Indonesia Auto Finance Market Size and Forecast (2019-2029)
Description
Executive Summary
The Indonesia auto finance market is dynamic and continuously evolving, reflecting the rapid expansion of the country's automotive industry and the increasing affluence of its middle-class population. Revenue for the market surpassed by USD 5.4 billion in 2023 as compared to results in 2021, underscoring its significant scale and potential for further growth. Between 2019 and 2023, the market demonstrated a Compound Annual Growth Rate (CAGR) of 4.10%. This sector is characterized by a diverse array of financing options provided by banks, non-bank financial institutions, and fintech companies, which collectively cater to a wide range of consumer needs and preferences. Despite this diversity, the market faces significant challenges such as data transparency issues, regulatory inconsistencies, and economic volatility. Understanding these factors is essential for stakeholders aiming to navigate the complexities of this market and seize the opportunities it presents.
The Indonesia auto finance market is poised for substantial growth driven by increasing vehicle ownership, rising disposable incomes, and expanding middle-class demographics. Key factors contributing to market expansion include favorable government policies aimed at boosting consumer spending, such as reduced down payment requirements, and the adoption of advanced digital technologies by finance companies to streamline processes and enhance customer convenience. The market is witnessing significant interest from both traditional financial institutions and fintech players, leveraging innovative solutions like digital payment systems and online car financing platforms. With robust economic growth and a growing preference for vehicle ownership among Indonesian consumers, the auto finance sector is projected to continue its upward trajectory, offering lucrative opportunities for investment and market expansion in the coming years.
Looking ahead, the World Bank projects a moderate easing in Indonesia's GDP growth, averaging 4.9% from 2024 to 2026. Concurrently, the International Monetary Fund (IMF) forecasts a sustained growth rate of 5% during the same period, driven primarily by rising private consumption. Reflecting on recent trends, the Indonesian economy showcased resilience in 2023, achieving an annual GDP growth rate of 5%, albeit a slight decrease from the 5.3% growth recorded in 2022, which itself marked significant progress from the 3.7% growth in 2021.
However, the outlook for auto sales in the remainder of 2024 appears cautious. Interest-rate hikes and the expectation of sustained high car-financing rates due to tightening market liquidity are likely to impede significant sales growth. This environment underscores the need for market participants to adopt strategic approaches to mitigate risks and leverage the underlying growth drivers effectively.
Financial institutions are a pivotal force behind Indonesia's automotive industry, playing an essential role in facilitating vehicle purchases through various financing options. Automotive financing accounts for a substantial portion, more than 60%, of the total financing across multiple industries in Indonesia. Since the early 2000s, the financing sector has witnessed significant expansion, marked by an average compound growth rate (CAGR) within the range of 25% to 30%. This robust growth has been particularly driven by the demand for motorcycle financing, reflecting the sector's responsiveness to consumer needs and the rising accessibility of credit for vehicle purchases. This expansion underscores the critical role of financial institutions in shaping the automotive market landscape in Indonesia.
In February 2023, sharia loans in Indonesia returned to pre-pandemic levels, reflecting the growing acceptance and potential for further development in sharia-compliant financial products and services. The previous year saw a notable resurgence in sharia loan growth, driven by the country's post-pandemic economic recovery, which spurred increased demand for financing across various sectors and boosted the need for sharia-compliant financial products.
In 2021, the growth of sharia loans also improved, showing a marked increase from the previous year's decline caused by the pandemic. This recovery and the increasing availability of sharia-compliant financing options can attract a broader customer base, potentially increasing demand for auto loans. Consequently, this could stimulate growth in Indonesia's auto financing sector, as more consumers seek sharia-compliant financial solutions to meet their vehicle purchasing needs.
In the latter half of 2023, new-car financing saw a notable increase, despite a slight decline in new car sales, driven by attractive financing offers and incentives from lenders and dealerships. However, used-car financing remains an emerging market opportunity, comprising a smaller portion of the finance industry's lending portfolio compared to new car sales.
Financing used cars tends to be more profitable than new vehicles, primarily because used cars are often sold at prices higher than their depreciated value. This pricing structure allows lenders to charge higher interest rates and fees, resulting in increased profitability. However, it also entails higher costs associated with managing credit issues.
Therefore, while the expansion of used-car financing presents significant opportunities for profitability within the auto financing market, it also requires careful risk management strategies to mitigate potential credit issues and ensure sustainable growth.
Banks currently dominate the auto finance market, issuing a significant majority of auto loans due to their strong credibility and competitive interest rates. In 2023, banks approved a substantial portion of the total credit disbursed for auto financing. Following banks, NBFCs held a notable share of the market, while captive NBFCs also had a presence.
