Indonesia★90% of Middle Class Have "Plans" to Purchase New Cars

In Indonesia, the emerging middle class is showing strong intent to purchase automobiles. Manufacturers are successively introducing new compact, affordable models that qualify for eco-car policies and benefit from tax incentives.

According to a survey by NNA, which delivers Asian economic news, over 70% of consumers in major cities responded that they would "purchase their first passenger car within the next year." Expectations for creating new markets appear to be rising.

NNA conducted a survey on car purchase intentions among non-car owners residing in five cities: Jakarta, Surabaya (East Java), Medan (North Sumatra), Makassar (South Sulawesi), and Balikpapan (East Kalimantan). The survey was conducted from late August to early September this year. Responses were obtained from 100 people in each city, totaling 500 respondents. Respondents were nearly evenly split between men and women, with those in their late 20s to early 30s accounting for about 80% of the total.

 

■Hatchbacks are Popular

Regarding plans to purchase a new car, 91% (average across the five cities) of respondents indicated they had such plans. By city, three cities (excluding Jakarta and Makassar) exceeded 90%, showing relatively strong intent. Among those without plans, over 40% cited "lack of financial means" as the reason, suggesting an even larger potential purchasing base.

Current commuting methods, in descending order, were "motorcycle" (42%), "company car" (29%), and "public transportation (bus, train, taxi, etc.)" (27%). Many households without car ownership appear to be considering switching from motorcycles.

The most common planned purchase timeframe is "within 6 to 12 months" at 42%. Next is "within 6 months" at 32%, meaning a combined 74% aim to acquire a vehicle within a year. Focusing solely on Jakarta, a similar survey last year (targeting office workers) showed only 27% planned to buy "within a year," but this figure has doubled to 57% this time.

The most desired model is the affordable hatchback at 62%, significantly outpacing the currently best-selling 7-seater multi-purpose vehicle (MPV) at 20%. While hatchbacks are overwhelmingly chosen by over 70% of consumers in the other four cities outside Jakarta, in the major city of Jakarta, hatchbacks only reached 16%, with MPVs leading at 43%.

The most common budget for a first purchase was "100 million to under 120 million rupiah" (approx. ¥900,000 to ¥1,080,000), chosen by about 30%. Combined with "under 100 million rupiah," 54% expressed a preference for low-priced models under 120 million rupiah.

 

■LCGCs show promise in rural areas

With rising incomes, Indonesia is seeing an increase in consumers joining the middle class. Alfyn (28, male), who lives in Surabaya, lives with his wife and two children, aged 3 and 1. They do not own a car, and their family relies on a motorcycle for transportation. Their household income is 7 million rupiah (approx. 63,000 yen) per month. "There are cars that can be purchased with a loan of less than 2 million rupiah per month if you just pay the down payment," he says, and he plans to buy one soon.

The Low Cost Green Car (LCGC), a fuel-efficient small car targeted by the eco-car policy, is priced in the low range of 120 million rupiah or less. Five Japanese automakers have been launching compliant models one after another for the past year, targeting this volume zone, but the current situation is that "demand is mainly for second cars, mainly for spouses," according to industry sources.

A representative of a Japanese car dealership pointed out, "Because income levels are high in Jakarta, many people purchase MPVs and other vehicles priced at 140 million rupiah or more as their first car." He expressed the view that prices below that level would be the target in rural areas.

Consumers seeking affordable vehicles are steadily increasing, particularly in regional areas, making LCGC demand especially promising there. The full-scale launch of the "primary vehicle market" – the segment manufacturers originally targeted in the LCGC market – also appears imminent.