Presented with challenges in the form of higher interest rates and soaring production costs, this year's car sales prospects might not look as grim as previously expected.

Car manufacturers had believed the industry would not be in a position to face a crash landing as sales were predicted to be stagnant this year.

The Indonesian Automotive Industry Association (Gaikindo) said demand would still be there, but that numbers would be flat.

Vehicle manufacturers expected to produce at least 1.2 million sales in 2014, similar to the figure estimated for last year, according to Gaikindo chairman Jongkie D. Sugiarto.

'We forecast that this year's sales may not exceed those of last year mostly due to slower economic growth, depreciation of the local currency and the potential rise in loan rates,' he said, recently.

According to figures from Gaikindo, car sales between January and November last year topped 1.13 million, higher than the 2012 full-year sales of 1.11 million.

The 2013 sales were the highest in the history of the industry, which has been dominated by Japanese manufacturers, with market share of more than 90 percent.

The figure is also likely the biggest in Southeast Asia, where Indonesia has been competing with Thailand over the past four years to become the center of the region's automobile industry.

Optimism over this year's sales is also fueled by the country's economic growth of around 5.5 percent, lower than last year's forecast of 5.6 to 5.7 percent.

Aside from the fairly high growth, which is among the highest in Asia, demand for cars will also be spurred by the general election, which usually sees increase in the purchases of cars as politicians and their supporters will travel extensively to lure voters.

Indonesia has not traditionally embraced itself as a prime automobile manufacturer and market as taxes imposed on the purchase of cars have made their prices higher by around 30 percent compared to Thailand and other countries in the region.

Higher sales will lure many international car producers to expand the capacity of their plants here, or set up new ones.

But manufacturers are unlikely to go for drastic change in models and strategies.

The marketing director of Toyota Astra Motor, Rahmat Samulo, said the firm had aimed to maintain 36 percent market share to cement its role as the market leader.

The share will be maintained through sales of its highly popular multi-purpose vehicles (MPVs) under the brands Kijang and Avanza, according to Rahmat.

Sports utility vehicle (SUV) Rush and Fortuner would also support the target, while the Agya, prepared under the government-backed low-cost green car (LCGC) program, might only contribute 12 percent to its overall sales, Rahmat added.

'With uncertainty in the economy and the depreciation of the rupiah, it will be harder to predict sales,' he said.

A stronger US dollar against the rupiah will push production costs higher as most materials for local manufacturing and certain models still have to be imported.

Second-biggest auto-seller Astra Daihatsu Motor also warned that the currency issue could contribute to slow sales.

The company has eyed sales to stay flat at around 180,000 units this year. Daihatsu delivered 171,195 units between January and November last year, which was equal to 15.12 percent of market share.

Rio Sanggau, who heads Daihatsu's domestic marketing division, said a stronger dollar had helped push up loan rates that would eventually cause higher borrowing costs.

'Around 70 percent of our buyers use credit to purchase cars. Higher rates will have a significant impact on sales,' he said.

In addition to its Xenia MPV, sales are expected to get a boost from the Ayla, its newly-launched LCGC priced below Rp 100 million (US$8,223). The new model is set to generate 20 percent of Daihatsu's total sales this year, according to Rio.

Unlike the two market leaders, Suzuki held a more optimistic outlook on its sales target next year, buoyed by a few models recently rolled out.

Davy Tuilan, sales director of Suzuki Indomobil Sales, said that it eyed a 16 percent market share this year.

As of November, its sales settled at 148,967 units, accounting for a 13.16 percent market share.

'Despite the challenges, we are upbeat about being able to achieve a larger portion of overall sales this year, driven by our new products,' he said, referring particularly to its Karimun Wagon R, which hit the market last November and would now contribute to Suzuki's full-year sales.

Dushyant Sinha, Frost&Sullivan associate director of the automotive and transportation division for AsiaPacific, predicted that there would be no radical changes in the segment or market share trends this year.

'However, LCGCs will surely make their presence felt,' he said.

Potential new entrants such as Nissan's Datsun and those of Suzuki might bring their models to the market, while Toyota and Daihatsu would have the opportunity to consolidate their lead, Sinha further said.

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