Indonesia Car Rental Market - Forecasts from 2024 to 2029

The Indonesian car rental market is projected to grow at a CAGR of 7.75% over the forecast period, from US$2.81 billion in 2024, and is expected to reach US$4.09 billion by 2029.

With an increased population and rapid urbanization, the Indonesian car rental market is expected to grow substantially. Further, the country’s travel and tourism industry has experienced significant expansion, mainly due to the increasing number of foreign tourists. The increase in foreign visitors is anticipated to favorably increase market demand.

INDONESIA CAR RENTAL MARKET DRIVERS:

The large population and growing international tourism are expected to bolster the demand for the Indonesian car rental market

With a large population share and increasing growth, the market for Indonesian car rental is expected to rise in the future, owing to the expected increase in rental bookings. For instance, as per the World Population Review, the population in Indonesia grew from 277.5 million in 2023 to 278.9 million in 2024.

Further, being the world’s largest archipelago nation, Indonesia attracts a major number of tourists every year, hence boosting the car rental market in Indonesia. With numerous islands and cultural sites, Indonesia is one of the most popular destinations in the world to visit. As per the United Nations Educational, Scientific and Cultural Organization (UNESCO), Indonesia has 9 world heritage sites, with over 19 sites under consideration for nomination. With visa flexibility options introduced by the government, Indonesian tourism is expected to grow further. For instance, in May 2024, the number of foreign visitors who arrived in Bali Province was recorded at 5,44,601, an increase of 8.23% over the previous month's total of 5,03,194 visits.

Indonesia's car rental market will grow in the future since there are a huge number of inhabitants in that area, and the rates of increase keep rising due to the potential increase in rentals. For instance, as per the World Population Review, the population of Indonesia is estimated at 277.5 million people in 2023 to reach 278.9 million people by 2024.

Moreover, some plans could be implemented in the Indonesian country car rental industry for these regions to gain more revenue from both domestic and foreign tourists, which in turn contribute significantly towards enhancing its general productivity rates. The ILO has also identified community eco-tourism training as one way through which the government can enhance domestic tourism, especially for the local people living in the eastern part of our country.

Indonesia Car Rental Market Segment Analysis

The gasoline segment is predicted to contribute significantly to market growth.

In the past years, the prevalence of gasoline cars in Indonesia has shown constant growth. Although the government is initiating green mobility to bolster electric car sales, their high cost, followed by the lack of required infrastructure to support their operation, is further favoring the market.

Moreover, the surge in disposable income is witnessed in a minor portion of the overall population, which has decreased the pace of EV adoption. Likewise, the rebounding travel and tourism sector after the initial shock of the pandemic and pocket-friendliness and favorable government reforms implemented to bolster traveling are projected to bring in lucrative demand for gasoline cars and expand the market potential.

The economy car type is expected to provide major expansion in the market.

Economy cars, compared to luxury vehicles, are the most cost-effective in terms of maintenance and offer greater convenience to tourists, especially those who travel on a budget. The rental rate of such cars is also less than that of SUVs, which makes them more attractive for companies looking to charter vehicles for their employee commutes.

Various market players operating in Indonesia have emphasized improving their economy and passenger vehicle fleet. Since the country is still developing, the scope for a cost-effective rental fleet is greater in the current scenario. According to the 2023 annual report of ASSA Pt Adi Sarana Armada Tbk, the company, through its passenger rental business, earned IDR15,31,575 million, which represented a growth of 8.23% compared to 2022’s revenue.

One of the prime reasons driving the economy car rental market is a surge in tourism. Tourists visiting the country look for cheaper rental options to sustain a budget-friendly trip. Travelers also prefer economy cars owing to their pocket-friendliness. Moreover, the mushrooming corporate sector has significantly augmented the demand for rented economy cars for employee commuting, hence creating promising opportunities for the market players. Toyota, Honda, and Daihatsu are leading economy car brands operating in the market. Economic cars from these companies have lower maintenance costs, attracting more demand from car rental companies.

Moreover, surging fuel prices, followed by traffic congestion in Indonesia, are acting as an additional driving factor. They would reduce the scale of car ownership and make consumers, especially the working class, opt for a convenient means of transportation other than public trains and buses.

Car rental companies are among the prime end-users of used cars, especially economy cars, since they are more pocket-friendly. The increased availability of used cars is anticipated to continue gaining traction among rental companies, thereby boosting the composition of the economy car rental market.

Jakarta region is predicted to have a significant market share.

As Indonesia's capital, Jakarta is one of the busiest cities in the country, and it holds high potential for expanding commercial business setups. According to the December 2022 “JIC Talks 7” organized by the Jakarta Investment Center, it was signified that in Q2 of 2022, the city’s economy witnessed a 5.72% growth. In 2023, this growth rate was between 4.5% and 5.3%, fueled by favorable investments.

Likewise, the city holds rich culture and heritage, often making it an attractive tourist destination. As per the same, Jakarta is expected to develop its potential sector, including tourism, thereby making it one of the major sources of revenue for growth. Further, it is a trade center for various companies as it has seaports. The city is home to six Forbes Global 2000 companies and two Fortune 500 companies. This opens up opportunities for the rental car business, despite the fact the city has good public transport.

Moreover, internet penetration is also in the boom in Jakarta as the city is an urban development that has allowed online rental apps to work effectively. The flagship program, the Indonesian Tourism Villages Award (ADWI) 2022, launched by the Ministry of Tourism and Creative Economy (Menparekraf), is anticipated to boost tourism. The government has taken several other steps to bring the economy back to normal.

Market Segmentation:

The Indonesian Car Rental Market is segmented and analyzed as below:

By Car Type

• Electric
• Gasoline
• Economy
• Luxury
• XUV
• MUV

By Service

• Self-Driven
• Chauffeur Driven

By Application

• Leisure/Activity Trips
• Corporate/Business Trips

By Booking

• Online
• Offline

By Rental Category

• Local Transport
• Airport Transport
• Outstation Transport
• Others

By Contract Type

• Long-Term
• Short- Term

By Cities

• Jakarta
• Surabaya
• Bali
• Yogyakarta
• Others