Manufacturing | Indonesia’s Automotive Industry

The automotive industry has become one of the central pillars of Indonesia’s manufacturing sector, with global corporations investing heavily to take advantage of strong growth in Southeast Asia’s biggest economy. As they increase their local production capacity, many carmakers see Indonesia as a future hub for their sales in the Southeast Asian region. Eight years after shutting its Indonesian facilities, General Motors in 2013 resumed operations at its Bekasi factory in West Java with the production of the Chevrolet Spin. The seven-seat family car serves a traditionally popular category among Indonesian consumers. However, small cars are expected to be the fastest growing segment over the coming years as drivers look to save on fuel costs and navigate worsening congestion in urban centres.

Most growth potential for car sales is now seen in the lower end of the market, as Indonesia’s consuming class expands to incorporate new first-time buyers

 

General Motors and other global companies are fighting an uphill battle to challenge the dominance of Japanese carmakers that have established strong distribution and servicing networks and together control most of the market. Meanwhile, Indonesia still harbours long-standing plans to build a national marque of its own. Government regulations encourage carmakers to build low-emission vehicles and to source most components in the domestic market.

The market in numbers

Indonesia’s automotive industry rebounded strongly from the 2009 financial crisis thanks to high consumer confidence and the easy availability of credit. Bank Indonesia’s key interest rate dropped to a record low in February 2012, helping reduce financing rates at the same time as many Indonesians enjoyed rapid increases in their personal income. Domestic car sales more than doubled from 2009 to 2012, when a record 1.116 million units were sold, including 780,500 passenger vehicles (Gaikindo). Motorcycle sales saw rapid growth in 2010 and 2011, but declined in 2012 amid stricter credit rules. To forestall excessive consumer loan growth, the Ministry of Finance and Central Bank in 2012 raised the minimum down payment on loans from multi-finance companies and commercial banks. Buyers of cars now need to pay at least 30% of the purchasing price upfront, while motorcycle purchases require a 25% down payment.

Despite the slowdown in GDP growth and investment in the course of 2013 the Indonesian Automotive Industry Association (Gaikindo) forecast full-year car sales to remain at least steady, while the Indonesian Motorcycle Industry Association (AISI) forecast a similarly flat development for motorcycle sales. Cumulative figures as of August 2013 showed solid year-on-year growth for both categories, though the price hike for subsidized petrol and diesel in June 2013 was expected to impact demand in the second half.

The Toyota Avanza was by far the preferred new vehicle in Indonesia in 2012 and sold almost three times as well as the second-placed Daihatsu Xenia. With total sales of 405,414 units, Toyota maintains a comfortable lead over its subsidiary Daihatsu (162,742) and rivals Mitsubishi (148,918), Suzuki (125,577) and Honda (69,320). The only non-Japanese brands to make the top ten were South Korea’s Kia and Ford from the US. As for motorcycles, Honda led 2012 sales ahead of Yamaha and Suzuki.

Growth potential

With car ownership in Indonesia still relatively low, the expected slowdown in 2013 is widely anticipated to be temporary and to give way to faster growth once again when global and domestic economic conditions pick up. Market research firm Frost and Sullivan estimated that there are about 80 vehicles per 1,000 people in Indonesia, which compares to more than 800 in the US. This highlights the tremendous growth potential as Indonesia’s economy is set to surpass Germany’s to become the world’s seventh largest by 2030, according to a forecast by business consultancy McKinsey & Company. Future motorcycle sales are harder to predict, because the market will be partly substituted by automobiles and because two-wheeler sales appear to react more strongly to financing rates and down payment requirements.

Small cars own the future

Most growth potential for car sales is now seen in the lower end of the market, as Indonesia’s consuming class expands to incorporate new first-time buyers. With more Indonesians beginning to regard cars as a necessity rather than a luxury, affordable smaller cars are poised to take a greater share of the market. The government’s low-cost green cars (LCGC) programme should further prod consumers to opt for ecological and economical cars, as should future reductions in fuel subsidies. LCGCs are to be fuel efficient and priced at no more than 120 million RP, must be locally assembled and include mostly domestically produced components. In return, they are partially or totally exempt from luxury tax.

