Indonesia's government expects expenditure on subsidized fuels in 2014 to amount between IDR 190-220 trillion (USD $19.2 to 22.2 billion). A high official at Indonesia's Finance Ministry, Robert Pakpahan, said that the assumption is based on a subsidized fuel quota of 48 to 51 million kiloliters and an Indonesian crude oil price of USD $100-115 per barel. Despite having raised the price of subsidized gasoline by 44 percent last week, it means that both volume quota and total expenditure on fuel subsidies will rise in 2014.
Demand for subsidized fuel in Indonesia is expected to continue its growth, despite the recent price hike, because the country's economy is growing at a pace of at least six percent per year and more and more cars fill the streets of Indonesia (resulting in more pressure on the country's already fragile infrastructure). In 2012, Indonesian car sales reached a record high level of over 1.1 million units. Moreover, Gaikindo (the Indonesian Automotive Industry Association) expects a similar sales figure in 2013. In the first five months of 2013, car sales in Indonesia had already reached a total number of 497,670 vehicles, which represents a 14.8 percent growth compared to the first five months of 2012.
Indonesia's Car Sales 2013:
Concerns about stagnating car sales seem to be unfounded. Analysts initially expected that car sales in 2013 would decline due to the new minimum down payment rule in automotive Shariah-financing. This new down payment rule involves a required down payment of 25 percent of the car´s value. Previously, down payment requirements had not been set for Islamic financing companies. Moreover, the government raised the price of subsidized gasoline by 44 percent and diesel by 22 percent on 22 June 2013 in order to relieve the ballooning budget deficit. On previous occasions when the government raised the price of fuel (such as in 2005) car sales plummeted immediately afterwards. However, if sales will fall it will only be a temporary trend as Indonesia still has a low car per capita ratio, while per capita GDP is rising and interest rates are affordable. Sales growth is also estimated to be supported by the introduction of more 'low cost and green cars' on Indonesia´s market.
|Indonesia's Car Sales
(number of car units)