Indonesian Auto Market: Riding the EV Wave – Chinese Automakers vs. Legacy Giants

The Indonesian automotive market is undergoing a seismic shift, driven by the rapid adoption of electric vehicles (EVs) and the aggressive expansion of Chinese automakers. As traditional Japanese brands like Toyota and Honda face declining sales and market share, investors are increasingly turning their gaze toward BYD and Chery—the vanguards of an EV revolution. This article dissects the structural dynamics reshaping the industry and identifies where capital can thrive in this volatile yet transformative landscape.

The EV Uprising: Chinese Automakers Lead the Charge

BYD and Chery have emerged as the architects of Indonesia’s EV boom, leveraging government incentives and aggressive pricing strategies to capture market share. In Q1 2025, BYD sold 5,718 units in Indonesia, with its premium sub-brand Denza adding 2,524 units. Combined, they now hold 4.9% of the market, up from 2.8% in early 2024. BYD’s M6 MPV, priced 15–20% below Japanese rivals, has become a poster child for affordability and tech-forward design. Meanwhile, Chery’s 187% sales surge in Q1 2025—driven by models like the Denza 9—has pushed its market share to 2.14%, outpacing even established brands like Wuling.

The numbers are unequivocal: Chinese automakers are capitalizing on Indonesia’s EV-friendly policies, including VAT reductions and local assembly mandates, to build dominance. Their focus on mid-tier urban buyers—coupled with advanced features like AI-driven infotainment—has created a formidable value proposition.

The Legacy Brands’ Struggle: Toyota Holds On, Honda Falters

While Toyota remains the market leader with 33.2% share, its reliance on hybrid models like the Hilux Rangga masks deeper vulnerabilities. Hybrid sales, though robust, are stagnating in the face of EV competition. Honda, meanwhile, is in freefall: its Q1 2025 sales plunged 20.4%, leaving it with just 10.2% share. The root cause? A delayed EV strategy and outdated ICE portfolios.

Honda’s decline is emblematic of a broader crisis for Japanese automakers. Their hesitation to pivot to battery electric vehicles (BEVs) in a market where EV sales rose 78.1% year-on-year through February 2025 has left them exposed. Even Toyota’s hybrid dominance is a stopgap, as infrastructure constraints—limited charging networks and resale value concerns—slow mass adoption of alternatives to pure EVs.

Structural Shifts Demand Strategic Investment

The Indonesian market’s 3% overall sales decline in early 2025 underscores a critical truth: the automotive sector is bifurcating. Investors must choose between two paths:
1. Growth in EVs: Back BYD and Chery, which are capitalizing on government support, cost advantages, and the urban middle class’s tech-driven preferences.
2. Defensiveness: Stick with Toyota’s hybrid strength, but acknowledge its long-term risks as EVs eclipse ICE vehicles.

The data is clear: EVs are the future, and Chinese automakers are writing its present. While Toyota’s scale and dealer networks provide a buffer, its inability to scale BEV production fast enough leaves it vulnerable. Honda’s lack of an EV strategy is a liability in a market where 90% of EV sales are now Chinese-made.

The Investment Case: Act Now, or Risk Missing the Boat

For investors seeking growth, the calculus is straightforward:
- BYD (002594.SZ): Its 374% year-on-year sales growth and strategic partnerships (e.g., local assembly by 2026) position it as a buy.
- Chery: With 187% sales growth and a focus on premium EVs like the Denza 9, it offers asymmetric upside.
- Avoid Honda (HMC) and Daihatsu unless they pivot decisively to EVs.

The window to capitalize on Indonesia’s EV transition is narrowing. As 5% GDP growth and government subsidies fuel demand, investors who bet on BYD and Chery now will secure a stake in a market poised to redefine automotive leadership in Southeast Asia.

Final Verdict: The era of Japanese automotive dominance in Indonesia is ending. Back the disruptors—or be disrupted.

Investment decisions should consider individual risk tolerance and professional advice. Data as of May 2025.