Indonesian car exports may reach 310,000 vehicles in 2014, a 12.72 percentage point growth from last year (275,000 vehicles). Exports of completely built up (CBU) units are expected to number 200,000 while completely knocked down (CKD) units are estimated to reach 110,000 units by the year-end. Indonesian Industry Minister MS Hidayat confirmed that the automotive industry of Indonesia has shown good performance. Currently, Indonesian automotive products are exported to a total of 80 countries.

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The national automotive industry of Indonesia recorded export growth of 10.4 percent in the first quarter of 2014 (year-on-year). Statistics Indonesia said that exports in the automotive industry (which includes automobiles and motorcycles) were worth USD $1.27 billion in the first three months of the year, compared to USD $1.15 billion in the same period in 2013. However, the automotive industry of Indonesia only contributes 3.49 percent to the country's total non-oil & gas exports.

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The Association of Indonesian Automotive Manufacturers (Gaikindo) expects Indonesia's car sales to increase by ten percent to 1.3 million sold vehicles for the year 2014. Growth in car sales will be particularly supported by sales in the Jakarta region, Indonesia's most densely populated area and which constitutes the country's economic and political center. In 2013, Indonesia will most likely set a new car sales record. Supported by popular low cost green car sales (LCGCs), total sales are expected to reach 1.2 million units in 2013.

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Indonesia is expected to replace the United States as the world's largest importer of oil by 2018, unless the country is able to limit domestic oil consumption or boost the nation's oil production. Recently, Indonesia has put more effort in limiting oil imports as these have caused a widening trade deficit. The trade deficit was at a new record high at USD $5.65 billion in the first seven months of 2013, particularly caused by the country's oil & gas deficit (USD $7.6 billion), while the non-oil & gas sector posted a surplus of USD $1.9 billion.

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With the development of a production hub for low cost green cars (LCGCs), Indonesia hopes to become the leading car producer within the group of ASEAN nations. Total car sales in ASEAN in 2012 surpassed the three million cars mark. The two largest contributors to these sales were Thailand (1.3 million sold cars) and Indonesia (1.1 million). Currently, Thailand is still the largest car production hub in the ASEAN region, both in terms of production rate and domestic sales (despite having only 60 million citizens to Indonesia's 240 million).

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Indonesian car sales may rise up to ten percent (y/y) to 1.1 million vehicles in 2016, from an estimated 1 million this year, amid accelerating economic growth in Indonesia. Car sales in 2015 have been disappointing, declining 18 percent (y/y) to 853,008 units in the first ten months of 2015, due to people's weakening purchasing power. Sales in 2016 are expected to be boosted by sales of the low-cost green car (LCGC), which was introduced on the Indonesian market in late-2013, and the crossover utility vehicle, a car that has gained popularity recently.

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Global consulting firm Frost & Sullivan expects Indonesian car sales to grow five percent year-on-year (y/y) to 1.28 million vehicles in 2015, particularly on the rising popularity of the low cost green car (LCGC) and the USA-based company’s assumption that the economy of Indonesia will expand by 5.5 percent (y/y) this year. The LCGC was introduced on the Indonesian market in late 2013 after the government had offered tax incentives to car manufacturers that met requirements of fuel efficiency targets.

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Amid Indonesia’s slowing economic growth as well as looming higher prices of subsidized fuels (which will cause accelerated inflation and declining purchasing power), domestic car sales in Indonesia have fallen 6.3 percent to 104,916 units in October 2014 from the same month last year according to preliminary data from the Indonesian Automotive Industry Association (Gaikindo). Cumulatively, car sales reached 1.04 million units in the first ten months of 2014, a slight 1.6 percentage point increase from the same period last year.

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After Indonesian President Joko Widodo and Vice President Jusuf Kalla have confirmed that prices of subsidized fuels (gasoline and diesel) will be raised in November 2014 in an attempt to ease the country’s wide current account deficit and government budget deficit (which are primarily caused by costly oil imports), domestic car manufacturers and dealers are expected to post declining earnings in 2015. Besides the subsidized fuel price issue, Indonesia’s car industry is also negatively impacted by the country’s slowing economic growth.

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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.

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It seems clear now how market conditions will be until the end of the year. Two important foreign issues - the US Federal Reserve's tapering of quantitative easing (QE3) as well as the US debt ceiling issue which resulted in a shutdown as the Democrats and Republicans failed to come to an agreement on the country's federal budget - and various economic data from Indonesia (inflation and the trade balance) have provided some more insight into the matter. I will discuss each topic one by one below.

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