As early as 2011, reports had it that Indonesia was set to take over from Thailand as Southeast Asia’s largest automotive market. It has been a while coming, but 2014 is the year it’s finally set to happen.

Reuters says that the switch will happen as early as this year, the change brought about by an expanding Indonesian middle class and growing demand for budget, environmentally friendly vehicles, according to automotive executives and analysts.

Indonesian sales jumped by 17.8% in March from the same period a year earlier, according to data from the Indonesian Automotive Industry Association (Gaikindo). This is more than double the anticipated 8.3% year-on-year growth set out in February. Japanese automakers dominate the market.

Meanwhile, data from the Federation of Thai Industries showed that Thai auto sales has fallen 45% percent year-on-year. According to data from market research firm Frost & Sullivan, Thai car sales are expected to fall 11.7% to 1.175 million in 2014 from a year earlier due to political turmoil and post-election uncertainties. Comparatively, Indonesian sales are projected to increase 6.5% to 1.31 million units this year.


Already, Toyota has said that it may reconsider investing up to 20 billion baht (RM2 billion) in the Kingdom and is contemplating cutting back on production if the political unrest drags on. Other automakers in the meantime are planning to ride out the slump, viewing the long-term growth potential in the region’s second largest economy.

The Indonesian economy, meanwhile, is expected to grow by 5.5 to 5.9% this year. Plans to increase four-wheeled mobility to the masses have seen the introduction of a Low Cost Green Car (LCGC) policy and a slew of lower-priced compact vehicles entering the market, propelling things along.

A market survey by Daihatsu last year anticipates that by 2020, around five million Indonesian households will have the ability to purchase a new vehicle, which is more than double the 2010 figure, with the LCGC potentially increasing that reach further to 12 million households.

Its ambitions to be a regional manufacturing hub could be however hampered by a number of issues, among them an ageing, insufficient infrastructure and a poor-performing electricity power supply, made unstable by decades of under-investment and bureaucracy, the report adds.