However, compared to last year’s car sales the decline continued into June 2015. Based on the latest data from the Indonesian Automotive Industry Association (Gaikindo) Indonesian car sales fell 16 percent to 92,645 units from the same month last year. Indonesia has been posting weakening car sales figures ever since September 2014 due to the country’s weakening purchasing power brought about by high inflation and Indonesia’s slowing economic growth. Gaikindo Deputy Chairman Yohannes Nangoi stated that commodity prices need to rebound before Indonesia will see higher car sales again. The islands Sumatra and Kalimantan, key regions for the production of coal, crude palm oil and mineral ores, form potential car sales markets that cannot be tapped due to sluggish global demand for commodities.

Besides the country’s slowing economic growth, accelerating inflation has also been an important factor that contributes to curbed purchasing power. In June, Indonesia’s inflation rate accelerated to 7.26 percent year-on-year (y/y) on higher food prices triggered by the start of the Ramadan month. High inflation is the main reason why Bank Indonesia keeps its interest rate high at 7.50 percent, hence causing high borrowing costs for consumers. However, the central bank did lower down payment requirements for car purchases in June in a bid to boost the country’s car sales (and credit growth).

Gaikindo recently cut its 2015 car sales forecast from 1.2 million to 1.1 million vehicles as each month in 2015 (so far) has shown plunging car sales. Indonesia sold an all-time record high number of 1.23 million cars in 2013. However, sales have been declining ever since. Given that the country’s key interest rate is most likely to stay high for the remainder of the year, while commodity prices are not expected to rebound anytime soon, it is expected that car sales will remain sluggish in the second half of 2015. In local media it was reported that Daihatsu Indonesia considers to extend its Ramadan sales discount program beyond Idul Fitri in an attempt to boost sales in the second half of the year.

Indonesian Car Sales (CBU):

 Month    Sold Cars 2012    Sold Cars 2013    Sold Cars 2014    Sold Cars 2015
 January           76,427           96,718          103,609           94,194
 February           86,486          103,278          111,824           88,741
 March           87,917           95,996          113,067           99,410
 April           87,144          102,257          106,124           81,600
 May           95,541           99,697           96,872           79,383
 June          101,746          104,268          110,614           92,645
 July          102,511          112,178           91,334
 August           76,445           77,964           96,652
 September          102,100          115,974          102,572
 October          106,754          112,039          105,222
 November          103,703          111,841           91,327
 December           89,456           97,706           78,802
 Total         1,116,230
        1,208,019          535,974

Source: Gaikindo