Car Production Indonesia to Fall 15% to 1.1 Million in 2015

Noegardjito, Secretary of the Indonesian Automotive Industry Association (Gaikindo), said the government's decision to raise the price of subsidized fuel in late 2014 also contributed to weakening purchasing power in Indonesia as inflation flared up. In the January-October 2015 period, Indonesian car sales stood at a total of 853,008 units, down 18 percent from car sales in the same period last year.

Through the automotive industry roadmap Indonesia targets to achieve a car production level of 2.6 million units per year by 2020. However, it is highly unlikely that this target can be achieved within a four-year period.

Indonesia is eager to top Thailand as regional leader (ASEAN) in terms of car production and export. Thailand produces over two million car units each year, while Indonesia is estimated to produce 1.1 million cars this year. Meanwhile, Thailand exported 1.1 million cars in 2014, while Indonesia only exported 202,273 vehicles last year. These figures indicate there is still a huge gap between both countries.

Indonesia has an installed car production capacity of 2 million vehicles per year, implying that the country currently only uses slightly over half of its total production capacity. It would be perfect if Indonesia could use its production capacity to manufacture cars for export purposes. However, I Gusti Putu Suryawirawan, Director General of Metal, Machinery, Transportation Equipment and Electronic Industries at the Industry Ministry, said it is hard for Indonesia to boost its export performance as Indonesia primarily produces the multipurpose vehicle (MPV) for which demand is low in export markets. Popular cars for export purposes are the sedan and sport utility vehicle (SUV).

Suryawirawan says domestic sales of the SUV and sedan should rise in order to encourage investment in SUV and sedan plants. To accomplish this, the government should offer attractive incentives. For example by lowering the luxury tax. Currently, a 30 percent luxury tax is levied on sedan purchases, much more than the 10 percent tax on MPV cars. Another incentive would be to make it cheaper for raw materials to be imported into Indonesia for the manufacturing of sedans that will be exported abroad.

Research from the Boston Consulting Group (BCG) shows that the Indonesian government fails to provide enough incentives to encourage the domestic automotive industry.

Indonesian Car Sales (CBU):

Month	Sold Cars 2012	Sold Cars 2013	Sold Cars 2014	Sold Cars 2015
January	76,427	96,718	103,609	94,194
February	86,486	103,278	111,824	88,740
March	87,917	95,996	113,067	99,411
April	87,144	102,257	106,124	81,600
May	95,541	99,697	96,872	79,375
June	101,746	104,268	110,614	82,172
July	102,511	112,178	91,334	55,615
August	76,445	77,964	96,652	90,538
September	102,100	115,974	102,572	93,038
October	106,754	112,039	105,222	88,325
November	103,703	111,841	91,327
December	89,456	97,706	78,802
Total	1,116,230	1,229,916	1,208,019	853,008

 

	2008	2009	2010	2011	2012	2013	2014
Indonesian Car Sales (number of car units)	607,805	486,061	764,710	894,164	1,116,230	1,229,916	1,208,019
Indonesian Exports (number of car units)	100,982	56,669	85,769	107,932	173,368	170,907	202,273

^{Source: Gaikindo}

Further Reading:

• Overview & Analysis of Indonesia's Automotive Industry

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