A growing number of new automotive brands, particularly from China, are entering the Indonesian automotive market.

Amid intense competition for customers, investment commitments through the establishment of local production facilities have become a focus for industry participants.

Chairman of the Association of Indonesian Automotive Industries (Gaikindo), Putu Juli Ardika, stated that the increasing number of brands entering Indonesia indicates continued interest in the domestic automotive market among global investors. However, he noted that the presence of new players should not be limited to sales activities and should also be accompanied by manufacturing investments to support the national industrial structure.

"The presence of new brands not only broadens consumer choice but also brings investment potential to Indonesia," Putu said in Jakarta, as quoted on May 31st, 2026.

He stated that the development of local production facilities could affect the economy through supply-chain development, job creation and increased vehicle export opportunities from Indonesia. Several new Chinese brands preparing to enter the Indonesian market include BAW, Changan, iCar, Leapmotor and Farizon. These brands are scheduled to participate in the 2026 Gaikindo Indonesia International Auto Show (GIIAS), which will take place from July 30th to August 9th, 2026, at ICE BSD City, Tangerang.

"Gaikindo continues to encourage the commitment of these new brand holders to not only market their products but also establish production facilities domestically," he said.

Some new brands have already announced plans for local production. For example, Changan and Leapmotor, both under the Indomobil Group, plan to produce vehicles locally using a completely knocked-down (CKD) system at the National Assemblers (NA) facility in Purwakarta, West Java.

Meanwhile, several other new brands have chosen to utilise Handal Indonesia Motor's (HIM) factory as their initial assembly base. Brands currently assembling vehicles at the facility include Chery, Jetour, BAIC, Aletra and Geely. The Indonesian automotive market has also recorded growth during this period.

Gaikindo data show that wholesale vehicle sales increased by 12.5% between January and April 2026 compared with the same period in the previous year. Retail sales during the first four months of 2026 increased by 6.9% compared with the corresponding period last year.

However, this growth is not considered to fully reflect a broad-based recovery in consumer purchasing power. As a result, industry participants hope that GIIAS 2026 will support demand while maintaining domestic automotive market activity.

Strengthening the production base

BYD, a Chinese electric vehicle manufacturer, has constructed a manufacturing facility in Subang, West Java. The project's investment value is estimated at IDR 11.2 trillion (US$ 627 million) and is intended to support vehicle production activities in Indonesia.

Head of Marketing, PR & Government of BYD Indonesia, Luther T. Panjaitan, stated that the factory construction process has entered its final stage and is expected to become operational soon.

"This is about finalising production. We have to begin shipping products that meet our standards and quality requirements. However, additional time is still required, and a specific timeline cannot yet be provided," Luther said recently.

One of the models expected to be prioritised for local production is the BYD M6 DM, a plug-in hybrid electric vehicle (PHEV) equipped with the company's Dual Mode (DM) technology. Models currently marketed include the Atto 1, Atto 3, Dolphin, M6, Sealion 7 and Seal.

In addition, Vietnamese electric vehicle manufacturer VinFast has invested more than US$ 300 million in the construction of a production facility on a 171-hectare site in Subang, West Java. Over the medium term, VinFast is targeting total investments of up to US$ 1 billion to serve both domestic and export markets. In addition to passenger vehicles, the company also plans to launch electric motorcycles in Indonesia during the second quarter of 2026 as part of its vehicle electrification strategy.

Manufacturing sector challenges

Amid the increase in new investment, Gaikindo data show that national vehicle production increased by 9.5% between January and April 2026 compared with the same period last year. However, weakening domestic consumption and global uncertainty continue to affect the manufacturing sector. This trend is reflected in Indonesia's manufacturing Purchasing Managers' Index (PMI), which returned to contractionary territory in April 2026.

Indonesia's manufacturing PMI declined from 50.1 in March to 49.1 in April 2026. A reading below 50 indicates that manufacturing activity contracted for the first time in nine months. Executive Director of the Centre of Economic and Law Studies (Celios), Bhima Yudhistira, stated that the weakening of the rupiah has also increased pressure on the manufacturing industry by raising the cost of imported raw materials and components.

According to him, this situation presents a contrast, with national economic growth remaining positive while manufacturing activity continues to slow.

"The economy grew by 5.61%, but the manufacturing PMI remains in contraction, indicating a disconnect. The government needs to improve policy credibility, economic data transparency and regulatory certainty," Bhima said.

In addition to maintaining exchange-rate stability, Bhima stated that the government needs to strengthen domestic demand through various forms of stimulus to support industrial activity.

"The purchasing power of the middle class must be maintained so that consumption can continue to support the national automotive industry," he concluded.