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Strong Vehicle Production Outlook Boosts Indonesia’s Overall RRI
Key View: In our recently updated Autos Production Risk/Reward Index, Indonesia continues to outperform the Asian regional average score of 57.9 as a large vehicle production volume and a sound vehicle output growth (based on our five-year vehicle production growth outlook) significantly increases the country’s appeal for automotive production operations. An underperformance in Indonesia’s longer-term political risk outlook dents its appeal.
Key Features And Latest Updates
- In the most recent update of our Autos Production Risk/Reward Index (RRI), Indonesia’s score has decreased from the previous quarter coming in at 58.4 out of a possible 100, from its previous quarter’s score of 59.2. That said, its overall score is now marginally above of the Asia regional average of 57.9. The country ranks in the top eight most attractive destinations for automakers to begin or maintain vehicle manufacturing operations in the Asian region (out of 13) and 21st globally.
- Indonesia’s key strengths remain its low costs of labour as reflected in the average wages/labour cost score (94.6) and strong automotive industry policy (81.3).
- Indonesia also benefits from its large-scale vehicle production volumes, scoring 66.1 on this indicator, above the Asia regional average of 58.7 out of a possible 100.
- Indonesia provides attractive growth opportunities for new/existing automakers, achieving a score of 67.9 out of a possible 100 on its vehicle production growth indicator (which is based on our five-year average forecast). This score comes in higher than the Asia average regional score of 59.6 on the same indicator.
- Indonesia’s attractiveness as an autos production destination is weighed down by the small size of its skilled labour force (28.6) and higher logistics risks (41.1) when compared to its regional peers. The country also suffers from an uncertain long-term political environment, scoring 37.5, as well as high operational risks (41.1) relative to its regional peers.
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