Car Industry Update Indonesia: Car Sales Increase in August 2014

In 2014, however, the influence of the Lebaran period (marking the end of the Islamic fasting month of Ramadan) was mostly felt in July, causing a steep decline of car sales (-17 percent month-to-month) in that month. A sharp fall in sales of cars and motorcycles in Indonesia is a traditional phenomenon during the Lebaran period. Usually, two weeks after the Lebaran holiday has ended, sales recover.

In the first eight months of 2014, Indonesian car sales totalled 830,398 vehicles, a five percent increase from the same period last year according to data from the Indonesian Automotive Industry Association (Gaikindo).

Forecast Indonesian Car and Motorcycle Sales in 2015

Prijono Sugiarto, President Director of Astra International, the market leader that holds the exclusive right to sell the popular Toyota brand on the Indonesian market through a jointly-controlled entity with the Toyota Motor Corporation, expects that car and motorcycle sales in 2015 will reach a similar level to this year’s sales target of 1.25 cars and 8 million motorcycles as economic growth in Indonesia will remain sluggish. Since 2011, Indonesia - Southeast Asia’s largest economy - has had to cope with a slowing economy. In the second quarter of 2014, the country’s gross domestic product (GDP) growth slowed to 5.12 percent (year-on-year), the slowest quarterly growth pace of the past 19 quarters.

The next government of Indonesia (led by president-elect Joko Widodo), which will be inaugurated on 20 October 2014, is expected to raise prices of subsidized fuels in an attempt to curb the country’s wide current account deficit. Higher fuel prices will limit demand for cars temporarily, particularly if the central bank (Bank Indonesia) will maintain its tight monetary policy (high borrowing costs are problematic for car sales). This policy is expected to remain tight to combat accelerated inflation after the possible higher subsidized fuel prices as well as to avert the impact of higher US interest rates in 2015. The US Federal Reserve is expected to raise its benchmark interest rate in the second or third quarter of 2015. This will then trigger capital outflows from emerging economies, such as Indonesia, and put pressure on the rupiah exchange rate.

Tata Motors Eyes Indonesian Market

It was reported in Indonesian newspapers that Tata Motors, a leading car manufacturer in India, aims to make Indonesia its largest car market (outside India) in the next five years. Currently, Bangladesh and South Africa are the company’s largest export markets, accounting for about 15 to 20 percent of the company’s total export volume, each. However, the company sees great potential in Indonesia as banking and incomes are developing rapidly, perhaps even surpassing Thailand as the region’s largest automotive hub.

After having established local units Tata Motors Indonesia and Tata Motors Distribusi Indonesia in 2013, the Indian car producer started selling vehicles on the Indonesian market starting from September 2013. So far, it has sold 500 vehicles only on the Indonesian market, the 3.0-liter diesel engine pickup truck being the top seller.

Indonesian Car Sales (CBU):

Month	Sold Cars 2012	Sold Cars 2013	Sold Cars 2014
January	76,427	96,718	103,565
February	86,486	103,279	111,862
March	87,917	95,996	113,096
April	87,144	102,257	106,056
May	95,541	99,697	97,136
June	101,746	104,268	110,560
July	102,511	112,178	91,395
August	76,445	77,964	96,728
September	102,100	115,973
October	106,754	112,039
November	103,703	111,841
December	89,456	97,694
Total	1,116,230	1,229,904	830,398

	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	1,229,904	1,280,000
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}

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