Indonesia After Market Service Industry recorded a positive CAGR of nearly 5% in 2021- How will Authorized Workshops help the market to develop in future?: Ken Research

ByVijay Kumar

Widespread availability of reliable and genuine parts in the independent aftermarket channels increase the challenge for non-genuine part players in 2020, as per a report by Ken Research.

1. Challenges faced by Indonesia’s Automotive Aftermarket Service Industry

Solutions to Mitigate the Challenges in Auto Aftermarket Industry

  • Disruption of global and domestic supply chain lead to difficulty in importing and exporting components and parts from and to other countries. The market witnessed a decline in both the new car and used car sales in 2020 in Indonesia.
  • Indonesian government has set a target to produce 20% electric and hybrid vehicles of total vehicle production by 2025. The car services companies will have to update their equipments and train their mechanics for the servicing of electric cars with time and money.
  • Unorganized Multi Brand companies will face challenge in servicing the electric vehicles due to low budget to upgraded their services.
  • Increasing competition in the automotive aftermarket service industry is affecting the business. Presence of large number of players in the market makes it difficult for the companies to create awareness. Consumers generally prefer visiting their nearest multi brand service centers for quick and low cost service.

2. Authorized Workshops are preferred by customers for their High Service Quality- Why is it so?

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  • High level of service quality due to mechanic expertise and experience of working with same brand of car. Standardization of car service due to SOPs.
  • High costs associated with service customization. Authorized/OEM Car Service Centres provide for high spare part cost due to genuineness of parts and high labour cost.
  • The service cost is less during the warranty period at OEM Workshop. High quality of consumables and materials used, backed by strong brand partnerships.
  • About 95% of cars in pre-warranty go to authorized service centres for service and nearly 20% of post-warranty cars are serviced by authorized centres.

3. Government initiatives and regulations in Indonesia automotive aftermarket service industry- tax cut policy on new cars is supporting the industry

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In 2021 the government decided to temporarily cut the luxury tax (PPnBM) on new car purchases in a bid to boost consumer spending. 100% tax cut applies for the first three months and a 50 per cent tax cut applies for the succeeding three months. The luxury tax cut in Indonesia lead to car sales surge by approx. 70% in March from February in 2021 and up by 10% from March, 2020.

According to National Industry Development 2015-2035 policy of Indonesia, the government focuses to Strengthen local components manufacturing capabilities by accelerating component production FDI and technology transfer. The government plans to turn Indonesia into an independent car manufacturing country that delivers completely built units (CBU) of which all components are locally-manufactured in Indonesia.