December 22, 2024

Greater Competition, Declining Sales Volume

Market Commentary

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Over the past six months, Indonesia's automotive market has experienced notable developments in vehicle launches.

In November 2024, during the Gaikindo Jakarta Auto Week, VinFast commenced deliveries of its VF 5 electric vehicle. This model represents VinFast's second electric car offering in Indonesia, underscoring the company's commitment to promoting electric mobility in the region.

In July 2024, BYD introduced the M6, marking the first all-electric MPV in the Indonesian market. This launch signifies BYD's entry into Indonesia's growing electric vehicle segment.

Hyundai launched the all-new Santa Fe (MX) in Indonesia, offering both 2.5-liter gasoline and 1.6-liter turbo-hybrid variants. The new model features a bold design and advanced interior amenities, aiming to strengthen Hyundai's presence in the SUV segment.

However, Indonesia's automotive sales experienced a decline in November, as purchasing power remained under pressure despite the ten-day GAIKINDO Jakarta Auto Week held in late November. Sales of 4W fell by 3.7% MoM to 74,347 units, bringing 11M24 sales to 784,788 units, representing a 14.7% YoY decline.

Similarly, 2W sales decreased by 5.8% MoM to 512,942 units, with 11M24 sales totaling 5,929,830 units, a slight growth of 2.1% YoY. Overall, both 4W and 2W segments are expected to meet this year’s sales targets of 850,000 units for 4W and 6.5 million units for 2W.

ASII’s sales in November dropped significantly to 39,408 units (-16.5% MoM), primarily due to weak Daihatsu sales, which amounted to 10,030 units—well below its three-year average of approximately 15,000 units. This underperformance is likely attributed to the lack of new product launches and major refreshes, which diminished Daihatsu's market appeal.

Despite a 14.1% YoY decline in ASII's 11M24 sales to 440,806 units, the company maintained its market share at 56.2%.

Chinese automakers continued to expand their presence, achieving a record-high 4W market share of 5.9% in 11M24, a significant increase from 3.0% in 2023. This growth was driven by brands such as BYD, Wuling, and Chery.

Meanwhile, market shares for Japanese and Korean brands declined to 83.7% (from 85.9%) and 2.8% (from 3.0%), respectively. The momentum for Chinese automakers is expected to persist, supported by competitively priced electric vehicle (EV) models and favorable government policies promoting EV adoption, highlighting their increasing competitiveness in the Indonesian market.

Looking ahead, the automotive sector is expected to remain under pressure from rising VAT, the potential implementation of the Opsen Tax, and constrained middle-class incomes. These factors are likely to dampen consumer sentiment and discretionary spending.

Consequently, we maintain a SELL rating on ASII with a target price of Rp4,400, citing the absence of clear growth catalysts in its core businesses (automotive, financial services, and commodities), limited affordable EV offerings, and the impact of normalizing commodity prices.

Conversely, DRMA remains our top pick with a BUY rating and a target price of Rp1,600, given its strategic role in the EV supply chain, robust financial position, and potential for industry consolidation.

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