The government has been eager to develop this LCGC industry in Indonesia as the green vehicles (which are more environmentally friendly) will somewhat curb Indonesians' demand for (subsidized) fuels. Due to declining domestic oil output, Indonesia needs to import an ever-increasing amount of expensive oil, putting serious pressure on the country's trade balance (as well as on the rupiah exchange rate). The LCGCs, having a price tag of around IDR 100 million (roughly USD $8,000), proved to be popular on the Indonesian market. The five principal Japanese companies that entered Indonesia's LCGC industry are Toyota, Daihatsu, Honda, Suzuki and Nissan.

Indonesia's Ministry of Industry expects that LCGC sales will account for about 10 to 15 percent of total car sales in Indonesia in 2014. Total car sales this year are expected to hit another record high at around 1.3 million. In the last four years, Indonesia's car sales have hit a new record year after year (see table below).

Bad weather conditions in January 2014 were not able to prevent a surge in total car sales. In the first month of the year - amid the peak in the rainy season - severe floods and high waves at sea disrupted the distribution networks of factories and car dealers. Toyota Astra Motor (TAM), however, said that these weather conditions caused a decline in January car sales. President Director of TAM, Johnny Darmawan, stated that car sales usually show a surge prior to Imlek (Chinese New Year) on 31 January 2014. In January this year, however, the company's car sales declined.

In 2014, car sales are expected to continue to increase even though various negative sentiments linger on. The rupiah exchange rate, which fell more than 21 percent against the US dollar in 2013, makes the import of car components more expensive. As a response car dealers increase prices. Moreover, Indonesia has seen a higher interest rate environment since mid-2013 when (between June and November 2013) the central bank gradually raised its benchmark interest rate from 5.75 percent to 7.50 percent in order to combat high inflation and support the ailing rupiah.

Although continuous rising car sales is an important indicator of economic growth (particularly Indonesia's per capita GDP is growing strongly), the massive influx of cars on Indonesian roads burdens the - already weak state of - infrastructure.

Indonesian Car Sales:

 Month    Sold Cars 2012    Sold Cars 2013    Sold Cars 2014
 January           76,427           96,718          107,496
 February           86,486          103,279  
 March           87,917           95,996  
 April           87,144          102,257  
 May           95,541           99,697  
 June          101,746          104,268  
 July          102,511          112,178  
 August           76,445           77,964  
 September          102,100          115,973  
 October          106,754          112,039  
 November          103,703          111,841  
 December           89,456           97,694  
 Total         1,116,230


     2008    2009    2010    2011     2012     2013     2014¹
Indonesia's Car Sales
(number of car units)
 607,805  486,061  764,710  894,164 1,116,230
1,229,904 1,300,000
Indonesia's Exports
(number of car units)
 100,982   56,669   85,769  107,932  173,368  170,907  200,000

¹ future forecast
Source: Gaikindo

Further Reading:

Expansion of Indonesia's Automotive Industry: Raising Exports to Asia
Car Sales in Indonesia Expected to Rise in 2014 amid Political Elections
Popular Low Cost Green Car Boosts Indonesian Car Sales in 2013
Gaikindo Targets 10% Car Sales Growth in Indonesia for 2014
Indonesian Automotive Industry: Car Sales Expected to Hit Record in 2013