Interest rates offered by banks for auto loans generally range around a certain percentage per annum. Some banks may offer slightly higher rates, typically for loans related to used cars. Loan tenures typically span from one to five years. Additionally, banks often provide options for early loan repayment, although this may involve an early repayment fee. These features make bank loans an appealing choice for many consumers due to their favorable terms and flexibility.
Recent Developments in Indonesia Auto Finance Market
PT Bank BTPN Tbk (Bank BTPN) on 27th March 2024officially announced the acquisition of twofinance companies, namely PT Oto Multiartha (OTO) and PT Summit Oto Finance (SOF) (hereinafter referred to as “OTO Group”). After completion of the acquisition, the ownership composition of OTO and SOF will be as follows: Bank BTPN at 51%, PT Summit Auto Group which is a subsidiary of Sumitomo Corporation at 34%, and PT Sinar Mas Multiartha Tbk at 15%.
An ongoing agreement from MUFG agreed to buy Mandala Multifinance for USD 467 million. The acquisition will help expand MUFG's auto loan business in Indonesia through Adira Dinamika Multi Finance, targeting emerging middle-class consumers in the region.
Future Opportunities in Indonesia Auto Finance Market
The used-car financing segment presents promising growth opportunities due to potentially higher profit margins, albeit accompanied by increased costs related to credit impairments. Effective risk management is crucial for maintaining credit quality, particularly given the heightened risk exposure in non-prime customer segments. Auto finance revenue is expected to reach its peak by 2028 with a significant growth rate.
Auto financing firms are increasingly adopting advanced technologies to improve operational efficiency and enhance customer experiences, such as digital installment payment systems and online car purchasing platforms. The emergence of fintech platforms like Broom and Cermati further supports this technological shift. Government and financial regulatory initiatives have also adjusted down payment requirements to stimulate loan demand. The market's compound annual growth rate (CAGR) for the forecast is estimated to be 9.11% during the estimated period reflects robust expansion.
Scope of Indonesia Auto Finance Market Research Report
Makreo Research has released a detailed analysis titled “Indonesia Auto Finance Market and Forecast (2019-2029),” providing a comprehensive overview of the country's auto finance market. The report delves into how trade impacts the market, examining import and export dynamics, and assesses the various demand and supply factors shaping the market. It analyzes the market's historical and current performance, including interest rate trends, popular financing options, and city-wise preferences for auto financing.
The report also highlights key players in the market, offering an in-depth examination of these companies, including their mergers and acquisitions, funding sources, and detailed profiles. Additionally, it explores the competitive landscape in the auto finance market, providing valuable information on established companies and their financial activities. This comprehensive analysis empowers stakeholders and industry experts with a deep understanding of the evolving dynamics within this rapidly growing sector.
Period of Study
2019 - 2023: Past and Present Scenario
2023: Base year of study
2024: 2029: Future Outlook of the industry
Key Areas Discussed in the Report
Vehicle Ownership
PTA Toyota Astra Financial Services
PT BFI Finance
JACCS MPM Finance
PT Suzuki Finance
Dipo Star Finance
OTO Multiartha
Mandiri Tunas Finance
BCA Finance
Radana Bhaskara Finance
PT Adira Dinamika Multi Finance
PT Indomobil Multi Jasa Tbk
PT KDB Tifa Finance Tbk
PT Batavia Prosperindo Trans Tbk
Key Questions Answered
1. How has the Indonesia auto finance market performed historically, and what is the current scenario?
2. How have trade and economic policies in Indonesia impacted the auto finance industry?
3. Which city exhibits the highest demand for auto financing in Indonesia?
4. Which types of auto finance products are experiencing increased demand in Indonesia's market?
5. How do interest rates and inflation impact the auto finance market in Indonesia?
6. Who are the leading players in the Indonesia auto finance market, and what is the current investment scenario?
7. What opportunities are expected to drive revenue growth in the Indonesia auto finance market in the future?
8. How do consumer preferences and behaviors impact the auto finance market in Indonesia?
9. What technological advancements are transforming the auto finance industry in Indonesia?
10. What are the competitive strategies of key players in the Indonesia auto finance market?
11. How does the availability of credit and loan terms affect the auto finance market in Indonesia?
12. What is the impact of urbanization on the auto finance market in Indonesia?
The Indonesia auto finance market is dynamic and continuously evolving, reflecting the rapid expansion of the country's automotive industry and the increasing affluence of its middle-class population. Revenue for the market surpassed by USD 5.4 billion in 2023 as compared to results in 2021, underscoring its significant scale and potential for further growth. Between 2019 and 2023, the market demonstrated a Compound Annual Growth Rate (CAGR) of 4.10%. This sector is characterized by a diverse array of financing options provided by banks, non-bank financial institutions, and fintech companies, which collectively cater to a wide range of consumer needs and preferences. Despite this diversity, the market faces significant challenges such as data transparency issues, regulatory inconsistencies, and economic volatility. Understanding these factors is essential for stakeholders aiming to navigate the complexities of this market and seize the opportunities it presents.
