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
 January           76,427           96,719
 February           86,486          103,279
 March           87,917           95,996
 April           87,144          102,257
 May           95,541           99,702
 June          101,746          104,278
 July          102,511          112,183
 August           76,445           77,962
 September          102,100          115,974
 October          106,754          112,039
 November          103,703          111,741
 December           89,456           94,069¹
 Total         1,116,230

¹ preliminary figures
Source: Gaikindo

     2008    2009    2010    2011     2012     2013¹     2014²
Indonesia's Car Sales
(number of car units)
 607,805  486,061  764,710  894,164 1,116,230
1,226,199 1,300,000

¹ preliminary figure
² future forecast
Source: Gaikindo

Further Reading:

Popular Low Cost Green Car Boosts Indonesian Car Sales in 2013
Gaikindo Targets 10% Car Sales Growth in Indonesia for 2014
Indonesian Automotive Industry: Car Sales Expected to Hit Record in 2013