Despite being popular, it had been reported earlier that the relatively new LCGC, which is fuel efficient and has a price tag of below IDR 100 million (USD $8000), still forms a small portion of total car sales in Indonesia. Between January and November 2014, the LCGC type accounted for about 14 percent of total Indonesian car sales while low-priced multipurpose vehicles remain the best-selling car type in Indonesia. As such, coming from a low base, sales of the LCGC segment still have ample room for growth in 2015 amid an expanding middle class in a country that is still characterized by a low per capita car ownership ratio but has also been facing weakening purchasing power due to several years of slowing growth.

Car sales are also expected to be boosted by improved economic performance of Indonesia in 2015. The estimated GDP growth pace of Indonesia in 2014 is 5.1 percent, thus having extended its slowing economic growth pace since 2011 when GDP growth was still at a level of 6.5 percent (y/y). However, the new Joko Widodo-led government is eager to raise economic growth to 5.7 percent in 2015 (the target that has been set in the revised 2015 State Budget). This rebound should come on the back of more public infrastructure investment as well as more (foreign and domestic) direct investment, made possible by structural reforms such as scrapping fuel subsidies to a high degree. Although this would make car ownership more expensive, it is not expected to lead to a fall in car sales, but will make the LCGC a more attractive choice. Meanwhile, current low global oil prices mean that - despite recent fuel subsidy cuts - Indonesians pay more or less the same amount of money for a liter of fuel than before the cuts.

However, the Indonesian Automotive Industry Association (Gaikindo) is less optimistic about domestic car sales growth this year as it expects sales to move sideways. In 2014 a total of 1,208,019 cars were sold in Indonesia, slightly down from 1,229,916 units the previous year. This slowdown occurred due to weaker purchasing power as Bank Indonesia raised its key interest rate (BI rate) gradually from 5.75 percent in June 2013 to 7.75 percent in November 2014 in an attempt to combat high inflation, curb the country’s current account deficit, and limit capital outflows amid monetary tightening in the USA. Moreover, sharp rupiah depreciation against the US dollar amid bullish US dollar momentum made imports of car components more expensive and thus cars became more expensive. However, the LCGC feels less price pressure due to rupiah depreciation as most car components for this type are domestically manufactured (the government stipulated that the LCGC should consist for at least 85 percent of domestically manufactured components).

Gaikindo expects that Indonesian car sales will rise to 2 million vehicles by 2020 and to 3 million by 2025.

Indonesian Car Sales (CBU):

 Month    Sold Cars 2012    Sold Cars 2013    Sold Cars 2014
 January           76,427           96,718          103,609
 February           86,486          103,278          111,824
 March           87,917           95,996          113,067
 April           87,144          102,257          106,124
 May           95,541           99,697           96,872
 June          101,746          104,268          110,614
 July          102,511          112,178           91,334
 August           76,445           77,964           96,652
 September          102,100          115,974          102,572
 October          106,754          112,039          105,222
 November          103,703          111,841           91,327
 December           89,456           97,706           78,802
 Total         1,116,230


     2008    2009    2010    2011     2012     2013     2014
Indonesian Car Sales
(number of car units)
 607,805  486,061  764,710  894,164 1,116,230
1,229,916 1,208,019
Indonesian Exports
(number of car units)
 100,982   56,669   85,769  107,932  173,368  170,907  

Source: Gaikindo

Further Reading:

Indonesia’s 2014 Car Sales Decline amid Slowing Economic Growth
Indonesia's 2014 Annual Car Sales Fall on Bleak Economy & Fuel Hike
Low Cost Green Cars Support Car Sales in Indonesia
Growth of Indonesian Car Sales Falls amid Slowing Economic Expansion
Impact of Higher Subsidized Fuel Prices on Indonesia’s Car Industry