Record car sales in September 2013 amounted to 115,921 sold vehicles, a 48 percent rise compared to the previous month. The rise is explained by car manufacturers' intention to raise prices in October as a reaction to the depreciating rupiah exchange rate (against the US dollar), which makes the import of spare parts and car components more expensive. Toyota, the clear market leader in Indonesia's automotive sector, is expected to raise its prices by one percent in October.

 Month    Sold Cars 2012    Sold Cars 2013
 January           76,427           96,718
 February           86,486          103,279
 March           87,917           96,009
 April           87,144          102,262
 May           95,541           99,685
 June          101,746          104,264
 July          102,511          112,180
 August           76,445           77,961
 September          102,100          115,921
 Total          816,317          908,279

Source: Gaikindo

Up to September 2013, car sales have increased 11.2 percent compared to the same period last year. This development goes against most analysts' expectations. Total car sales in 2013 were expected not to exceed last year's record sales figure of 1.1 million as several issues would negatively affect Indonesia's automotive industry. These issues include the country's higher benchmark interest rate (BI rate), the depreciating rupiah, higher subsidized fuel prices and the new minimum down payment requirements.

    Q3-2012   Q3-2013
   Growth (yoy)
Indonesia's Car Sales
(number of car units)
  816,317   908,279        11.26%
     2008    2009    2010    2011     2012
Indonesia's Car Sales
(number of car units)
 607,805  486,061  764,710  894,164 1,116,230

Source: Gaikindo

Meanwhile, the Citigroup has cut its forecast for car sales in Indonesia in 2014 from a 20 percent increase to 10 percent. As such, the institution expects 1.32 million vehicles to be sold next year. The downward revision was conducted due to the intention of Jakarta's provincial administration to raise taxes for car and motorcycle ownership. Moreover, Indonesia's current higher interest rate environment (after the benchmark interest rate has been raised in steps from 5.75 percent to 7.25 percent in recent months) will curb car purchases.

Indonesia's Car Industry

Indonesia has been experiencing an unique and important chapter in its car industry history: the country is transforming from a mere production hub into a major car sales market. Low production costs (due to low wages and cheap land) made Indonesia attractive as a production hub, but with GDP per capita reaching over USD $3,500 in 2012, the country's rapidly increasing middle class has turned into a significant consumer force. Domestic car sales reached a record-high level of over 1.1 million car units in 2012, and has recently attracted increased foreign investment in the nation's car industry. Although it is expected that the industry will feel the impact of Indonesia's slowing economic growth as well as macroeconomic policies that aim for financial stability at the expense of economic growth, Indonesia's car industry still has healthy prospects for the middle and longer term as the country's per capita car ownership is still relatively low, while per capita GDP continues to grow.

Toyota is Indonesia's clear market leader. Through a jointly controlled entity with the Toyota Motor Corporation, Astra International holds the exclusive right to sell Toyota vehicles on the Indonesian market. The country's second most popular car is the Daihatsu, which is also distributed by Astra International. As such, the company holds a powerful position in Indonesia's car market. Mitsubishi cars, the country's third most popular car brand, are distributed by Krama Yudha Tiga Berlian Motors.