Automotive Market Indonesia: Car Sales to Rebound in 2016
Indonesian car sales may rise up to ten percent (y/y) to 1.1 million vehicles in 2016, from an estimated 1 million this year, amid accelerating economic growth in Indonesia. Car sales in 2015 have been disappointing, declining 18 percent (y/y) to 853,008 units in the first ten months of 2015, due to people's weakening purchasing power. Sales in 2016 are expected to be boosted by sales of the low-cost green car (LCGC), which was introduced on the Indonesian market in late-2013, and the crossover utility vehicle, a car that has gained popularity recently.
Popularity of the crossover vehicle has been rising, evidenced by the growth in orders for the Honda BR-V since its display at the Gaikindo Indonesia International Auto Show (GIIAS) in August 2015. Honda Prospect Motor (HPM) - the company that imports, produces and distributes Honda vehicles in Indonesia - will start distributing the Honda BR-V in early 2016. There have been more than 3,500 orders so far for this model, the first-ever crossover vehicle in Indonesia. This car combines the large passenger capacity of the multipurpose vehicle (MPV) and the toughness of the sport utility vehicle (SUV).
However, the MPV will remain the most popular car in Indonesia in terms of domestic sales, especially as this type of vehicle is most popular among first-time car buyers. Indonesia still has a very low per capita car ownership ratio (less than four percent of the population owns a car) implying there is an enormous potential for growth.
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 | 2015¹ | |
| Car Sales (car units) |
607,805 | 486,061 | 764,710 | 894,164 | 1,116,230 |
1,229,916 | 1,208,019 | 1,000,000 |
| Exports (car units) |
100,982 | 56,669 | 85,769 | 107,932 | 173,368 | 170,907 | 202,273 | 200,000 |
¹ prognosis
Source: Gaikindo
Jongkie Sugiarto, Chairman of the Indonesian Automotive Industry Association (Gaikindo), said his institution is yet to agree on an official target for 2016 car sales in Indonesia, but believes that sales can reach 1.1 million units as economic activity in Indonesia is expected to accelerate next year. According to Sugiarto, the LCGC and MPV will be the main contributors to car sales in 2016 as both car types match Indonesian consumers' demand. The MPV can transport up to seven people, while the LCGC is a relatively cheap option. Furthermore, he believes the crossover model and low sport utility vehicle (LSUV) may cause a shift from the MPV to the crossover or LSUV in 2016.
However, sales of the LSUV and crossover are curtailed by the high luxury goods tax that the government levies on these cars. While the purchase of a MPV is only subject to a luxury tax of 10 percent, the crossover and LSUV types are subject to a 30 percent luxury tax (the luxury tax is a tax implemented during the Suharto regime in order to combat income inequality in Indonesian society). Therefore, Gaikindo requested the government to lower the tax to ten percent (as this will not only boost domestic sales and production but also exports). However, the government is yet to respond to this request.
Noegardjito, Secretary of the Indonesian Automotive Industry Association (Gaikindo), expects Indonesian car sales to grow 10 percent next year on improving economic conditions. Due to sharply declining car sales in 2015, local car manufacturers cut production rates. The number of cars produced in Indonesia is expected to fall 15 percent (y/y) to 1.1 million vehicles in 2015, from 1.3 million last year, far below the target set in the automotive industry roadmap (1.6 million units).
It is positive that Indonesia's economic growth in the third quarter of 2015 (4.73 percent y/y) accelerated from growth in the preceding quarter (4.67 percent y/y), while inflation has eased markedly. However, rebounding commodity prices are also required to restart growth in Indonesia's automotive industry as low commodity prices curtail people's purchasing power in the commodity-producing regions outside the island of Java. Sales of commercial cars outside Java have plunged due to falling commodity prices.
Jonfis Fandy, Marketing and After-Sales Service Director at Honda Prospect Motor, believes that the crossover model will become a rising star in Indonesia (as it has been in the global market over the past two years) as sales of the LSUV, which is only slightly more expensive than the crossover, surged 150 percent in Indonesia in 2015. Based on research conducted by Honda Prospect Motor, Indonesian consumers now want a car that can carry many passengers (such as the MPV) but has the design and features of the SUV.
Based on the latest data from Gaikindo (covering the January-October 2015 period), the multipurpose vehicle remains the most popular car in Indonesia, accounting for 26 percent of total car sales, followed by the pick up and the low-cost green car.
Further Reading
• Overview & Analysis of Indonesia's Automotive Industry