On Tuesday 20 November markets are closed for a public holiday
19 November 2018 (closed)
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Research institute Frost & Sullivan expects car sales in Indonesia to rise 4.6 percent year-on-year (y/y) in 2018 supported by growing domestic demand for commercial vehicles, stable demand for low-cost green cars (LCGCs), the availability of affordable car prices, and the launch of new car models.
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
|• 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):