Indonesian car sales have already exceeded the one million mark in October 2013. In the January-October period, 1,018,786 car units were sold, a ten percent increase compared to car sales in the same period last year. Growing demand for cars in Indonesia indicates that this sector of Southeast Asia's largest economy is not influenced by current negative market sentiments, such as the sharply depreciated Indonesian rupiah exchange rate (against the US dollar), high inflation (8.32 percent yoy in October 2013), and slowing economic growth.
The secret to the continued robust growth of Indonesia's car industry is the introduction of the low cost green car (LCGC), which has a price tag of less than IDR 100 million (USD $8.850). The Indonesian government has been offering tax incentives to producers that meet the requirements of fuel efficiency targets. As a result, the LCGC has been on sale in Indonesia since September 2013. The government aims to turn Indonesia into the regional hub for LCGCs ahead of the start of the ASEAN Economic Community in 2015, which foresees to turn ASEAN into a single market and production base. The LCGC is also considered as one solution to the limitation of subsidized fuel consumption. For the government it is important to reduce the import of expensive oil in order to curb the country's current account deficit.
|Month||Sold Cars 2012||Sold Cars 2013|
¹ preliminary figures
Due to the relatively low price of the LCGC, Indonesians have been able to continue buying cars despite the falling purchasing power amid high inflation (brought on by higher subsidized fuel prices) and the weakening rupiah exchange rate (which makes the import of spare parts and car components more expensive). The LCGC segment's contribution to car sales in October increased 10.6 percent from the previous month, while the contribution share of the traditionally popular multi purpose vehicle (MPV) toward the October sales figure declined from 34 percent to 27 percent. Currently, six LCGC models are sold on the Indonesian market, with three more models to come next year.
|Low Cost Green Car Models
|Astra Toyota Agya|
|Astra Daihatsu Ayla|
|Honda Brio Satya|
|Suzuki Karimun Wagon R. Agya-Ayla|
Car sales in 2013 are expected to set a new record. The Association of Indonesian Automotive Manufacturers (Gaikindo) held an initial target of 1.1 million sold cars in 2013, more or less the same as last year's record-breaking result. However, with two more months to go and the sales figure already having exceeded the one milion mark, it should be possible to reach 1.2 million sold car vehicles in 2013.
Overview of 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.
The introduction of the low cost green car (LCGC) from September 2013 constitutes a new development in Indonesia's car industry. The government provided tax incentives to LCGC producers in order to try to establish a regional production hub in Indonesia. These cars are more affordable for consumers and more fuel-efficient, thus helping the government to curb the import of expensive oil as domestic demand for subsidized fuels increased significantly in recent years. Moreover, the LCGCs are designed to consume non-subsidized fuels.
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, this company holds a powerful position in Indonesia's car market.
|Top Five most sold car brands Indonesia
|Indonesia's Car Sales
(number of car units)