Soerjopranoto added that not only in the automotive sector sales have remained bleak so far this year but the same trend also occurs in most other sectors, reflecting that Indonesian consumers, generally, indeed still lack the purchasing power and/or confidence to increase consumption and investment.

Regarding the automotive sector, another factor is at play here. Soerjopranoto said Indonesian banks have been more careful with credit disbursement as the non-performing loan (NPL) ratio in the nation's banking sector has been rising gradually in recent times. As most buyers use credit to finance the purchase of a car (and motorcycle) in Indonesia, such prudent management of banks has curbed car sales figures in Southeast Asia's largest economy.

Considering the GAIKINDO Indonesia International Auto Show (GIIAS 2017), the largest car show in Indonesia, will be held between 10 - 20 August 2017, Soerjopranoto is optimistic that car sales will grow in the second half of the year.

Toyota Astra Motor is the clear market leader in Indonesia's car market, controlling about 32 percent of the market. This year the company wants to push its market share higher, toward 35 percent.

Another Astra subsidiary, Astra Honda Motor, experiences the same turmoil. The company's motorcycle sales fell 7 percent (y/y) in the January-June 2017 period. However, Ahmad Muhibbudin, Manager Corporate Communication at Astra Honda Motor, is optimistic that sales can grow in the second half of the year as the company launches new models, while motorcycle sales traditionally tend to rise toward the year-end. Thus, by the year-end sales should be more-or-less the same as last year.

The question now is how come consumer purchasing power seems to have weakened while overall economic growth of the country has been accelerating since 2016? Possibly the large group of Indonesian middle income earners have not seen a major improvement in their financial situations over the past year and are therefore still unable to boost consumption and investment.

Shares of Astra International, listed on the Indonesia Stock Exchange, have risen 5.74 percent to IDR 8,750 a piece so far in 2017.

Stock Quote Astra International - ASII:

Discuss