Indonesia’s May Car Sales Decline 18% on Weak Consumer Demand
Car sales in Indonesia have declined 17 percent to 443,328 units in the first five months of 2015 according to the latest data from the Indonesian Automotive Manufacturers Association (Gaikindo), hence providing further confirmation that consumer demand has continued to fall amid the country’s slowing economic growth, depreciating rupiah and accelerating inflation. Car sales are one of the key indicators to measure people’s purchasing power as well as the general state of the economy.
Due to various factors (including Indonesia’s slowing economic growth, the weak rupiah, low commodity prices, high domestic interest rates, and high inflation) Gaikindo had already cut its car sales target for 2015 to 1.1 million vehicles from its original target of 1.2 million vehicles. Indonesia’s May car sales fell to 79,383 units, down 2.7 percent from 81,600 cars in the preceding month.
Gaikindo’s Deputy Chairman Yohannes Nangoi said on Tuesday (09/06) that falling commodity prices resulted in limited car demand on Indonesia’s two largest and commodity-rich islands (Kalimantan and Sumatra). Java - the center of the country’s automotive industry - has now started to feel the pinch from Sumatra and Kalimantan. He added that car sales in Indonesia are expected to improve from August onward provided that the government is able to increase spending, particularly on infrastructure projects.
People’s purchasing power has been curbed by accelerating inflation. In May, Indonesian inflation reached 7.15 percent (y/y). Secondly, Bank Indonesia’s high interest rate environment makes borrowing expensive (with the key interest rate at 7.50 percent).
The heavily depreciating rupiah also impacts on Indonesia’s car industry as it makes imports expensive. Many car components are imported hence raising costs for Indonesian car producers. Given the slowing car market, it is currently difficult for car manufacturers to pass these costs on to end-users due to fierce competition between car manufacturers. The rupiah has depreciated more than 7 percent against the US dollar so far this year:
Indonesian Rupiah versus US Dollar (JISDOR):| Source: Bank Indonesia
The clear market leader in Indonesia’s car industry remains Toyota, distributed by Astra International, with 29 percent market share in May, followed by Daihatsu (18 percent) and Honda (14 percent).
Indonesian Car Sales (CBU):
|Month||Sold Cars 2012||Sold Cars 2013||Sold Cars 2014||Sold Cars 2015|