The Indonesia auto finance market is poised for substantial growth driven by increasing vehicle ownership, rising disposable incomes, and expanding middle-class demographics. Key factors contributing to market expansion include favorable government policies aimed at boosting consumer spending, such as reduced down payment requirements, and the adoption of advanced digital technologies by finance companies to streamline processes and enhance customer convenience. The market is witnessing significant interest from both traditional financial institutions and fintech players, leveraging innovative solutions like digital payment systems and online car financing platforms. With robust economic growth and a growing preference for vehicle ownership among Indonesian consumers, the auto finance sector is projected to continue its upward trajectory, offering lucrative opportunities for investment and market expansion in the coming years.
Looking ahead, the World Bank projects a moderate easing in Indonesia's GDP growth, averaging 4.9% from 2024 to 2026. Concurrently, the International Monetary Fund (IMF) forecasts a sustained growth rate of 5% during the same period, driven primarily by rising private consumption. Reflecting on recent trends, the Indonesian economy showcased resilience in 2023, achieving an annual GDP growth rate of 5%, albeit a slight decrease from the 5.3% growth recorded in 2022, which itself marked significant progress from the 3.7% growth in 2021.
However, the outlook for auto sales in the remainder of 2024 appears cautious. Interest-rate hikes and the expectation of sustained high car-financing rates due to tightening market liquidity are likely to impede significant sales growth. This environment underscores the need for market participants to adopt strategic approaches to mitigate risks and leverage the underlying growth drivers effectively.
Financial institutions are a pivotal force behind Indonesia's automotive industry, playing an essential role in facilitating vehicle purchases through various financing options. Automotive financing accounts for a substantial portion, more than 60%, of the total financing across multiple industries in Indonesia. Since the early 2000s, the financing sector has witnessed significant expansion, marked by an average compound growth rate (CAGR) within the range of 25% to 30%. This robust growth has been particularly driven by the demand for motorcycle financing, reflecting the sector's responsiveness to consumer needs and the rising accessibility of credit for vehicle purchases. This expansion underscores the critical role of financial institutions in shaping the automotive market landscape in Indonesia.
In February 2023, sharia loans in Indonesia returned to pre-pandemic levels, reflecting the growing acceptance and potential for further development in sharia-compliant financial products and services. The previous year saw a notable resurgence in sharia loan growth, driven by the country's post-pandemic economic recovery, which spurred increased demand for financing across various sectors and boosted the need for sharia-compliant financial products.
In 2021, the growth of sharia loans also improved, showing a marked increase from the previous year's decline caused by the pandemic. This recovery and the increasing availability of sharia-compliant financing options can attract a broader customer base, potentially increasing demand for auto loans. Consequently, this could stimulate growth in Indonesia's auto financing sector, as more consumers seek sharia-compliant financial solutions to meet their vehicle purchasing needs.
In the latter half of 2023, new-car financing saw a notable increase, despite a slight decline in new car sales, driven by attractive financing offers and incentives from lenders and dealerships. However, used-car financing remains an emerging market opportunity, comprising a smaller portion of the finance industry's lending portfolio compared to new car sales.
Financing used cars tends to be more profitable than new vehicles, primarily because used cars are often sold at prices higher than their depreciated value. This pricing structure allows lenders to charge higher interest rates and fees, resulting in increased profitability. However, it also entails higher costs associated with managing credit issues.
Therefore, while the expansion of used-car financing presents significant opportunities for profitability within the auto financing market, it also requires careful risk management strategies to mitigate potential credit issues and ensure sustainable growth.
Banks currently dominate the auto finance market, issuing a significant majority of auto loans due to their strong credibility and competitive interest rates. In 2023, banks approved a substantial portion of the total credit disbursed for auto financing. Following banks, NBFCs held a notable share of the market, while captive NBFCs also had a presence.
Interest rates offered by banks for auto loans generally range around a certain percentage per annum. Some banks may offer slightly higher rates, typically for loans related to used cars. Loan tenures typically span from one to five years. Additionally, banks often provide options for early loan repayment, although this may involve an early repayment fee. These features make bank loans an appealing choice for many consumers due to their favorable terms and flexibility.
Recent Developments in Indonesia Auto Finance Market
PT Bank BTPN Tbk (Bank BTPN) on 27th March 2024officially announced the acquisition of twofinance companies, namely PT Oto Multiartha (OTO) and PT Summit Oto Finance (SOF) (hereinafter referred to as “OTO Group”). After completion of the acquisition, the ownership composition of OTO and SOF will be as follows: Bank BTPN at 51%, PT Summit Auto Group which is a subsidiary of Sumitomo Corporation at 34%, and PT Sinar Mas Multiartha Tbk at 15%.
