In 2014, however, the influence of the Lebaran period (marking the end of the Islamic fasting month of Ramadan) was mostly felt in July, causing a steep decline of car sales (-17 percent month-to-month) in that month. A sharp fall in sales of cars and motorcycles in Indonesia is a traditional phenomenon during the Lebaran period. Usually, two weeks after the Lebaran holiday has ended, sales recover.

In the first eight months of 2014, Indonesian car sales totalled 830,398 vehicles, a five percent increase from the same period last year according to data from the Indonesian Automotive Industry Association (Gaikindo).

Forecast Indonesian Car and Motorcycle Sales in 2015

Prijono Sugiarto, President Director of Astra International, the market leader that holds the exclusive right to sell the popular Toyota brand on the Indonesian market through a jointly-controlled entity with the Toyota Motor Corporation, expects that car and motorcycle sales in 2015 will reach a similar level to this year’s sales target of 1.25 cars and 8 million motorcycles as economic growth in Indonesia will remain sluggish. Since 2011, Indonesia - Southeast Asia’s largest economy - has had to cope with a slowing economy. In the second quarter of 2014, the country’s gross domestic product (GDP) growth slowed to 5.12 percent (year-on-year), the slowest quarterly growth pace of the past 19 quarters.

The next government of Indonesia (led by president-elect Joko Widodo), which will be inaugurated on 20 October 2014, is expected to raise prices of subsidized fuels in an attempt to curb the country’s wide current account deficit. Higher fuel prices will limit demand for cars temporarily, particularly if the central bank (Bank Indonesia) will maintain its tight monetary policy (high borrowing costs are problematic for car sales). This policy is expected to remain tight to combat accelerated inflation after the possible higher subsidized fuel prices as well as to avert the impact of higher US interest rates in 2015. The US Federal Reserve is expected to raise its benchmark interest rate in the second or third quarter of 2015. This will then trigger capital outflows from emerging economies, such as Indonesia, and put pressure on the rupiah exchange rate.

Tata Motors Eyes Indonesian Market

It was reported in Indonesian newspapers that Tata Motors, a leading car manufacturer in India, aims to make Indonesia its largest car market (outside India) in the next five years. Currently, Bangladesh and South Africa are the company’s largest export markets, accounting for about 15 to 20 percent of the company’s total export volume, each. However, the company sees great potential in Indonesia as banking and incomes are developing rapidly, perhaps even surpassing Thailand as the region’s largest automotive hub.

After having established local units Tata Motors Indonesia and Tata Motors Distribusi Indonesia in 2013, the Indian car producer started selling vehicles on the Indonesian market starting from September 2013. So far, it has sold 500 vehicles only on the Indonesian market, the 3.0-liter diesel engine pickup truck being the top seller.

Indonesian Car Sales (CBU):

 Month    Sold Cars 2012    Sold Cars 2013    Sold Cars 2014
 January           76,427           96,718          103,565
 February           86,486          103,279          111,862
 March           87,917           95,996          113,096
 April           87,144          102,257          106,056
 May           95,541           99,697           97,136
 June          101,746          104,268          110,560
 July          102,511          112,178           91,395
 August           76,445           77,964           96,728
 September          102,100          115,973  
 October          106,754          112,039  
 November          103,703          111,841  
 December           89,456           97,694  
 Total         1,116,230

     2008    2009    2010    2011     2012     2013     2014¹
Indonesian Car Sales
(number of car units)
 607,805  486,061  764,710  894,164 1,116,230
1,229,904 1,280,000
Indonesian Exports
(number of car units)
 100,982   56,669   85,769  107,932  173,368  170,907  200,000

¹ Gaikindo forecast
Source: Gaikindo