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Car sales expected to recover after 2015 slump
Car producers expect business will recover in 2016 as projected higher growth in the economy will help push up sales, which unusually dropped sharply in 2015
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Car producers expect business will recover in 2016 as projected higher growth in the economy will help push up sales, which unusually dropped sharply in 2015.
The Association of Indonesian Automotive Manufacturers (Gaikindo) predicts total car sales will grow 5 percent to approximately 1.1 million units next year if the economy grows above 5 percent as estimated by the government.
'The economy should grow more than 5.3 percent and the value of the rupiah should be less unstable,' the association's chairman Jongkie Sugiarto said recently.
The government expects the economy to grow 5.3 percent next year, a slight increase from this year's predicted growth of 5.2 percent.
Jongkie said his association had met with President Joko 'Jokowi' Widodo in October and had asked the President to consider several tax incentives for both car manufacturers and buyers to boost sales.
Lower taxes, he said, would not adversely affect state incomes as the gap could be filled by more car purchases due to the lower prices resulting from the lower taxes.
Data from Gaikindo showed that car sales stood at 940,072 units as of November. The figure was 16.75 percent lower year-on-year (yoy) than the 1.13 million units recorded during the January to November period of last year.
Domestic car sales exceeded one million for the first time in 2012, reaching 1.1 million. Sales further increased to 1.23 million units in 2013 but slightly dropped to 1.21 million units in 2014.
Gaikindo revised down its car sales target for this year to around 1 million units from an original target of 1.2 million units.
'We hope the sales will reach slightly more than one million units by the year's end,' Jongkie said.
Bank Central Asia (BCA) economist David Sumual said on Monday that the overall outlook for next year's car sales would be better compared to this year because people who had postponed car purchases in 2015 would start buying in 2016.
'This is in line with the improving economy and with people's confidence that the situation will get better,' he said over the phone.
A recent survey conducted by Bank Indonesia (BI) showed that consumer confidence in November had returned to an optimistic level of 103.7, higher than the 99.3 recorded in the previous month. A level lower than 100 indicates pessimism, while any number higher than 100 shows optimism.
Consumers surveyed by BI expressed optimism that the country's economy was improving and would continue to improve over the next six months.
Indonesia's economic growth stood at 4.73 percent in the third quarter of this year, up from 4.67 percent recorded in the previous quarter. Economists see the pick up as a turning point for the country, grappling with a sluggish economy unseen since 2009.
Meanwhile, David said that annual automotive shows could help boost car sales as consumers were often lured by price discounts offered at the exhibitions.
Two automotive exhibitions, the Gaikindo Indonesia International Auto Show (GIIAS) and the Indonesia International Motor Show (IIMS), both of which took place at the end of August, seem to have successfully boosted car sales figure.
According to Gaikindo data, August's sales figures jumped 62.79 percent month-on-month to 90,538 units from 55,615 units booked in July. The sharp monthly increase, however, failed to prop up the annual sales.
Gaikindo, which is also the organizer of GIIAS, booked Rp 5.45 trillion (US$399.27 million) from the sale of 17,077 cars during the event.
Meanwhile, IIMS booked Rp 1.63 trillion from 4,894 units of both cars and motorcycles sold during the event. The combined sales of the two events surpassed that of the previous year's exhibition, which only booked Rp 5.4 trillion. However, last year's event did not include two-wheeled vehicles.
David argued that these trends should be supported by the government through a lower loan interest rate program.
Reza Priyambada, head of research at NH Korindo Securities Indonesia, echoed a similar view, arguing that a lower rate was required as between 55 and 60 percent of car purchases used automotive financing schemes.
'If there is no improvement in the lending rate, then the sales will be no different [than this year],' he said, adding that the car market would continue to be dominated by middle and lower-class buyers, who were sensitive to lending rates.
Meanwhile, automotive industry observer Soehari Sargo advised auto companies to increase exports in a bid to offset cooling domestic demand.
The slow demand pushed diversified conglomerate Astra Internasional Indonesia, whose automotive sector contributes more than 40 percent to its profits, to record a poor business performance up to September. The sector's net profits slid 10 percent to Rp 5.33 trillion (US$390.48 million) from Rp 5.90 trillion yoy, while the conglomerate's total profits decreased 8 percent yoy to Rp 138.18 trillion.
Astra Internasional investor relation head Tira Ardianti said recently that her office projected that the contraction in car sales would continue into next year.
'We predict flat growth next year,' she said.
However, she expressed hope that slow car sales would soon bottom out and then start to climb up and slowly recover.
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