Based on data from the Indonesian Automotive Industry Association (Gaikindo), Japanese car brands control 98.39 percent of the domestic car market in Indonesia with the top five Japanese car brands being Toyota (the clear market leader), followed by Daihatsu, Honda, Mitsubishi, and Suzuki.

Since the end of the Suharto regime in 1998 various car-makers from the United States, Europe, South Korea, Malaysia, and China have come to Indonesia (some exited again). However, they have not been able to compete with their Japanese counterparts. In fact, over the past two decades Japanese car brands have strengthened their control over the Indonesian car market.

For example, Kia and Hyundai (both well-known names originating from South Korea) are strong brands, globally. However, in Indonesia, their market share slid significantly from 5.12 percent in 2001 to 0.21 percent in 2017.

It is actually remarkable that Japanese cars gained such tremendous popularity in Indonesia. In the 1960s these cars were not popular at all in the bigger cities of Indonesia and were often called a "can of crackers" (kaleng kerupuk) due to their shape (which was in contrast to the western cars - status symbols - that focus on the body of the car). But even today the richer segments of Indonesian society prefer to use western cars such as Mercedes Benz or BMW. For example, the Indonesian president and ministers drive in state-owned Mercedes-Benz cars, while many diplomats working at embassies in Jakarta use the BMW.

However, over the past decades there has emerged a huge pool of middleclass consumers in Indonesia who can afford the more competitive Japanese car. Moreover, the quality of the Japanese car proved sufficient and reliable.

Herry Yanto, Sales and Marketing Development Manager at Kia Motors Indonesia, said one of the reasons why the Indonesian consumer is more willing to buy a Japanese car brand is because it is easier to sell these vehicles on the second-hand market. Moreover, it is much easier (and cheaper) to order car components or parts for a Japanese brand than it is for a non-Japanese brand because Japanese automotive manufacturers have invested in Indonesia's car components industry.

Therefore, Jongkie Sugiarto, Chairman of Gaikindo, advises western automotive companies to invest in car component manufacturing facilities in Indonesia in order to gain market share in Southeast Asia's largest economy.

Besides Japan's integrated upstream-downstream advantage in Indonesia's car manufacturing market, other factors that result in Japanese car brands' success in Indonesia are the big amount of dealers that are ready to supply Japanese brands, and strong advertising campaigns.

Read more: Analysis of Indonesia's Automotive Industry

The success of Japanese brands is also based on their eagerness to adapt to new regulations in Indonesia. For example, when the Indonesian government announced around 1970 that foreign car-makers had to appoint a sole local agent to distribute the cars on the Indonesian market, Japanese car manufacturers reacted swiftly. For example, Toyota and Daihatsu appointed Astra International.

Then just after 2010 the Indonesian government decided to offer tax incentives to those car manufacturers that use at least 80 percent of locally-sourced material/components for the manufacturing of vehicles. This was the basis for the low-cost green car (LCGC) that has become a popular car in Indonesia, controlling about 22 percent of the car market. It were Toyota, Daihatsu, Honda, Nissan and Suzuki that acted swiftly by investing and are now the engines behind the LCGC vehicle in Indonesia.

Hence, part of the success if that Japanese automotive companies have the courage to invest and understand future developments in Indonesia's automotive industry.