Toyota and Daihatsu, Nissan (Datsun), Suzuki and Honda are vying for shares in the nascent micro car market in Indonesia. The country’s largest auto distributor, Astra International, which assembles cars in joint ventures with global companies, reportedly wants to produce an initial 10,000 LCGCs per month at its manufacturing facilities in Cikarang, West Java. Fast-developing secondary cities such as Medan and Makassar offer lots of untapped potential for automobile sales, while clogged streets in Jakarta make driving there increasingly frustrating and could see some commuters switch to improving public transportation. City cars, as well as busses, are the automotive industry’s best answer to secure strong growth in the capital region.

Parts industry

Car production is set to outpace sales growth over the coming years, as global carmakers strengthen domestic output and the local supplier industry achieves higher quality. Notwithstanding high logistical costs stemming from poor infrastructure, the government is hoping to turn Indonesia into a major car exporter, taking advantage of its proximity to the giant markets of China and India. These trends provide a solid foundation for growth in the component industry. Several domestic and foreign-controlled auto-parts manufacturers have announced large-scale investment. Joint ventures allow local companies to benefit from technology transfers from global players, who in turn enjoy easy access to the lucrative market. Tire makers can take advantage of the domestic rubber supply. South Korea’s Hankook Tire in September 2013 opened a plant in Cikarang that will sell some 30% of its production in Indonesia with the rest shipped to markets around the globe.

ASEAN and beyond

The ASEAN Economic Community (AEC), a single market and production area to be implemented by 2015, will intensify regional trade and open up opportunities for exporters. Whether Indonesia will become a vital hub for the regional auto industry depends to a large extent on the sophistication of domestic assembly and component production as well as on vital infrastructure, notably the capacity and efficiency of the TanjungPriok port. The overburdened export terminal is currently undergoing a long-term expansion programme, but there are concerns that the upgrade is not ambitious enough (See Indonesia’s Logistics Sector). Another concern is the Indonesian labour market, which in 2012 saw excessive increases in minimum wages and sudden curbs on outsourcing arrangements following widespread industrial action.

Due to the importance of the automotive industry to the country’s manufacturing sector, the government has an interest in fostering further growth (See Overview of the Manufacturing Sector). To build a competitive industry the authorities must ensure attractive regulations for global investors and temper industrial relations. The LCGC trend offers highly attractive prospects for producers to take advantage of a wholly new segment, and together with favourable macroeconomic and demographic conditions should trump concerns about fuel prices, the labour market or infrastructure deficiencies for many years to come.

Auto Sales Slump in Indonesia on Economic Slowdown

Visitors crowd the opening of Indonesia Internastional Motor Show 2014 at Jakarta International Expo Kemayoran, Thursday, Sept. 18, 2014. The expo is followed by 35 auto brand and will be hold until Sept. 28. (JG Photo/Jurnasyanto Sukarno)

Jakarta. Car sales in Indonesia slowed in the January to October period this year amidst the country’s economic slowdown, according to data by the Association of the Indonesian Automotive Industry on Monday.

Over 1.04 million cars were sold across Indonesia during the 10-month period, up 1.72 percent from 1.02 million in the same period last year. Still, the growth rate is lower than last year’s when national car sales climbed 10.5 percent from 2012 to 2013.

On a monthly basis, national car sales fell 6 percent to 105,430 units in October this year. This compared to 112,038 units in October last year.

Toyota remains the biggest brand in Indonesia by sales, making up 33 percent of the national total.

Car sales is one of the important measures for household spending, which contributes 55 percent of domestic economic activity. Indonesia’s economy grew 5.01 percent in the third quarter this year, posting its slowest growth in five years.

