Indonesia's auto sector recorded overall in-line results for FY24, despite a tough 4W market (sales -12% y-y). The drivers of the results were: 1) export market (e.g. Dharma Polimetal [DRMA IJ, Buy], Astra Otoparts [AUTO IJ, Buy], and Selamat Sempurna [SMSM IJ, Buy] reported in-line results); 2) downtrading; and 3) companies’ pricing power allowing them to pass through rising costs.

4W market has experienced a slowdown in sales over the past 18 months. Indonesia’s 4W sales typically range 80-90k units per month, but now it is hovering around 70k units per month. We attribute this to consumers’ weakened purchasing power and stringent financing from multi-finance companies.

Auto exports in 2024 declined by 9% to 472k units, with the major decline coming from Honda (7267 JP, Rating Suspended) at -50% y-y, Suzuki (7269 JP) at -38% y-y, and Daihatsu (6023 JP, Not rated) at -30% y-y. Brands that grew in exports included Toyota (7203 JP, Buy) at +21% y-y, Hyundai (005380 KS, Buy) at +15% y-y, and Mitsubishi (8058 JP, Rating Suspended) at +9% y-y, according to Gaikindo.

Doubling export value in automotive sector

Indonesia's auto exports in terms of value has doubled in the past decade, from USD5bn in 2012 to USD11bn in 2024. This was due to Indonesia being a production hub in ASEAN and production relocation from several auto plants (such as from Mexico – due to high minimum wage increase). This benefits several auto companies including AUTO (through its associates and trading business), DRMA, and also to some extent Astra International (ASII IJ, Buy) (through its 5% ownership in Toyota Manufacturing Indonesia [TMMIN, unlisted], 32% ownership in Astra Daihatsu Motor [ADM, unlisted], 50% ownership in Astra Honda Motor [AHM; unlisted] and 80% ownership in AUTO).

Limited tariffs impact on Indonesia auto sector

We believe the tariffs impact on Indonesia’s auto sector will be largely limited. SMSM is likely to face the biggest impact, given that it derived 16% of sales from the US in FY24, according to the company. On DRMA, we estimate its exposure to the US is less than 5% of profit, and for AUTO at less than 10%. We remain defensive on the sector given lack of catalysts and escalating global trade tensions that are making maintaining export momentum difficult.

Fig. 2: Indonesia autos & parts exports and to US...

Fig. 3: ...remained low at 5% of exports

Fig. 4: Annual autos market snapshot – exports growing but took a breather in 2024. Imports improved due to tax incentive for EV players

Fig. 5: 4W monthly wholesales and retail sales – still sluggish overall

Fig. 6: Exports market share – Toyota is growing, alongside Mitsubishi & Hyundai

Fig. 7: Monthly wholesales market share

Fig. 8: Monthly retail sales market share

Fig. 9: Indonesia 2W market – relatively resilient

INVESTMENT RATINGS
A rating of ‘Buy’, indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of ‘Neutral’, indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of ‘Reduce’, indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of ‘Suspended’, indicates that the rating, target price, and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies that are labelled as ‘Not Rated’ or ‘No Rating’ are not in regular research coverage. Benchmark is Indonesia Composite Index (‘IDX Composite’). A ‘Target Price’, if discussed, indicates the analyst’s forecast for the share price with a 12-month time horizon, reflecting in part of the analyst’s estimates for the company’s earnings, and may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market in general. 

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Jupriadi Tan (jupriadi.tan@verdhana.id)

David Tjahjadi (david.tjahjadi@verdhana.id)

Gerald Hugo (gerald.hugo@verdhana.id)