Indonesia’s May Car Sales Decline 18% on Weak Consumer Demand

Due to various factors (including Indonesia’s slowing economic growth, the weak rupiah, low commodity prices, high domestic interest rates, and high inflation) Gaikindo had already cut its car sales target for 2015 to 1.1 million vehicles from its original target of 1.2 million vehicles. Indonesia’s May car sales fell to 79,383 units, down 2.7 percent from 81,600 cars in the preceding month.

Gaikindo’s Deputy Chairman Yohannes Nangoi said on Tuesday (09/06) that falling commodity prices resulted in limited car demand on Indonesia’s two largest and commodity-rich islands (Kalimantan and Sumatra). Java - the center of the country’s automotive industry - has now started to feel the pinch from Sumatra and Kalimantan. He added that car sales in Indonesia are expected to improve from August onward provided that the government is able to increase spending, particularly on infrastructure projects.

People’s purchasing power has been curbed by accelerating inflation. In May, Indonesian inflation reached 7.15 percent (y/y). Secondly, Bank Indonesia’s high interest rate environment makes borrowing expensive (with the key interest rate at 7.50 percent).

The heavily depreciating rupiah also impacts on Indonesia’s car industry as it makes imports expensive. Many car components are imported hence raising costs for Indonesian car producers. Given the slowing car market, it is currently difficult for car manufacturers to pass these costs on to end-users due to fierce competition between car manufacturers. The rupiah has depreciated more than 7 percent against the US dollar so far this year:

Indonesian Rupiah versus US Dollar (JISDOR):

| Source: Bank Indonesia

The clear market leader in Indonesia’s car industry remains Toyota, distributed by Astra International, with 29 percent market share in May, followed by Daihatsu (18 percent) and Honda (14 percent).

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	88,741
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	79,383
June	101,746	104,268	110,614
July	102,511	112,178	91,334
August	76,445	77,964	96,652
September	102,100	115,974	102,572
October	106,754	112,039	105,222
November	103,703	111,841	91,327
December	89,456	97,706	78,802
Total	1,116,230	1,229,916	1,208,019	443,328

^{Source: Gaikindo}

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