Vivek Vaidya, Senior Vice President of Mobility at Frost & Sullivan, said there are several factors at play in Indonesia; some encourage rising sales in the automotive industry, while others form an obstacle (see table below).

The strengthening economy of Indonesia, reflected by expected accelerated gross domestic product (GDP) growth in 2018, will surely impact positively on car sales in Indonesia. The Indonesian government set its economic growth target at 5.4 percent (y/y) in 2018, up from an estimated 5.1 percent (y/y) in 2017. In line with rising GDP growth, people's purchasing power and consumer confidence should strengthen.

However, regarding Indonesians' recovering consumers' purchasing power, Vaidya remains somewhat skeptical at this moment, and would not be surprised if Indonesians' purchasing power will not recovery markedly in 2018. Another problem is that the government is expected to see another fiscal deficit in 2018. This could make the government less eager to spend heavily on infrastructure projects, implying demand for commercial vehicles is curtailed.

Meanwhile, low inflation, the stable rupiah exchange rate and the relatively low interest rate environment in Indonesia are important factors that should boost car sales this year.

The Indonesian Automotive Industry Association (Gaikindo) set its target for car sales in Indonesia at 1.1 million units in 2018, approximately 1 - 2 percent (y/y) higher than estimated car sales in full-year 2017 (expected to reach 1,070,000 units). As such, Gaikindo set a very cautious target. The institution expects to see the same conditions in 2018 compared to 2017 when car sales also failed to impress.

What Can Impact on Indonesian Car Sales in 2018? Opportunities & Risks

Positive Negative
• Accelerating GDP growth • Purchasing power may remain bleak
• Consumer confidence is high • Rising crude oil/fuel prices
• Launch of new models • Fiscal deficit
• Low inflation/stable rupiah • People prefer to save
• Low interest rate regime

However, Fransiscus Soerjopranoto, Executive General Manager at Toyota Astra Motor (TAM), the company which controls around 35 percent of the car sales market, has a much more ambitious forecast for domestic car sales in 2018. He believes that a 4 - 5 percent (y/y) growth range is possible, similar to the forecast of Frost & Sullivan, because of the strengthening Indonesian economy. According to him people have been saving money rather than spending it (hence there occurred an overall decline in consumption across Indonesia). In 2018 people may become more willing to spend, including on cars.

Soerjopranoto added that - in the past - political years would have a significant positive impact on domestic car sales because people were buying cars amid political campaigns. In recent years, however, this impact is not visible anymore. Both 2018 and 2019 are political years as Indonesia will see regional, legislative and presidential elections but Soerjopranoto does not expect to see an impact on car sales.

Indonesian Car Sales (CBU):

Month Sold Cars
   2013
Sold Cars
   2014
Sold Cars
   2015
Sold Cars
   2016
Sold Cars
   2017
January   96,718  103,609   94,194   85,002   86,262
February  103,278  111,824   88,740   88,208   95,163
March   95,996  113,067   99,410   94,092  102,336
April  102,257  106,124   81,600   84,770   89,624
May   99,697   96,872   79,375   88,567   94,085
June  104,268  110,614   82,172   91,488   66,389
July  112,178   91,334   55,615   61,891   85,354
August   77,964   96,652   90,537   96,282   97,256
September  115,974  102,572   93,038   92,541   87,696
October  112,039  105,222   88,408   92,106   94,433
November  111,841   91,327   86,938  100,365   96,148
December   97,706   78,802   73,264   86,547
Total 1,229,916
1,208,019 1,013,291 1,061,859

 

     2009    2010    2011     2012     2013     2014     2015     2016
Car Sales
(car units)
 486,061  764,710  894,164 1,116,230
1,229,916 1,208,019 1,013,291 1,061,859
Car Production
(car units)
    n.a.     n.a.     n.a.      n.a. 1,208,211 1,298,532 1,098,780 1,177,797

Source: Gaikindo

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