Indonesia's 2015 vehicle sales to hit 1.268 mn units

TOTAL vehicle sales in Indonesia are forecast to reach 1.268 million units this year at 5% YoY growth. 

 

Frost & Sullivan projects higher purchasing power from the middle class population and infrastructure development spending by the government will drive sales growth.

 

A variety of new cars on display in a mall in the city of Solo, Central Java, Indonesia (Photo © Suryo | Dreamstime.com; taken on: January 15th, 2015)

 

The projected 5% stable growth of Indonesia’s economy this year will also boost vehicle sales, according to Vivek Vaidya, vice president at Automotive & Transportation Practice, Asia Pacific at Frost & Sullivan.

 

Mr. Vaidya identified five key themes that will shape the Indonesian automotive sector in the next five years. These are the LCGC/LEC program, next-generation FTAs, focus on exports, competition from the Thai automotive sector, and the evolution of ASEAN Economic Community (AEC), with the last likely to be a game changer for the regional industry with impact to be felt across the value chain.

 

The global economic uncertainty will also influence the sector with imports of both parts or components and completely built-up (CBUs) becoming more expensive. 

 

"The increase in cost of automotive imports could have a significant impact as high value parts and aggregates are still imported for many models," Mr. Vaidya said.

 

Imported CBUs, in particular luxury cars, are likely to become more expensive. LCGC cars will experience the least impact because of their high degree of localization.

 

Indonesia’s total industry volume (TIV) for 2014 declined 1.8% YoY to 1.208 million units after five years of continuous growth, mainly due to the 6% slump in commercial vehicle demand, according to Mr. Vaidya.

 

Despite dipping vehicle sales, however, Indonesia overtook Thailand to become the largest automotive market in ASEAN. The former contributed 38% to the overall ASEAN market, resulting in a bigger gap of 11% with Thailand.

 

The decline in vehicle sales last year was also attributed to the economic slowdown and demand contraction in key export destinations such as China and Japan. 

 

"The lower economic growth of 5.1%, increase in tariffs—electricity, wages, and luxury taxes— also further contributed to the weak auto sales in Indonesia," Mr. Vaidya said.