Popularity of the crossover vehicle has been rising, evidenced by the growth in orders for the Honda BR-V since its display at the Gaikindo Indonesia International Auto Show (GIIAS) in August 2015. Honda Prospect Motor (HPM) - the company that imports, produces and distributes Honda vehicles in Indonesia - will start distributing the Honda BR-V in early 2016. There have been more than 3,500 orders so far for this model, the first-ever crossover vehicle in Indonesia. This car combines the large passenger capacity of the multipurpose vehicle (MPV) and the toughness of the sport utility vehicle (SUV).

However, the MPV will remain the most popular car in Indonesia in terms of domestic sales, especially as this type of vehicle is most popular among first-time car buyers. Indonesia still has a very low per capita car ownership ratio (less than four percent of the population owns a car) implying there is an enormous potential for growth.

Indonesian Car Sales (CBU):

 Month    Sold Cars 2012    Sold Cars 2013    Sold Cars 2014    Sold Cars 2015
 January           76,427           96,718          103,609           94,194
 February           86,486          103,278          111,824           88,740
 March           87,917           95,996          113,067           99,411
 April           87,144          102,257          106,124           81,600
 May           95,541           99,697           96,872           79,375
 June          101,746          104,268          110,614           82,172
 July          102,511          112,178           91,334           55,615
 August           76,445           77,964           96,652           90,538
 September          102,100          115,974          102,572           93,038
 October          106,754          112,039          105,222           88,325
 November          103,703          111,841           91,327
 December           89,456           97,706           78,802
 Total         1,116,230
        1,208,019          853,008


     2008    2009    2010    2011     2012     2013     2014     2015¹
Car Sales
(car units)
 607,805  486,061  764,710  894,164 1,116,230
1,229,916 1,208,019 1,000,000
(car units)
 100,982   56,669   85,769  107,932  173,368  170,907  202,273  200,000

¹ prognosis
Source: Gaikindo

Jongkie Sugiarto, Chairman of the Indonesian Automotive Industry Association (Gaikindo), said his institution is yet to agree on an official target for 2016 car sales in Indonesia, but believes that sales can reach 1.1 million units as economic activity in Indonesia is expected to accelerate next year. According to Sugiarto, the LCGC and MPV will be the main contributors to car sales in 2016 as both car types match Indonesian consumers' demand. The MPV can transport up to seven people, while the LCGC is a relatively cheap option. Furthermore, he believes the crossover model and low sport utility vehicle (LSUV) may cause a shift from the MPV to the crossover or LSUV in 2016.

However, sales of the LSUV and crossover are curtailed by the high luxury goods tax that the government levies on these cars. While the purchase of a MPV is only subject to a luxury tax of 10 percent, the crossover and LSUV types are subject to a 30 percent luxury tax (the luxury tax is a tax implemented during the Suharto regime in order to combat income inequality in Indonesian society). Therefore, Gaikindo requested the government to lower the tax to ten percent (as this will not only boost domestic sales and production but also exports). However, the government is yet to respond to this request.

Noegardjito, Secretary of the Indonesian Automotive Industry Association (Gaikindo), expects Indonesian car sales to grow 10 percent next year on improving economic conditions. Due to sharply declining car sales in 2015, local car manufacturers cut production rates. The number of cars produced in Indonesia is expected to fall 15 percent (y/y) to 1.1 million vehicles in 2015, from 1.3 million last year, far below the target set in the automotive industry roadmap (1.6 million units).

It is positive that Indonesia's economic growth in the third quarter of 2015 (4.73 percent y/y) accelerated from growth in the preceding quarter (4.67 percent y/y), while inflation has eased markedly. However, rebounding commodity prices are also required to restart growth in Indonesia's automotive industry as low commodity prices curtail people's purchasing power in the commodity-producing regions outside the island of Java. Sales of commercial cars outside Java have plunged due to falling commodity prices.

Jonfis Fandy, Marketing and After-Sales Service Director at Honda Prospect Motor, believes that the crossover model will become a rising star in Indonesia (as it has been in the global market over the past two years) as sales of the LSUV, which is only slightly more expensive than the crossover, surged 150 percent in Indonesia in 2015. Based on research conducted by Honda Prospect Motor, Indonesian consumers now want a car that can carry many passengers (such as the MPV) but has the design and features of the SUV.

Based on the latest data from Gaikindo (covering the January-October 2015 period), the multipurpose vehicle remains the most popular car in Indonesia, accounting for 26 percent of total car sales, followed by the pick up and the low-cost green car.

Further Reading

Overview & Analysis of Indonesia's Automotive Industry