Market Trends of indonesia road freight transport Industry
The transportation and storage sector witnessed a rise by 36.68% YoY in 2022, fueled by investment and increased mobility
- In 2022, transportation and storage experienced remarkable growth, surging by 36.68% YoY, due to higher community mobility and increased foreign tourist arrivals. The sector continued its rapid expansion in Q1 2023, recording a 15.93% YoY growth rate. During the same period, Indonesia achieved an impressive total investment realization of IDR 328.9 trillion (USD 0.021 trillion), representing 23.5% of its full-year investment target for 2023. Road transport accounted for 44% of the transport sector's GDP contribution, and rail accounted for only 1.4%.
- Indonesia's transportation and storage sector is crucial for facilitating the movement of goods, people, and services across the vast archipelago, contributing significantly to the country's economy. In the second quarter of 2022, the transportation and warehousing sector experienced a notable growth rate of 21.27% compared to the same quarter in 2021. Additionally, the first quarter of 2022 saw a positive growth rate of 15.79% in the sector. To enhance the transport and storage sector and support the development of the new Indonesian capital city, the government allocated approximately USD 19.27 million for road infrastructure projects in the Sepaku sub-district, Penajam Paser Utara district.
- Indonesia is set to allocate approximately USD 240 billion for infrastructure advancements from 2022 to 2024. Nevertheless, the nation's focus on infrastructure expansion primarily centers around transportation. Within this sector, road, rail, and port infrastructure projects constitute 29%, 22%, and 23%, respectively, of the overall value of ongoing and upcoming infrastructure initiatives. In 2022, the foreign direct investment in vehicle and other transportation industries in Indonesia amounted to approximately USD 1.5 billion.
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Indonesia faced fiscal challenges amid surging crude oil prices and subsidy pressures in 2022
- The price of the Indonesian crude basket increased to an average of USD 99.4 per barrel between January and April 2022, compared to USD 68.5 per barrel in 2021, recording a 45% increase YoY. In the face of a widening gulf between domestic and international prices, state-owned Pertamina adjusted prices of three non-subsidized, high-grade fuel variants - Pertamax Turbo, Dexlite, and Pertamina Dex. After that, the price of unsubsidized Pertamax rose by 39% to USD 0.83 from April, with the fuel types accounting for 16% of total consumption and the rest of the subsidized fuels. By contrast, the prices of commonly used subsidized variants, Pertalite (90) and Premium (88), which accounted for over 80% of consumption, have remained unchanged for the past three years.
- In Q1 2022, total subsidies were up by 80% YoY, of which energy subsidies increased by 55% YoY. Compensation due to PT Pertamina amounted to USD 3.3 billion in 2020, of which USD 1.06 billion was pending, alongside USD 4.56 billion for 2021, which might have been much higher than the budgeted USD 9.32 billion in 2022. Assuming a 20% increase in total subsidies and higher compensation toward the state-owned oil player, a cumulative headroom for 0.4% of GDP will be required of this year's math for the country to remain within the -4.85% target.
- To reduce growing subsidies, the Indonesian government increased subsidized fuel prices by approximately 30% in September 2022 despite the potential risk of mass protests. The price of subsidized gasoline was raised from IDR 7,650 (USD 1.18) per liter to IDR 10,000 (USD 0.67) per liter, while the price of subsidized diesel rose from IDR 5,150 (USD 0.35) per liter to IDR 6,800 (USD 0.46) per liter.
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OTHER KEY INDUSTRY TRENDS COVERED IN THE REPORT
- Indonesia aims to become one of the leading global economies under Vision 2045, driven by growth in manufacturing
- E-commerce sector is projected to register a CAGR of 10.41% during 2023-27, supported by the launch of BNPL in the country
- Rising focus on infrastructure with USD 430 bn investment and National Logistics Ecosystem implementation
- Indonesia aims to export more than 74% of its coal production in 2023 to meet global demand
- Rise in fuel prices and a shortage of nearly 40,000 drivers impacting the trucking operational costs
- The Indonesian government is aggressively promoting the country as a production hub for EV batteries, offering consumer subsidies to boost demand
- Indonesia aims to lower transport costs by around by 2024 through initiatives and strategies
- Supply and worker shortages and the government's 30% subsidized fuel price hike increased PPI and CPI
- Government to allocate 40% of total investment in manufacturing & attract oil and gas market investments
- The manufacturing sector in Indonesia is expected to contribute more than 20% to the GDP by 2024
- Expansion of toll roads, coupled with road infrastructure investments, majorly facilitating market growth in the country
- Indonesia aims to phase out LPG and fuel imports by 2030 and utilize domestic resources
- Japanese brands are leading the distribution of commercial vehicles, and Chinese investors are developing Indonesia's EV market
- Road fleet digitization, cross border trade prospects enhancing freight volume in Indonesia
- Government focusing on development of road & sea infrastructure to facilitate international freight services
