Indonesia's 2014 Annual Car Sales Fall on Bleak Economy & Fuel Hike

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	1,229,916	1,129,746

 

	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

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