Frost & Sullivan Expect 4.6% Growth in Car Sales in Indonesia

Vivek Vaidya, Senior Vice President of Mobility at Frost & Sullivan, said there are several factors at play in Indonesia; some encourage rising sales in the automotive industry, while others form an obstacle (see table below).

The strengthening economy of Indonesia, reflected by expected accelerated gross domestic product (GDP) growth in 2018, will surely impact positively on car sales in Indonesia. The Indonesian government set its economic growth target at 5.4 percent (y/y) in 2018, up from an estimated 5.1 percent (y/y) in 2017. In line with rising GDP growth, people's purchasing power and consumer confidence should strengthen.

However, regarding Indonesians' recovering consumers' purchasing power, Vaidya remains somewhat skeptical at this moment, and would not be surprised if Indonesians' purchasing power will not recovery markedly in 2018. Another problem is that the government is expected to see another fiscal deficit in 2018. This could make the government less eager to spend heavily on infrastructure projects, implying demand for commercial vehicles is curtailed.

Meanwhile, low inflation, the stable rupiah exchange rate and the relatively low interest rate environment in Indonesia are important factors that should boost car sales this year.

The Indonesian Automotive Industry Association (Gaikindo) set its target for car sales in Indonesia at 1.1 million units in 2018, approximately 1 - 2 percent (y/y) higher than estimated car sales in full-year 2017 (expected to reach 1,070,000 units). As such, Gaikindo set a very cautious target. The institution expects to see the same conditions in 2018 compared to 2017 when car sales also failed to impress.

What Can Impact on Indonesian Car Sales in 2018? Opportunities & Risks

Positive	Negative
• Accelerating GDP growth	• Purchasing power may remain bleak
• Consumer confidence is high	• Rising crude oil/fuel prices
• Launch of new models	• Fiscal deficit
• Low inflation/stable rupiah	• People prefer to save
• Low interest rate regime

However, Fransiscus Soerjopranoto, Executive General Manager at Toyota Astra Motor (TAM), the company which controls around 35 percent of the car sales market, has a much more ambitious forecast for domestic car sales in 2018. He believes that a 4 - 5 percent (y/y) growth range is possible, similar to the forecast of Frost & Sullivan, because of the strengthening Indonesian economy. According to him people have been saving money rather than spending it (hence there occurred an overall decline in consumption across Indonesia). In 2018 people may become more willing to spend, including on cars.

Soerjopranoto added that - in the past - political years would have a significant positive impact on domestic car sales because people were buying cars amid political campaigns. In recent years, however, this impact is not visible anymore. Both 2018 and 2019 are political years as Indonesia will see regional, legislative and presidential elections but Soerjopranoto does not expect to see an impact on car sales.

Indonesian Car Sales (CBU):

Month	Sold Cars    2013	Sold Cars    2014	Sold Cars    2015	Sold Cars    2016	Sold Cars    2017
January	96,718	103,609	94,194	85,002	86,262
February	103,278	111,824	88,740	88,208	95,163
March	95,996	113,067	99,410	94,092	102,336
April	102,257	106,124	81,600	84,770	89,624
May	99,697	96,872	79,375	88,567	94,085
June	104,268	110,614	82,172	91,488	66,389
July	112,178	91,334	55,615	61,891	85,354
August	77,964	96,652	90,537	96,282	97,256
September	115,974	102,572	93,038	92,541	87,696
October	112,039	105,222	88,408	92,106	94,433
November	111,841	91,327	86,938	100,365	96,148
December	97,706	78,802	73,264	86,547
Total	1,229,916	1,208,019	1,013,291	1,061,859

 

	2009	2010	2011	2012	2013	2014	2015	2016
Car Sales (car units)	486,061	764,710	894,164	1,116,230	1,229,916	1,208,019	1,013,291	1,061,859
Car Production (car units)	n.a.	n.a.	n.a.	n.a.	1,208,211	1,298,532	1,098,780	1,177,797

^{Source: Gaikindo}

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