Observers Warn of the Impact of Car Price Wars in Indonesia

KatadataOTO – Chinese automotive manufacturers in Indonesia offer competitive car prices, lower than similar models from other brands in their class.

Several brands like Chery often implement a special launch pricing strategy for their cars. The vehicle's price tag will increase as the number of orders grows.

Their latest PHEV (Plug-in Hybrid Electric Vehicle) is the cheapest in the country, priced in the Rp 500 million range.

“So, I was also surprised by this price. When it was presented, I was heartbroken. Essentially, the first 1,000 people can see the latest technology (from Chery),” said Zeng Shuo, Vice President of PT CSI (Chery Sales Indonesia) in Jakarta some time ago.

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On one hand, affordable car prices have a positive effect. Consumers get more vehicle options, especially in the electrification lineup.

This ‘price-slashing’ move was then apparently followed by Japanese manufacturers. The Honda HR-V Hybrid launched with a price under the Rp 500 million mark, lower than the previous version. Observers believe a positive impact can be felt.

“This has the potential to massively boost sales of the Honda HR-V Hybrid among the majority of Indonesian consumers who are still concerned about BEV (Battery Electric Vehicle) infrastructure,” said Yannes Pasaribu, an automotive observer and academic at ITB (Bandung Institute of Technology) to KatadataOTO on Thursday (19/05).

The presence of competitively priced hybrid cars from Japanese manufacturers helps debunk the notion that HEVs (Hybrid Electric Vehicles) are more expensive than conventional engine vehicles.

“Honda's move will also force major competitors like Toyota and other brands to no longer be able to play it safe by placing their hybrid models in the premium price segment,” he continued.

However, he warned that a car price-slashing strategy still has negative effects for both producers and consumers.

“A price war will directly erode producer profit margins. These profits are crucial for long-term investment in R&D (Research and Development), dealership network expansion, improving after-sales service quality, and future innovation,” he asserted.

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Furthermore, a low new car selling price automatically makes the used version even cheaper. Meanwhile, resale value is one of the things that automotive consumers in the country pay close attention to.

Lastly, a price war where manufacturers compete to offer products at the lowest price can impact vehicle quality.

“There is a risk they might start cutting costs on crucial aspects like material quality, safety features, or product testing. Ultimately, this will harm consumers and the industry's reputation globally,” Yannes said, concluding his statement.