Annual Car Sales in Indonesia Expected to Decline in 2014

However, higher fuel prices bring severe inflationary pressures as transportation of goods and people becomes more expensive (multiplier effect) and caused the central bank to introduce a higher interest rate environment (the key interest rate being 7.75 percent currently), thus reducing both people’s purchasing power and consumer confidence. In this context, consumers tend to postpone a car or motorcycle purchase.

Rahmat Samulo, Marketing Director of Toyota Astra Motor, said that the slowdown in Indonesian car sales will continue into the first half of 2015. Provided that the government manages to reallocate the funds (which are saved by the fuel price hike) to structural sectors, such as infrastructure development, then car sales will bounce back in the second half of 2015. Samulo expects to see relatively stagnant growth in the domestic car industry over the next two years. After this ‘consolidation phase’, the industry is able to grow rapidly again as the country is still characterized by a low per capita car ownership ratio (less than four percent of the Indonesian population owns a vehicle). Moreover, by 2016, the Indonesian economy should expand at an impressive pace again. Between 2011 and 2014, the economy has shown a slowing growth trend (from GDP growth of 6.5 percent y/y in 2011 to 5.2 percent y/y in 2014). Forecasts suggest that GDP growth will rebound to 5.8 percent (y/y) in 2015, and then to +7 percent (y/y) in 2016 (provided that external factors - i.e. the global economy - are conducive). Accelerated growth will enhance people’s purchasing power and is expected to give rise to higher car sales figures.

Accumulatively, - based on the preliminary November figure - Indonesian car sales (wholesales) reached 1,129,746 vehicles in the January-November 2014 period, or 0.2 percent down from the same period last year (1,132,210 units). The weak November car sales result implies that it is highly unlikely for Indonesia to meet the car sales target of the Indonesian Automotive Industry Association (Gaikindo) at 1,250,000 cars by the year-end. In fact, it may be the first time since 2009 that Indonesia experiences negative annual car sales growth in 2014.

Indonesian Car Sales (CBU):

 Month    Sold Cars 2012    Sold Cars 2013    Sold Cars 2014
 January           76,427           96,718          103,563
 February           86,486          103,278          111,861
 March           87,917           95,996          113,095
 April           87,144          102,257          106,052
 May           95,541           99,697           96,927
 June          101,746          104,268          110,572
 July          102,511          112,178           91,409
 August           76,445           77,964           96,753
 September          102,100          115,974          102,709
 October          106,754          112,039          105,357
 November          103,703          111,841           91,449
 December           89,456           97,706  
 Total         1,116,230


     2008    2009    2010    2011     2012     2013     2014¹
Indonesian Car Sales
(number of car units)
 607,805  486,061  764,710  894,164 1,116,230
1,229,916 1,250,000
Indonesian Exports
(number of car units)
 100,982   56,669   85,769  107,932  173,368  170,907  200,000

¹ Gaikindo forecast
Source: Gaikindo

Apart from the economic slowdown, weakening purchasing power, poor infrastructure and higher subsidized fuel prices, players in Indonesia’s car industry also have to deal with increased competition due to the influx of several car manufacturers in recent years. For example, Astra International (Southeast Asia's largest automotive group) saw its market share decline from 58 percent in 2009 to 51 percent in the January-October 2014 period.

Further Reading:

Low Cost Green Cars Support Car Sales in Indonesia
Growth of Indonesian Car Sales Falls amid Slowing Economic Expansion
Impact of Higher Subsidized Fuel Prices on Indonesia’s Car Industry