Market News

As the biggest economy in Southeast Asia and the world’s tenth largest economy, there is no denying that Indonesia has sustained its strong economic performance in the past few years, with its industries providing impetus for its industrial expansion. Now, Indonesia continues to pursue its 20-year development plan covering the period from 2005 to 2025, in which it will focus its last phase this year on improving human capital and enhancing its global competitiveness. High private consumption and favorable foreign trade has been contributing to the growth of the country’s positive gross domestic product (GDP) , which, according to the World Bank forecast, would average around 4.9% annually.

Indonesia’s plastics market has also shown remarkable improvement over the years. With a market size estimated at 7 million tons in 2024, it is growing annually by 4.5% to reach 8.88 million tons by 2029, according to the report released by Mordor Intelligence. Increasing demand from end-user industries, such as packaging, automotive, electrical and electronics as well as construction industry, heightens the demand for plastics. The country also offers growth opportunities for producers of environmental friendly products as it intensifies its circular economy initiatives. While the country continues to rely on polyethylene (PE), polypropylene (PP), polyvinyl chloride (PVC), and polyethylene terephthalate (PET), other engineering plastics, as well as recycled materials such as recycled PET, are also gaining acceptance.

Among the high-growth industries in Indonesia, packaging continues to benefit from the increase in personal consumption, which is partly driven by the increasing adoption of e-commerce. As plastics offer the ideal properties, including wear and tear resistance, chemical resistance, ease of processing, recyclability, and other mechanical properties, they have been the material of choice for a wide range of packaging applications. From 140.3 billion units in 2023, the country’s packaging industry is projected to grow at a CAGR of over 3% from 2023 to 2028, based on the projections by IMARC Group. It also stated that consumers’ focus on recyclability, convenience and ease of use are pushing brands to improve their product packaging. Flexible packaging accounts for the highest share in the Indonesian packaging industry, with growth at over 5% in the next few years.

Many innovations in the packaging industry are made to ensure the products align with circular economy goals. Several projects have been launched by leading companies in the areas of sustainable packaging production and packaging recycling. Among them, Danone, in partnership with Prevented Ocean Plastic Southeast Asia, opens a new high-volume plastics collection center in Samarinda, Indonesia. The center is designed to process 500 tons of recycled plastics per month. AQUA, Danone’s bottled water, brand is a partner of the project who funds the construction of the center. The company commits to be the customer for the recycled plastics produced by the center.

Another projects have been launched in Indonesia. The ALBA Group operates a plastic waste recycling plant with a rPET production capacity of 36,000 tons yearly in Central Java. ALBA would leverage the expertise of its sister company, Interzero, to build and operate the plant. The PET bottles waste would be collected from the surrounding areas. Besides, Indorama Ventures Public Co., Ltd., a major player in the scene, has obtained US$200 million loan from the International Finance Corporation (IFC) to expand its PET recycling capabilities in Indonesia, as well as Thailand and India. With the loan, the company will be able to expand its recycling facilities in Nakhon Pathom and Rayong in Thailand, to launch an automated plant in Karawang, Indonesia and to construct new recycling plants in India.

As Indonesia moves forward to increase its plastics recycling rate, the demand for recycling technologies will form parts of the overall strategy to achieve circular economy.

Indonesia’s dynamic automotive industry benefits from the innovations in materials, as engineering plastics offer the most ideal alternative to support the production of vehicles and automotive parts. Aside from potentially being the biggest consumer market for vehicles, Indonesia has also become an important manufacturing hub for global automotive brands, with many Japanese and Chinese automotive makers now operating their production and assembly plants in the country. As Indonesia strives to overtake Thailand as ASEAN’s biggest car manufacturer, the Indonesian government has been offering attractive incentives, including tax breaks, subsidies and improvements in infrastructure, to lure foreign direct investments to develop the country’s automobile assembly and auto parts manufacturing sector. Rising middle class has also contributed to the expanding market size of SUVs and electric vehicles (EVs), which in turn attracts companies to set up production plants in Indonesia’s industrial centers.

Aside from leading Japanese car makers, there has been a remarkable increase in the number of Chinese automotive brands in Indonesia. Wuling, Chery and BYD are among the Chinese brands that have found their way to enter into the Indonesian automotive market. These Chinese companies are attracted by the opportunities posed by Indonesia’s large consumer market, in which EVs are increasingly adopted for a cheaper price. Local consumers are also attracted by wider model selections as well as excellent after sales service. These Chinese car makers have expanded their manufacturing operations in the country following the agreement with the Industry Ministry of Indonesia where Chinese EV makers like Neta, Wuling, Chery, and Sokon, pledged to establish Indonesia as their centers for EV production for export. Wuling Motors, the first Chinese automobile manufacturer to build a production plant in Indonesia, has already started to produce EV models at the Wuling factory located in Cikarang, West Java. It has been producing more than 100,000 units in Indonesia for both domestic and export markets. The company is also set to produce EV battery at its facility. Wuling has launched its flagship EV, the Wuling Air EV model, capturing the attention of consumers due to its compact design and competitive price.

Another Chinese brand, BYD, anticipates high demand in Indonesia’s EV market. PT BYD Motor plans to build an EV production plant with a capacity of 150,000 EVs production per year. Chery Automobile also eyes producing plug-in hybrid electric vehicles (PHEVs) in Indonesia with plans to produce 100,000 EV units by 2030. Other Chinese EV giants are setting sights on Indonesia as well, including GAC Aion, the EV subsidiary of GAC Group. The company has announced its entry into Indonesia, to tap Southeast Asia's largest automotive market, with a plan to build a factory there with an initial capacity of 100,000 units per year. The investment puts Indonesia in a strategic position of EV production.

At CHINAPLAS 2025, plastics manufacturers from Indonesia will be able to explore the wide range of high performance materials and innovative solutions in high-growth industries such as packaging and automotive. The mega exhibition will showcase advanced packaging technologies and environmental friendly materials to support automobile production. For more information, please visit: www.chinaplasonline.com.