JAKARTA (TheInsiderStories) – The Indonesia road freight transport market is expected to grow above 9 percent during 2020 – 2025, said Reportlinker in the latest report. The demand for trucking services in the country is expected to increase, majorly due to the increasing international freight movement and ocean freight, which is a primary demand driver for the domestic trucking industry in Indonesia.
Companies operating in the Indonesian trucking industry are currently focusing on integrating technological advancements, such as an online trucking platform that help the companies in finding clients and reduce empty hauls. The trucking costs in Indonesia are comparatively higher than those other ASEAN countries, primarily owing to the topography of the country.
Road transport accounts for 70 – 80 percent of the total freight volume that is handled annually within Indonesia’ borders. In value terms, the share of the road freight market has stayed between 40 – 50 percent of the total logistics market size.
Growing E-commerce in Indonesia Drives the Demand
The e-commerce segment is one of the key drivers of the road freight segment in terms of domestic transportation leg and last-mile logistics. Indonesia has the largest population in Southeast Asia by far, and its e-commerce penetration is still low, making it one of the hottest e-commerce markets in the world. Attracting both local and global companies’ interests, currently, Indonesia has a fast-growing e-commerce scene poised to become a global powerhouse.
E-commerce is expected to expand in double digits in the future in Indonesia. Although the market is not as mature as that in Malaysia or Singapore, the Indonesian population of more than 260 million makes the absolute numbers of growth in the country high, with millions of new online shoppers adding every year.
The growth of the e-commerce market in the country over the last few years has been primarily driven by structural changes in the industry and the overall economy. Among the key characteristics, the availability of low-cost mobile phones and the internet has created a wider penetration among consumers and enabled them to use multiple e-commerce platforms, with more ease than accessing an offline and physical store.
Additionally, explosive growth in mobile internet has bolstered the customer base for e-commerce companies.
Manufacturing Sector Dominates the Market
As per the analysis, its observed that the manufacturing sector accounted for the largest share in the Indonesia road freight transport market. Indonesia’s manufacturing sector is largely un-diversified, and exports are relatively few product categories. Its main exports are unprocessed natural resources and simple manufactured goods, which are different from the high-value and complex products exported by advanced economies, such as machinery, chemicals, electronics, and others.
Indonesia is planning to diversify and upgrade its manufacturing sector, which is essential for the country to attain higher economic growth and become an upper middle-income economy.
The logistics industry plays a predominant role in supporting and enhancing the distribution flow of most manufactured products to all areas across Indonesia. Logistics costs are a major concern and will reduce the growth possible due to higher natural spending on logistics in Indonesia, which indicates that there is more so an opportunity to present cost-effective logistics solutions to manufacturers and deliver high-quality services in an environment with improving logistics infrastructure.
Many logistics companies have made significant investments in the country’s logistics sector. For instance, PT Synthetic Rubber Indonesia (SRI), a joint venture between the Michelin Group and PT Chandra Asri Petrochemical Tbk (IDX: CAPC), consolidated its plant-to-port supply chain under a single DHL solution for faster and more scalable shipment of increasing volumes of synthetic rubber, one of the critical ingredients in modern tire production.
DHL oversees all road freight transportation, warehousing, and customs clearance of synthetic rubber between the SRI plant in West Java to Tanjung Priok port in North Jakarta, with particular focus on quality and safety standards as appropriate for Michelin’s world-class tire products.
The Indonesia road freight transport market is a fragmented market as more than 75 percent of the trucking companies have less than 20 trucks. The condition of the road infrastructure has severely hindered the development of the freight transport industry in Indonesia. It limits the ability of small business owners to attain a profitable target market.
Companies operating in the Indonesian trucking industry are currently focusing on integrating technology such as the online trucking platform, which helps the companies in finding clients and reduce empty hauls. The key players in the market are Siba Surya, Puninar Jaya, CKB Logistics, Nippon Yusen, Ceva Logistics, amongst others.
Edited by Staff Editor, Email: theinsiderstories