Supported by legislative and presidential elections, car sales in Indonesia are expected to grow between five and ten percent to 1.30 million total vehicles in 2014. These elections are estimated to boost the domestic money flow due to increased economic activity in Southeast Asia's largest economy. Consumption goods such as cars and food & beverage products are expected to feel the impact of this development and may offset the negative impact brought on by the weak rupiah, high inflation and the high interest rate environment.
Vice-Chairman of the Association of Indonesian Automotive Manufacturers (Gaikindo) Rizwan Alamsjah said that the IDR rupiah exchange rate, which has depreciated about 27 percent against the US dollar in 2013, is a serious problem as it increases production costs of cars considering that certain car components are imported (using US dollars). Producers can transfer these costs to end-buyers by raising prices of cars but this will curb the number of car sales. Toyota, the most popular car brand in Indonesia, will raise prices of its cars in the beginning of 2014. 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 higher benchmark interest rate (BI rate) also forms an obstacle as around 75 percent of car buyers use a loan for the purchase. The central bank's BI rate has been raised gradually from 5.75 percent to 7.50 percent between June and November 2013 in order to curtail high inflation and support the rupiah exchange rate.
But despite these matters, car sales are expected to increase (or at least remain stable) in 2014 due to the influence of the elections in Indonesia. Prior to - and during - these elections, about IDR 44 trillion (USD $3.6 billion) of funds is expected to flow on the domestic market (amid campaigns of the political parties), part of which will be used to buy cars.
In 2013, Indonesia's car sales increased 10 percent to 1,226,199 car units from 1,116,230 in 2012. Although the weakening rupiah and higher BI rate also formed a problem last year, car sales were supported by the introduction of the low cost green car (LCGC), which has a price tag of around IDR 100 million (USD $8,196), on the Indonesian market. Car sales are generally a good indicator of the state of the economy (and consumer confidence) as economic growth and car sales tend to go hand in hand.
|Month||Sold Cars 2012||Sold Cars 2013|
¹ preliminary figures
|Indonesia's Car Sales
(number of car units)
¹ preliminary figure
² future forecast