The Indonesian Automotive Industry (Gaikindo) aims for sales of 1.25 million units by the end of the year, slightly higher than last year.

Meanwhile, motorcycle sales in also slowed in the 10-month period this year with a 3.4 percent growth to 6.73 million units. In comparison, motorcycle sales grew 9.22 percent year-on-year over the January to October period last year.

Motorcycles sales in October alone reached 675,652 units, down 5.4 percent from the same period last year.

Despite the slowdown, Indonesia dominated car and motorcycle sales in the Southeast Asia region last month, according to the Asean Automotive Federation (AEF).

Southeast Asia’s largest economy accounted for 39.2 percent of regional sales, beating Thailand out of the top position, the AEF latest data showed.

Following Indonesia, Thailand contributed to 16 percent of regional automotive sales.

Fitch Ratings said on Monday that Indonesia may see a short-lived decline in car and motorcycle sales due to higher fuel prices but the economy will continue to grow as subsidy funds are shifted into other programs.

The ratings agency did not rule out the possibility that higher fuel prices will likely drive inflation and keep interest rates high for at least the next 12 months thus impairing consumer’s purchasing power and dampening the demand for cars and motorcycles.

However, Fitch said it expects lower auto sales to be only a temporary and that it would likely to recover, along with the Indonesian economy.

Car sales drop again in Indonesia, Thailand

BANGKOK — New-car sales continue to decline in the two largest auto markets of Southeast Asia.

Indonesian sales slipped a fifth consecutive month this January, dropping 9% from a year earlier to 94,194 vehicles. Seven of the 10 market leaders, including Toyota and Suzuki, suffered double-digit declines. The economy is stagnating, auto loan interest rates remain high, and gas costs are on the rise with the elimination of government subsidies. The central bank lowered interest rates for the first time in three years in mid-February, but the nation’s automotive trade group says this has had little impact.

Thai sales declined for a 21st month in January, sinking 13% to 59,721 vehicles. This pushed sales under 60,000 for the first time since December 2011, when heavy flooding took a toll.

Auto production in Thailand actually increased for the first time in 19 months this January, but this was thanks to exports. With consumers here not in a spending mood, the local auto industry will continue to rely on exports for the foreseeable future.

But neighboring Southeast Asian auto markets are rolling right along. January car sales rose 1% in Malaysia, 81% in Vietnam, and 69% in Singapore.

Indonesia Total Car Sales 1999-2015 | Data | Chart | Calendar | Forecast

 

Actual Previous Highest Lowest Dates Unit Frequency
79236.00 81600.00 115975.00 1898.00 1999 – 2015 Cars Monthly Volume, NSA

This page provides – Indonesia Total Car Sales – actual values, historical data, forecast, chart, statistics, economic calendar and news. Content for – Indonesia Total Car Sales – was last refreshed on Sunday, July 5, 2015.

Indonesia Business Last Previous Highest Lowest Unit
Business Confidence 96.30 104.70 122.50 95.12 [+]
Manufacturing PMI 47.80 47.10 58.50 46.40 [+]
Industrial Production 5.83 7.23 34.50 -25.40 percent [+]
Capacity Utilization 73.06 79.78 79.78 62.43 percent [+]
Changes in Inventories 55061.10 -10270.05 55061.10 -15576.80 IDR Billion [+]
Car Registrations 79236.00 81600.00 115975.00 1898.00 Cars [+]
Competitiveness Index 4.57 4.53 4.57 4.18 Points [+]
Competitiveness Rank 34.00 38.00 55.00 34.00 [+]
Corruption Index 34.00 32.00 34.00 17.00 Points [+]
Corruption Rank 107.00 114.00 143.00 41.00 [+]
Ease of Doing Business 114.00 120.00 129.00 114.0

 

 

Source : www.tradingecinomics.com |PT. ASTRA INTERNATIONAL TBK

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