Car Sales in Indonesia Grow 8.2% in February Backed by LCGC Demand

The LCGC type accounted for about 15 percent of total sales in February 2014. Through tax incentives, the Indonesian government stimulated the establishment of a LCGC industry in Indonesia, provided that these car manufacturers meet requirements of fuel efficiency targets. This is one strategy of the government to curb both domestic fuel demand and expensive imports of oil. With an average price tag of around IDR 100 million (USD $8,850), these LCGCs proved highly popular on the Indonesian market. The five principal car brands that participate in this LCGC program are Astra Toyota Agya, Astra Daihatsu Ayla, Suzuki Wagon R, and Honda Brio Satya. Business consulting firm Frost & Sullivan expect that Indonesian LCGC sales will grow by 125 percent to 125,000 in 2014 from 51,000 in 2013.

Gaikindo expects that a total of 1.2 to 1.3 million cars will be sold on the Indonesian market in 2014, roughly similar to last year's result. Johnny Darmawan, deputy chairman of Gaikindo, said that he believes there is a chance of moderating car sales during and after the legislative and presidential elections in April and July 2014 if the election does not run smoothly. Despite the popularity of the LCGC, Indonesia's car sales are expected to be stagnant in 2014 due to the higher interest rate environment (the central bank raised its benchmark interest rate gradually from 5.75 percent in June 2013 to 7.50 percent in November 2013), high inflation (7.75 percent year-on-year in February 2014 thus reducing people's purchasing power), and the slowing economy (Indonesia's gross domestic product growth slowed from 6.23 percent in 2012 to 5.78 percent in 2013). The higher interest rate environment is expected to continue in 2014, while inflation is showing an easing trend in recent months and may be kept within the central bank's target range of 3.5 to 5.5 percent. Economic growth of Indonesia in 2014 is estimated to reach around 5.7 percent, similar to last year's result.

Car sales - similar to cement and motorcycle sales - are an important indicator to measure the current state of household consumption. Household consumption accounts for around 55 percent of total economic growth in Indonesia.

However, increasing car sales burden the already fragile condition of Indonesia's infrastructure.

Indonesian Car Sales (CBU):

Month	Sold Cars 2012	Sold Cars 2013	Sold Cars 2014
January	76,427	96,718	103,510
February	86,486	103,279	111,767
March	87,917	95,996
April	87,144	102,257
May	95,541	99,697
June	101,746	104,268
July	102,511	112,178
August	76,445	77,964
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	215,277

	2008	2009	2010	2011	2012	2013	2014¹
Indonesia's Car Sales (number of car units)	607,805	486,061	764,710	894,164	1,116,230	1,229,904	1,250,000
Indonesia's Exports (number of car units)	100,982	56,669	85,769	107,932	173,368	170,907	200,000

^{¹ future forecast
Source: Gaikindo}

Further Reading:

• Car Sales, Production and Exports of Indonesia Estimated to Grow in 2014
• Car Sales in Indonesia Unaffected by Weather Conditions in January 2014
• Expansion of Indonesia's Automotive Industry: Raising Exports to Asia
• Car Sales in Indonesia Expected to Rise in 2014 amid Political Elections
• Popular Low Cost Green Car Boosts Indonesian Car Sales in 2013
• Gaikindo Targets 10% Car Sales Growth in Indonesia for 2014

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