Indonesia’s sluggish car sales have taken a toll on General Motors (GM), which has decided to stop selling cars in the country after falling drastically behind other carmakers in one of Asia’s largest car markets.

The United States-based automotive company announced on Monday that it would permanently halt its vehicle sales in the Indonesian market at the end of March next year.

GM’s Southeast Asia president, Hector Villarreal, said in a statement obtained by The Jakarta Post that the decision was in line with the company’s global strategy to focus on markets that had a clear path to achieve a sustainable profit.

“In Indonesia, we don’t have a specific automotive market segment that can give us sustainable profitability,” he said on Monday, adding that factors like weakening commodity prices and currency pressures also added to the reasons why it chose to permanently stop its sales in the country.

The decision was made less than five years after the company halted the production of its multipurpose vehicle (MPV) brand Chevrolet Spin in June 2015.

The company started producing the MPV with a production capacity of 40,000 cars a year in Pondok Ungu, Bekasi, West Java, in April 2013 to tap into the country’s large MPV market. However, the company failed to compete with the popularity of Japanese carmakers such as Toyota, Suzuki and Daihatsu.

Data from the Association of Indonesian Automotive Manufacturers (Gaikindo) showed that wholesale figures of Chevrolet — the only GM brand sold in Indonesia — continued to decline since 2017, with 970 units sold in the January to September period of this year. The figure reflects a 48.59 percent year-on-year (yoy) drop from the same period in 2018.

Villarreal conceded that the company’s withdrawal would affect its employees and partners. However, he assured that the former would receive adequate severance pay and the latter the support they needed during the transition period.

He also assured that GM would still acknowledge the warranties, maintain aftersales service at official Chevrolet outlets across the country and also partner with dealership networks to ensure the smooth transition and preparation of aftersales services.

GM’s decision to leave the country was made amid a continued decline in general car sales in the country. According to Gaikindo’s latest data, 753,600 cars have been sold as of the third quarter of this year, down 12 percent yoy.

Gaikindo vice chairman Jongkie Sugiarto said on Tuesday that the association had forecast the slump at the beginning of 2019, taking into account the general elections held in April.

Although he declined to comment too much on GM’s exit from the Indonesian market, Jongkie said Gaikindo regretted the company’s decision as he believed the country’s car market still had the potential to grow.

“Everyone’s sales are down, but we have all tried to survive during this hard time,” he said, urging GM to adjust its products to fit the Indonesian people’s preferences in order to survive instead of totally withdrawing from the market.

Automotive expert Bebin Djuana also believed that GM’s exit was mainly due to its inability to compete with other carmakers.

Meanwhile, Center of Reform on Economics (CORE) Indonesia economist Mohammad Faisal said he was not surprised by GM’s decision as most US and European car brands found it hard to compete with their Japanese counterparts, especially in the non-premium car market.

He explained that 97 to 98 percent of Indonesia’s automotive market share in all segments of the market was controlled by Japanese manufacturers, which received better benefits and incentives.

“Through the Indonesia-Japan Economic Partnership Agreement [IJ-EPA], Japanese car and spare parts manufacturers receive additional benefits that facilitate the establishment of new plants and lower import duties in Indonesia — which are not available for its American and European counterparts,” he said.

Moreover, he said, the slowing global economy, low commodity prices and political uncertainty had prompted middle-class customers to shift to car brands that are cheaper but have the same sophisticated features as those provided by American and European carmakers.

With political stability having somewhat returned following the appointment of President Joko “Jokowi” Widodo’s new Cabinet, Bebin believes that the domestic auto sales would begin to recover in the fourth quarter of this year.

Jongkie shared a similar sentiment but predicted that car sales would reach 1 million units by the end of the year and slightly increase to 1.1 million in 2020.