Frost & Sullivan Forecasts Indonesia's 2016 Vehicle Sales to Contract by 4.3% to Reach 969,100 units

Jan 29, 2016, 01:58 ET from Frost & Sullivan

JAKARTA, Indonesia, Jan. 29, 2016 /PRNewswire/ -- Frost & Sullivan is expecting total vehicle sales in Indonesia to decline 4.3 per cent year-on-year to reach 969,100 units in 2016, mainly due to the weak economic conditions.

Vivek Vaidya, Vice President, Automotive & Transportation Practice, Asia Pacific at Frost & Sullivan said that the depressed commodity market, weak prices and further depreciation of the Rupiah are likely to be key factors that will pull down sales.

He added that the increase in interest rates by the US Fed and the turmoil in the Chinese economy would further weaken the Rupiah, making import of both parts and components and completely built-up units (CBUs) more expensive. "This could have a significant impact on the prices of many models," he said. "Imported CBUs, especially luxury cars, are likely to become more expensive.  LCGC cars will be least impacted due to high degree of localization," he added.

However, Vivek Vaidya said that there are incentives for investments in SEZs, 8 per cent hike in infrastructure spending, development assistance to SMEs, proposed cuts in taxes, removing restrictions on foreign investment – direct increase in CV demand as Government aims for growth between 5 – 6 per cent. "The Government has initiated measures to spur the economy which would help stimulate the demand for Commercial Vehicles", he added.

2015 Vehicle Sales Review

Vivek Vaidya said that in 2015, Indonesia's total industry volume (TIV) declined 16 per cent year-on-year to 1.013 million units, mainly due to economic volatility and the resulting low consumer confidence which outweighed the efforts of Government's stimulus measures and the loose monetary policy.

However, in a declining market, Low Cost Green Cars (LGCG) were the most resilient while SUVs showed a major jump in demand. Vivek Vaidya noted that SUVs also increased their market share buoyed by new models and eating into the MPV and Sedan segments.

Vivek Vaidya also said that the Government has also initiated to lowering of down payment on cars from 30 percent to 25 percent in June 2015. Some of brands have launched new models with aggressive promotion through the Auto Show in H2. For example, Honda their market consolidates further continues its impressive run, riding on the success of the Mobilio and the good reception of HR-V.

He added that the economy grew by 4.7 percent, the lowest in a decade, and this was not sufficient to sustain the momentum required by the auto sector to grow and expand. The economic slowdown and demand contraction in key export destinations like China also contributed to the market volatility, Mr. Vaidya said.

However, despite lower vehicle sales, Indonesia still maintained its position as the largest automotive market in ASEAN.

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SOURCE Frost & Sullivan