The production of cars in Indonesia rose 11.97 percent year-on-year (y/y) to 319,241 units in the first quarter of 2017, a significant increase that indicates the economy is improving. Meanwhile, local manufacturers are convinced the low cost green car vehicle will continue to boost sales and strengthen the competitiveness of Indonesia's automotive industry.
Based on the latest data from the Indonesian Automotive Industry Association
(Gaikindo), production of all car categories rose in Q1-2017 with the exception of the pick-up (-13.45 percent y/y), buss (-55.16 percent y/y), and the sedan (-6.86 percent y/y).
The low-cost green car (LCGC) remains the fastest-growing vehicle in Indonesia. Production of the LCGC rose 49.36 percent (y/y) to 66,052 units in Q1-2017. Since the introduction of the LCGC on the Indonesian market in late-2013, the LCGC is gaining market share at a rapid pace. Based on the latest data, the LCGC now accounts for 20.7 percent of total manufactured cars in Indonesia. This vehicle is an affordable and fuel efficient vehicle. Development of the LCGC industry was encouraged by Indonesia's central government after it had offered tax incentives to those car manufacturers who meet requirements regarding fuel efficiency targets.
Kukuh Kumara, General Secretary at Gaikindo, said rising production of cars in Indonesia in the first quarter of 2017 is a sign that the economy is improving. Increasing production is triggered by growing car sales, both on the domestic market of Indonesia and in export markets.
Car deliveries to dealers rose 5.96 percent (y/y) to 283,245 units in Q1-2017, while exports of Indonesian completely-built up (CBU) units rose 53.39 percent (y/y) to 56,371 units over the same period.
Regarding falling production rates of buses and pick-ups in Indonesia Kumara said both consumers and manufacturers are now - ahead of the Ramadan and Idul Fitri celebrations - focusing on manufacturing/purchasing other types of vehicles. Regarding the declining production rate of the sedan, he said this is in line with the drop in sedan production that has been ongoing over the past couple of years. This drop is related to the high luxury goods tax that makes the sedan an expensive vehicle in Indonesia.
Read more: Analysis of Indonesia's Automotive Industry
Considering Indonesia's economic growth is expected to continue to accelerate in the remainder of 2017, while tensions surrounding the 2017 gubernatorial election of Jakarta, blasphemy trial and imprisonment of former Jakarta Governor Ahok should ease (despite the outrageous decision to imprison him), production and sales of cars should continue to rise in Indonesia in the next couple of quarters.
The Industry Ministry of Indonesia is optimistic that the domestic automotive industry will manufacture a total of 2.5 million car units in 2020.
Indonesian Car Sales (CBU):