Last week, GM Indonesia Executive Vice President Stefan Jacoby said that the company will continue to distribute Orlando, Captiva and Trailblazer models through dealers in Indonesia (implying that GM Indonesia becomes a sales unit), but will stop to manufacture the Chevrolet Spin (Chevy Spin), a low multipurpose vehicle, in its Bekasi plant. This move is part of a broader repositioning of the Chevrolet brand across the Southeast Asian region. GM announced it may also cease production of the Chevrolet Sonic in Thailand by mid-2015.

Indonesia is an attractive market for car manufacturers as the country is still characterized by a low per capita car ownership ratio (less than four in every 100 people own a car), while per capita GDP has been growing rapidly in the past decade. Between 2008 and 2014 car sales have about doubled to 1.2 million car units in 2014, evidencing robust demand for cars in Southeast Asia’s largest economy. However, in the period 2012-2014 car sales in Indonesia have been more-or-less stagnant amid the country’s economic slowdown, including a higher interest rate environment (Bank Indonesia raised its key interest rate gradually from 5.75 percent to 7.75 percent between June 2013 and November 2014) hence limiting people’s purchasing power.

Tough Japanese Rivals in the Indonesian Car Market

The car (sale) industry in Indonesia is dominated by Japanese car manufacturers. Market leader Toyota (of which the car units are distributed by Astra International through a jointly-controlled entity with Japan’s Toyota Motor Corporation) accounts for about half of total car sales in Indonesia. Initially, GM was confident that it would to be able to compete with these Japanese brands and therefore revived its Bekasi plant in 2013 (through a USD $150 million injection) to produce the Chevy Spin. This Bekasi plant had already been established by GM in 1995 but operations were halted in 2005 (also due to its weak market share amid Japanese domination). However, production costs of the Chevy Spin were high as most car components had to be imported. Moreover, demand for GM cars in Indonesia never took off as Indonesians prefer other brands, particularly the Toyota Avanza, Honda Mobilio, Daihatsu Xenia, and Suzuki Ertiga. The GM plant in Bekasi was operating at only a quarter of its full capacity of 40,000 vehicles per year. The company sold 8,412 Chevy Spins and exported around 3,000 in 2014. As a result, the Bekasi plant became a financial burden for GM. In total, GM only sold 10,018 vehicles in Indonesia last year, implying a market share of below 1 percent. Meanwhile, Japanese car manufacturers control over 90 percent of the market.

GM’s presence in Indonesia stretches back eight decades. Currently, six GM models are sold on the Indonesian market: Chevy Spin, Aveo, Capitiva, Orlando, Trailblazer and Colorado.

Indonesian Car Sales (CBU):

 Month    Sold Cars 2012    Sold Cars 2013    Sold Cars 2014
 January           76,427           96,718          103,609
 February           86,486          103,278          111,824
 March           87,917           95,996          113,067
 April           87,144          102,257          106,124
 May           95,541           99,697           96,872
 June          101,746          104,268          110,614
 July          102,511          112,178           91,334
 August           76,445           77,964           96,652
 September          102,100          115,974          102,572
 October          106,754          112,039          105,222
 November          103,703          111,841           91,327
 December           89,456           97,706           78,802
 Total         1,116,230


     2008    2009    2010    2011     2012     2013     2014
Indonesian Car Sales
(number of car units)
 607,805  486,061  764,710  894,164 1,116,230
1,229,916 1,208,019
Indonesian Exports
(number of car units)
 100,982   56,669   85,769  107,932  173,368  170,907  

Source: Gaikindo

Further Reading:

Indonesia’s 2014 Car Sales Decline amid Slowing Economic Growth
Indonesia's 2014 Annual Car Sales Fall on Bleak Economy & Fuel Hike
Low Cost Green Cars Support Car Sales in Indonesia
Growth of Indonesian Car Sales Falls amid Slowing Economic Expansion
Impact of Higher Subsidized Fuel Prices on Indonesia’s Car Industry