The automotive industry in Indonesia plays an important role to the economic growth of the nation, contributing 10.16 per cent of the GDP. Indonesia automotive product exports is currently higher in value than their imports. In 2021, Indonesia is the 14th-largest passenger-vehicle producer in the world and the 6th largest passenger vehicle producer in Asia, producing 1.121.967 vehicles.
Most of the vehicles built in Indonesia are from foreign brands, notably Japanese, and produced in the country through a joint-venture plant with a local partner or a fully owned plant. While full manufacturing with a high percentage of local components in the country is usually preferred by manufacturers and encouraged by the government, several plants in the country also conducted a CKD assembly. CBU imports of new cars in the country is also allowed since 1999 with considerably light import tariffs, although it is discouraged by the government.
Indonesia predominantly produces mini or compact MPVs (52 per cent of total production), SUVs and light pickup trucks under one ton. In 2019, a total 26 per cent of its production output was exported. As of 2025, around 9.7 per cent of total automobile sales in Indonesia consists of imported vehicles, notably from Thailand, Japan, China, India and South Korea.
Most automobile manufacturers in Indonesia (including passenger car manufacturers and commercial truck manufacturers) are a member of the non-governmental Association of Indonesia Automotive Industries (Gabungan Industri Kendaraan Bermotor Indonesia, GAIKINDO).
Characteristics
Traditionally Indonesia is a market heavily oriented to Japanese cars like most of its Southeast Asian neighbours. However, while other Southeast Asian markets prefer compact sedans, Indonesian car market has a strong preference to three-row MPVs. In 2019, 96.3 per cent of cars and trucks sold in Indonesia are from Japanese brands. The percentage is even higher than the proportion of Japanese brands in Japan itself which stood at 90 per cent. In the same year, around 550,000 cars or 68 per cent of passenger cars sold in Indonesia consisted of MPVs, crossovers and SUVs equipped with three rows of seats. The percentage is one of the highest in the world. For example, in 2006, models such as Toyota Avanza (16.4%), Toyota Kijang Innova (14.6%), Daihatsu Xenia (7.4%), and Suzuki Carry/Futura (7.3%) had a very high market share. Top ten best-selling models consisted of almost 73 per cent of domestic sales of the vehicles in 2006.
Japanese manufacturer Toyota is leading the market share in Indonesia for decades since the early 80s. Despite that, the largest manufacturer in Indonesia is Daihatsu as several popular Toyota-branded models sold in Indonesia are developed and produced by Daihatsu, which is wholly owned by Toyota since 2016. The subsidiary, Astra Daihatsu Motor (ADM) operates several plants capable of producing a total 530,000 cars per year. Around 2 out of 5 automobiles sold in Indonesia is produced by ADM.
Apart from Indonesian consumers wanting a large car to carry the whole family, the popularity of MPVs or three-row cars in general could be explained by the regulations and the car culture that followed after. When the complete ban on car imports on 22 January 1974 by a Decree No. 25/74 was imposed, the Indonesian government also imposed a tax scheme which saw pickup trucks and minibuses with wagon body style free from luxury goods tax, while sedan cars were charged a 100% luxury goods tax. As the result, a sedan of any size became a luxury-type vehicle for most consumers while minibuses became more popular, even when at the time, despite its natural practicality, tended to be much less comfortable to drive or to ride in. As the result, unlike its neighbouring countries in Southeast Asia that prefers mostly compact sedans, Indonesian consumers are predominantly buying three-row MPVs.
According to GAIKINDO, 82 per cent of the national automobile sales in 2018 is contributed by the island of Java. In 2017, West Java province contributed 19.6 per cent of the national car sales at around 207,000 vehicles, Jakarta at 19.3 per cent, and East Java at 13.1 per cent.
History The first motor vehicle to arrive in Indonesia is reported to have been a German Hildebrand & Wolfmüller two-cylinder motorcycle, brought in by Briton John C Potter who was a machinist at the Oemboel Sugar Factory in Probolinggo, East Java. The first car arrived shortly thereafter, an 1894 Benz Viktoria belonging to Pakubuwono X, the Susuhunan of Surakarta.
Local production of automobiles began in 1964, originally with SKD assembly of imported cars and commercial vehicles.
Some motor vehicle building activities did take place before independence: Between 1901 and 1903, Max Wenkel is reported to have built some Wenkelmobil cars."Automobiling in the Tropics" in The Horseless Age, 25 November 1903, pp. 557-8 In 1927, N.V. General Motors was set up in Tanjung Priok and started assembling cars and trucks. N.V. Demmo started making DKW-engine, three-wheeled vehicles in Surabaya in the 1930s.
Government programs From 1969, the National Plan for Industrial Development was aimed at substituting imports in all areas of manufacture. A series of laws were enacted in the following years to create this situation, affecting passenger cars as well as commercial vehicles. Gradual limitations on CBU vehicle imports were introduced, reaching a complete ban on CBUs by 1974. A localization program commenced with Decree no. 307 of 1976. This law included a provision requiring the bodies for cargo vehicles of a one-ton capacity or less to be made locally beginning in 1978. The new law then led to a series of sub-sequential decrees designed to minimize its harmful impacts.
