automakers accelerate their push into Indonesia, the stakes for all players have never been higher.