Fitch Ratings & Gaikindo Expect Indonesia's Car Sales to Rebound

Both Gaikindo and Fitch Ratings expect to see improving purchasing power as well as improving consumer confidence in Indonesia this year on the back of accelerated economic growth. Most domestic and international institutions put their GDP growth forecasts for Indonesia in the range of 4.9 - 5.3 percent (y/y) in 2016, up from a 4.79 percentage point GDP growth realization in 2015 hence marking the end of Indonesia's five-year economic slowdown. Acceleration in economic growth is primarily supported by government spending on infrastructure development projects.

Apart from accelerated GDP growth, purchasing power in Indonesia will also rise due to Bank Indonesia's decision to cut its interest rate environment by 25 basis points at its March policy meeting. In the preceding two meetings Indonesia's central bank had also cut rates by 25 basis points, each. The lower benchmark BI rate (now at 6.75 percent from 7.50 percent at the year-start) will make it less expensive to borrow money for the purchase of a car. It is estimated that about two-thirds of car purchases in Indonesia are done using a car loan.

However, given that commodity prices are still weak, demand for commercial cars may not rebound yet. But even here is some reason for optimism because prices of various commodities have gone up in recent weeks (in line with the recently rising trend of crude oil prices). Furthermore, the government's push for infrastructure development should boost demand for commercial vehicles in the construction sector. This may be able to offset the negative impact of low commodity prices on Indonesian car sales.

Both Gaikindo and Fitch Ratings expect Indonesian car sales to grow by about 5 percent (y/y) to a maximum of 1.1 million cars in 2016.

Further Reading: Overview & Analysis of Indonesia's Automotive Industry

Regarding Indonesia's car exports, Sugiarto said there occurred a 33 percent (y/y) drop to 22,246 cars in February from 33,459 cars that were exported in the same month one year earlier. According to Sugiarto this decline was caused by weaker purchasing power in the Middle East, one of the biggest markets for Indonesian-made car. Purchasing power in this region had weakened due to cheap oil. Gaikindo says it is important for the nation's car manufacturers to find new export markets. Based on the government's roadmap for the automotive industry, Indonesia will produce a total of 2.5 million vehicles by the year 2020. To achieve this target it is vital to boost the nation's car exports. This year Indonesian car exports may fall to 200,000 units.

Indonesian Car Sales (CBU):

Month	Sold Cars       2012	Sold Cars       2013	Sold Cars       2014	Sold Cars       2015	Sold Cars       2016
January	76,427	96,718	103,609	94,194	84,885
February	86,486	103,278	111,824	88,740	88,250
March	87,917	95,996	113,067	99,410
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	90,537
September	102,100	115,974	102,572	93,038
October	106,754	112,039	105,222	88,408
November	103,703	111,841	91,327	86,938
December	89,456	97,706	78,802	73,264
Total	1,116,230	1,229,916	1,208,019	1,013,291

 

	2008	2009	2010	2011	2012	2013	2014	2015
Car Sales (car units)	607,805	486,061	764,710	894,164	1,116,230	1,229,916	1,208,019	1,013,291
Car Exports (car units)	100,982	56,669	85,769	107,932	173,368	170,907	202,273	207,691

^{Source: Gaikindo}

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