An ongoing agreement from MUFG agreed to buy Mandala Multifinance for USD 467 million. The acquisition will help expand MUFG's auto loan business in Indonesia through Adira Dinamika Multi Finance, targeting emerging middle-class consumers in the region.
Future Opportunities in Indonesia Auto Finance Market
The used-car financing segment presents promising growth opportunities due to potentially higher profit margins, albeit accompanied by increased costs related to credit impairments. Effective risk management is crucial for maintaining credit quality, particularly given the heightened risk exposure in non-prime customer segments. Auto finance revenue is expected to reach its peak by 2028 with a significant growth rate.
Auto financing firms are increasingly adopting advanced technologies to improve operational efficiency and enhance customer experiences, such as digital installment payment systems and online car purchasing platforms. The emergence of fintech platforms like Broom and Cermati further supports this technological shift. Government and financial regulatory initiatives have also adjusted down payment requirements to stimulate loan demand. The market's compound annual growth rate (CAGR) for the forecast is estimated to be 9.11% during the estimated period reflects robust expansion.
Scope of Indonesia Auto Finance Market Research Report
Makreo Research has released a detailed analysis titled “Indonesia Auto Finance Market and Forecast (2019-2029),” providing a comprehensive overview of the country's auto finance market. The report delves into how trade impacts the market, examining import and export dynamics, and assesses the various demand and supply factors shaping the market. It analyzes the market's historical and current performance, including interest rate trends, popular financing options, and city-wise preferences for auto financing.
The report also highlights key players in the market, offering an in-depth examination of these companies, including their mergers and acquisitions, funding sources, and detailed profiles. Additionally, it explores the competitive landscape in the auto finance market, providing valuable information on established companies and their financial activities. This comprehensive analysis empowers stakeholders and industry experts with a deep understanding of the evolving dynamics within this rapidly growing sector.
Period of Study
2019 - 2023: Past and Present Scenario
2023: Base year of study
2024: 2029: Future Outlook of the industry
Key Areas Discussed in the Report
Vehicle Ownership
- New Car
- Used Car
- Other Finance
- Passenger Cars
- Commercial Cars
- Banks
- NBFCs
- Captives
- Jabodetabek
- Yogyakarta
- Surabaya
- North Sumatra
- Other Regions
- State
- Regional
- Government
- Cash
- Credit
PTA Toyota Astra Financial Services
PT BFI Finance
JACCS MPM Finance
PT Suzuki Finance
Dipo Star Finance
OTO Multiartha
Mandiri Tunas Finance
BCA Finance
Radana Bhaskara Finance
PT Adira Dinamika Multi Finance
PT Indomobil Multi Jasa Tbk
PT KDB Tifa Finance Tbk
PT Batavia Prosperindo Trans Tbk
Key Questions Answered
1. How has the Indonesia auto finance market performed historically, and what is the current scenario?
2. How have trade and economic policies in Indonesia impacted the auto finance industry?
3. Which city exhibits the highest demand for auto financing in Indonesia?
4. Which types of auto finance products are experiencing increased demand in Indonesia's market?
5. How do interest rates and inflation impact the auto finance market in Indonesia?
6. Who are the leading players in the Indonesia auto finance market, and what is the current investment scenario?
7. What opportunities are expected to drive revenue growth in the Indonesia auto finance market in the future?
8. How do consumer preferences and behaviors impact the auto finance market in Indonesia?
9. What technological advancements are transforming the auto finance industry in Indonesia?
10. What are the competitive strategies of key players in the Indonesia auto finance market?
11. How does the availability of credit and loan terms affect the auto finance market in Indonesia?
12. What is the impact of urbanization on the auto finance market in Indonesia?
Table of Contents
120 Pages
- 1. Research Methodology
- 1.1. Research Objective
- 1.2. Research Design and Procedure
- 1.3. Data Collection Methods
- 1.4. Methodology of Research
- 1.5. Analytical Framework
- 2. Indonesia EPTD (Economic, Political, Technology, Demographic) Analysis
- 2.1. Country Overview EPTD Analysis
- 2.2. EPTD Analysis: Indonesia Economic Overview
- 2.2.1. Indonesia Economic Overview: FDI in Motor Vehicle Industry
- 2.3. EPTD Analysis: Indonesia Political Overview
- 2.4. EPTD Analysis: Indonesia Technological Overview
- 2.5. EPTD Analysis: Indonesia Demographic Overview
- 3. Indonesia Auto Finance Market Past and Present Performance
- 3.1. Indonesia Auto Finance Market: An Overview
- 3.2. Indonesia Auto Financing Contribution to Multi Finance Industry
Pricing
Currency Rates
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