Car sales in Indonesia declined 8 percent to 98,198 units in May 2014 from 106,811 units in the previous month. The Indonesian Automotive Industry Association (Gaikindo) said that the decline was the direct consequence of several public holidays (International Labour Day and the commemorations of Buddha’s birthday as well as ascensions of Prophet Muhammad and Jesus Christ). These holidays caused a lower car production rate and a reduced number of car deliveries to wholesale dealers.
Gaikindo expects total car sales of approximately 1.2 million in 2014 in Southeast Asia’s largest economy. This target is roughly similar to last year’s record result of 1,229,904 sold car units. Car sales are expected to be stagnant due to Indonesia’s higher interest rate environment (Bank Indonesia raised its benchmark interest rate gradually from 5.75 percent in June 2013 to 7.50 percent in November 2013), high inflation (7.32 percent year-on-year in May 2014 thus curbing people's purchasing power), the sharply depreciated rupiah exchange rate in 2013 (which makes imports of car components more expensive) as well as the slowing economy (gross domestic product growth having slowed to 5.21 percent year-on-year in the first quarter of 2014). The higher interest rate environment is expected to continue throughout 2014, while inflation expected to ease further in the months ahead and may be kept within the central bank's target range of 3.5 to 5.5 percent for 2014. Approximately 70 to 80 percent of total Indonesian car sales involve credit loans from a financial institution (which adjust their interest rates conform the central bank’s benchmark rate).
Despite this troubled context, Indonesian car sales are boosted by the recently introduced and popular low- cost green car (LCGC). Various LCGC models have been released since late 2013 (for example Toyota Agya, Daihatsu Ayla, Suzuki Karimun Wagon R, and Honda Brio Satya). Through tax incentives, the Indonesian government supported the establishment of a LCGC industry in Indonesia, provided that the car manufacturers meet requirements of fuel efficiency targets. This is one of the strategies of the government to curb both domestic fuel demand and expensive imports of oil.
In the first five months of 2014, Indonesian car sales have recorded a 7 percentage point growth to 533,234 car units from the same period in 2013. Despite slowing, Indonesian economic growth can still be labelled robust at +5 percent, thereby giving rise to higher per capita GDP. Chairman of Gaikindo Jongkie Sugiharto said that only when economic growth slows to one percent, then growth of the car industry will be disturbed.
Indonesian Car Sales (CBU):
|Month||Sold Cars 2012||Sold Cars 2013||Sold Cars 2014|
|Indonesia's Car Sales
(number of car units)
(number of car units)
¹ future forecast
Honda has shown impressive sales figures this year. Honda car sales in Indonesia increased from 13,025 units in April 2014 to 16,356 units in May 2014. Honda’s most popular car in Indonesia is the Honda Mobilio, a low multipurpose vehicle (9,684 sold units in May 2014). The second-most popular Honda car in Indonesia is the Honda Brio Satya (a LCGC) with 2,500 sold units in May 2014.