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Latest Reports Automotive
Like with most sectors, the automotive sector of Indonesia received a wave of fresh air as most of the COVID-19-related social and business restrictions were scrapped by the government at the end of 2022. And, when the government also scrapped the vaccine-booster requirement for traveling into, and across, the country in June 2023 we can argue that the COVID-19 crisis is truly over.
On 7 August 2023 Indonesia Investments released the July 2023 edition of its monthly report, zooming in on various economic, political and social matters that were relevant in the month of July 2023.
Over the past years we have mentioned on several occasions that the electric vehicle is the automotive industry’s future thanks to three key inter-related circumstances: (1) recent rapid technological developments that allow the electric vehicle battery to be more energy efficient, (2) the world’s eagerness to move away from fossil fuels toward renewable energy, and (3) rising political support for the development of an efficient and conducive regulatory ecosystem for the electric vehicle industry.
Indonesian Investment Minister and Head of the Investment Coordinating Board (or BKPM) Bahlil Lahadalia confirmed that the groundbreaking ceremony for a new electric vehicle battery plant, which is developed by state-owned Indonesia Battery Corporation (IBC) and South Korea’s LG, will be held in late-July or August 2021 in Bekasi (West Java).
At its latest monetary policy meeting, completed on 18 February 2021, Indonesia’s central bank (Bank Indonesia) decided to cut its benchmark interest rate (the seven-day reverse repurchase rate) by 25 basis points (bps) to 3.50 percent, a historically low level for Southeast Asia’s largest economy. Also the deposit facility and lending facility rates were cut by 25 bps to 2.75 percent and 4.25 percent, respectively.
Astra International, one of the biggest companies that is listed on the Indonesia Stock Exchange (in terms of market capitalization), targets to boost its market share in Indonesia's automotive industry to 50 percent before the end of the year.
Although Astra International, one of Indonesia's biggest diversified conglomerates, has been affected by subdued car sales in Indonesia in recent years, the company remains comfortably within the top ten of biggest listed companies in terms of market capitalization on the Indonesia Stock Exchange.
Astra International, one of the largest diversified conglomerates in Indonesia, has always been one of investors' favorite blue chip stocks. Although the automotive sector contributes around half to the company's total revenue, Astra International is usually regarded the barometer of the Indonesian economy because the company is engaged in most key sectors of the economy. Thus, if the company is doing well, so is the Indonesian economy.
Terminal operator Indonesia Kendaraan Terminal (better known as IPC Car Terminal) plans to conduct an initial public offering (IPO) on the Indonesia Stock Exchange in mid-July 2018. The company, which is owned by state-owned port operator Pelindo II, handles the movement of cargo containers for shipments related to the automotive industry at its terminal in Jakarta's Tanjung Priok harbor.
Also in 2017 Indonesia remained the biggest car sales market as well as the second-biggest car producer in the ASEAN region. Total car sales in ASEAN grew 5 percent year-on-year (y/y) to 3.3 million in 2017. Indonesia contributed almost one-third to the total. However, Thailand remains the dominant car manufacturer in the region, producing nearly 2 million vehicles in 2017.
Latest Columns Automotive
Car sales in Indonesia continued to decline. Based on the latest data from the Indonesian Automotive Industry Association (Gaikindo) Indonesian car sales (delivery to dealers) fell around 10 percent year-on-year (y/y) to 84,885 vehicles in the first month of the year from 94,194 units in January 2015. Retail sales, on the other hand, showed a 1 percentage point growth to 82,423 vehicles over the same period.
The Indonesian government approved the request of Indonesia's automotive sector to be exempted from the anti-dumping duties that have been imposed on imports of steel from specific countries. Through Finance Ministry Regulation No. 65/2013 on Anti-Import Duties, the government set import duties - ranging between 7 and 55.6 percent - for steel imports from China, Japan, South Korea, Taiwan and Vietnam in an effort to protect the domestic steel manufacturing industry amid a global steel oversupply (particularly caused by a supply glut in China).
Whereas the Indonesian Automotive Industry Association (Gaikindo), expects Indonesia's car sales to rise five percent (y/y) in 2016 on the back of improving economic conditions, US-based consulting firm Frost & Sullivan expects to see a 4.3 percent decline in the country's car sales this year as continued rupiah depreciation and persistently low commodity prices undermine Indonesians' purchasing power.
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.
The structure of Indonesia's automotive industry remains weak as it is too dependent on imports of raw materials, making sales prices of cars highly vulnerable to the volatile Indonesian rupiah. The automotive industry has been one of the many local industries that has been plagued by Indonesia's economic slowdown and fragile rupiah (amid looming tighter monetary policy in the USA) as people's purchasing power has weakened. In the first ten months of 2015, Indonesian car sales stood at a total of 853,008 units, down 18 percent from car sales in the same period last year.
Indonesian automotive group Indomobil Sukses Internasional is facing challenges in 2015. The listed company, affiliated with the Salim Group (one of Indonesia’s largest conglomerates), is plagued by intense competition in the car industry of Indonesia, while it also feels the negative impact of the weak rupiah (which is depreciating against the US dollar). Over 2014, the company posted a net loss of IDR 128.2 billion (USD $9.9 million), down significantly from net profit of IDR 532.5 billion it recorded in the preceding year.
Car sales in Indonesia declined 8 percent to 98,198 units in May 2014 from 106,811 units in the previous month. The Indonesian Automotive Industry Association (Gaikindo) said that the decline was the direct consequence of several public holidays (International Labour Day and the commemorations of Buddha’s birthday as well as ascensions of Prophet Muhammad and Jesus Christ). These holidays caused a lower car production rate and a reduced number of car deliveries to wholesale dealers.
According to a survey of the Japan Bank for International Cooperation (JBIC), 44.9 percent of respondents assessed Indonesia as the most promising investment destination for the next three years. The respondents in this survey involved 500 Japanese companies that engage in international businesses. For Indonesia it is the first time in 21 years that it forms the preferred choice of overseas investments for Japanese companies, thus replacing China. In 2013, Japan already dominates foreign direct investment in Indonesia.
Astra International, Indonesia's largest listed company by market capitalization, presented its Q1-2013 financial results yesterday. The company, which represents the dominating force in Indonesia's automotive sector, posted a seven percent fall in net earnings (YoY) to IDR 4,310 trillion (USD $444.3 million) amid Indonesia's rising labour costs, weak commodity prices, increased competition in the country's car sector and effects of new minimum down-payment regulations in automotive Shariah-financing.
Associated businesses Automotive