Beginning in 1980, new rules were also enacted to inhibit the sprawl of brands, with the government limiting local assembly to 71 models of 42 different makes. All assemblers and agents were to be forced into eight separate groups manufacturing everything except engines. Engines were to be supplied by separate corporations. GAAKINDO, made up in large part of small pribumi operations, was opposed to these programs and also had an outspokenly anti-Chinese leader from 1981 to 1984. The companies most in favor of localization were the large Chinese firms like the Liem Group and PT Astra Motor.Doner, p. 152
In 1981 the government declared that no engine built in Indonesia was to be of less than one liter's displacement by 1985. As a result, manufacturers of local microvans and trucks scrambled to install larger engines. Daihatsu and Suzuki already manufactured suitable engines for other vehicles, but Mitsubishi did not and used a Daihatsu engine for a few years, while Honda withdrew from the mini pick-up/microvan segment. In October 1982, the VAT on certain diesel vehicles were raised dramatically. Diesel sedans and station wagons, as well as diesel off-roaders, were hit with a 40 per cent VAT, while light commercial vehicles (Category 1) in the form of small trucks, pickups, and passenger vans received a twenty per cent VAT. Some commentators expected this to spell the end of diesel vehicles in Indonesia.
Low Cost Green Car
In 2007 the Indonesian government announced a set of tax incentives intended to help develop a "Low Cost Green Car" (LCGC) as an Indonesian people's car. The initial rules required a low price, set lower for villagers, a fuel efficiency of at least , and at least 60 per cent domestic content. A few projects were shown but none made it to market, and in May 2013 a new set of regulations was issued, meaning a 0% luxury tax for cars under 1,200 cc (1,500 cc for diesels) as long as they could meet the same 20 km/L mileage goal. The luxury tax is between 50 and 75 per cent for larger and less fuel efficient vehicles.
Local manufacturing encouraged Indonesia levies an import tax of 10% on foreign imported luxury cars, while the import tariff for imported cars from outside the free trade area is currently at 50%.
Associations From 1969 until 1975, sole agents and assemblers were represented by separate groups, GAM (Gabungan Assembler Mobil) and GAKINDO. In 1972 the government decreed that assemblers and agencies be consolidated and since 1975 the industry was represented by the unified GAAKINDO trade group (Gabungan Agen-agen dan Assembler Kendaraan Bermotor Indonesia, "Association of Indonesia Sole Agents and Automobile Assemblers").Witoelar, p. 32 In the first half of the 1980s, GAAKINDO was an outspoken opponent of the government's localization programs. In 1985 the group was reconsolidated into a new organization called GAIKINDO (Gabungan Industri Kendaraan Bermotor Indonesia, "the Association of Indonesia Automotive Industries").
Manufacturers
The dominant manufacturer in Indonesia is the Astra International, which is indirectly controlled by Jardine Matheson; their products represented around half of the annual vehicle sales in Indonesia in the early 2010s – in large part thanks to the success of the Toyota Kijang.
Most cars sold in Indonesia were originally European in origins; In the 1950s, the most popular cars were Morris and Austin. Japanese imports commenced on a small scale in 1959 with the Mitsubishi Jupiter truck, but by the 1970s this had changed considerably as the Japanese took an ever-growing share of the market. Japanese cars was first imported by the government in 1961 as a fleet for cooperative across Indonesia. It was a Toyota Land Cruiser Canvastop. The main reason the Toyota was picked is its low price compared to the nominated Land Rover. At the same year, A.H. Budi, the founder of Nasmoco Toyota dealership network in Central Java bought a Toyopet Tiara from an importer in Jakarta. Impressed by the quality of the car, Budi founded the PT Ratna Dewi Motor Coy to retail Toyota cars.
The January 1974 Malari incident started as a protest against Japanese trading practices and included the burning of a Toyota dealership, but sales of Japanese cars reached new heights soon afterwards. By 1980, from 181,100 new registrations, 88.5 per cent were Japanese in origin.
Distribution and manufacture In Indonesia, the import, marketing, distribution, and after sales service rights of foreign brands are usually held by firms called ATPMs (, "sole trademark-holding agent"). ATPMs may be foreign or locally owned, with certain differences to their licensing requirements and scope. Foreign firms, for instance, may not sell directly to Indonesian consumers (Agency), although Distribution may be foreign-controlled. ATPMs may carry out the manufacture under license, or contract the manufacture to third parties (subject to approval of the principal), or may simply act as distributors and retailers. In the case of special-bodied vehicles, such as the angkots offered by many body builders (, from ), ATPMs also have relationships with specific companies and often sell their designs through their own showrooms.
Active manufacturers BMW NV Spemotri was BMW's main importer of motorcycles during the 1950s; they mainly brought in the 250cc one-cylinder R25, R26, and R27. A handful of BMW 700s were imported to Indonesia by NV Spemotri in the early 1960s; the Salim Group held the import rights until they sold the tiny concession to the Astra Group in the late 1970s. Astra sells BMW through a wholly owned subsidiary called PT Tjahja Sakti Motor. The first BMW to be assembled locally was the 520/4, which was sent CKD and built in Jakarta by PT Indonesia Service Coy. 780 E12 were assembled from 1976 until 1981, with the 520/6 replacing the four-cylinder in 1978. Indonesia Service Coy later built the E28, E30, E36, and E34 models, until assembly was taken over by the PT Gaya Motor company in 1993.