Indonesia’s Middle Class Faces Challenges in Auto Market, Affordability Concerns Rise

Jakarta – Rising car prices coupled with stagnant income growth are creating headwinds for Indonesia’s middle class, making new car ownership increasingly difficult. The trend is impacting sales across the automotive market, particularly in the traditionally affordable Low Cost Green Car (LCGC) segment.

Income Growth Lags Behind Vehicle Price Increases

Josua Pardede, Chief Economist at Permata Bank, explained that wage increases and average middle-class income are not keeping pace with the annual increases in vehicle prices. “Income for the middle class, on average, might increase by 3.5 percent each year. However, car prices, for example, are increasing by 5-7 percent,” Pardede stated on LinkedIn.

Dominance of Affordable Car Segment

The Indonesian automotive market remains heavily reliant on vehicles in the more affordable price range. Approximately 70 to 80 percent of the market is concentrated in price points below IDR 300 million (approximately $18,700 USD as of March 8, 2026), representing the most popular segment among buyers according to Fortune Indonesia.

LCGC Sales Decline Signals Shift in Consumer Behavior

Ironically, the LCGC segment, designed to offer the most affordable options, is experiencing a decline in sales. Pardede attributes this to a “downgrading” of the middle class, suggesting consumers are being forced to reconsider their purchasing power.

Wholesale data from Gaikindo reveals that LCGC sales reached 122,686 units in 2025, a 31 percent decrease compared to 2024. While the segment averaged over 12,000 units per month in the first quarter of 2025, distribution fell to 8-9,000 units monthly in the remaining three quarters. Retail sales also reflect this trend, with 130,799 LCGC units sold in 2025, down 27 percent from the 178,726 units sold in 2024.

Shrinking Middle Class Proportion

Data from the Central Statistics Agency (BPS) indicates a shrinking middle class in Indonesia. In October 2024, the middle class comprised 17.13% of the Indonesian population, totaling 46.85 million people. This represents a decline from 21.45% (57.33 million people) in 2019 and 19.82% (53.83 million people) in 2021.

Shift in Consumer Priorities

Consumer behavior at car dealerships is also changing. Rather than focusing on features, comfort, or design, potential buyers are now primarily concerned with affordability. “People come to the showroom, not only asking whether their car is quality or not, but also calculating whether their installments will be manageable,” Pardede observed.