Car makers brace for bumpy ride next year

JAKARTA. Indonesia’s car manufacturers may expect another year of hardship in 2015 as automobile sales prospects remain gloomy in the lead-up to an imminent fuel price hike and a lingering economic slowdown.

The Association of the Indonesian Automotive Manufacturers (Gaikindo) forecast that sales of four-wheeled vehicles in the major Southeast Asian auto market would likely remain flat at 1.2 million units this year, the same as last year.

“For now, we are anticipating stagnant sales for the next year,” said Gaikindo chairman Sudirman M. Rusdi after a meeting with the Indonesian Chamber of Commerce and Industry on Thursday.

“We will continue monitoring developments in the market because of the nagging uncertainty, for example, as to when [the government] will be raising fuel prices,” he said.

According to him, rising fuel prices would usually impact car sales for three months by causing a decline in sales of between 10 and 15 percent each month. He said the market would manage to adjust afterward.

The new government under President Joko “Jokowi” Widodo earlier pledged to raise fuel prices by Rp 3,000 (24 US cents) to reduce state spending on the oil subsidy. His economic advisors recently revealed the policy may be implemented this November, but no official announcement has been made so far.

From January to September car sales, a key indicator of consumption in Southeast Asia’s biggest economy, rose slightly by 2.71 percent to 932,943 units from last year. Based on the reading of the first three quarters of this year, the association earlier revised its estimate, saying that this year’s sales might increase by 4 percent to 1.25 million, instead of remaining flat at 1.2 million, the same as last year’s figure.

However, with the upcoming fuel price hike, the association again scaled back its estimates.

After years of resilience, Indonesia is now struggling with a new economic downturn, a repeat of the economic conditions before 2009, with a dwindling of people’s purchasing power.

Some domestic manufacturers have been locking horns to win the hearts of their customers through aggressive promotions as well as through so-called discount wars, at the expense of slimmer margins of profit.

Gaikindo expected the low-cost green car (LCGC) would continue playing a role as one of the key drivers of overall sales growth in the future.

“LCGCs help boost our sales amid weakening purchasing power. We may see this situation remaining the same until next year,” Sudirman said.

According to Gaikindo’s data, the affordable cars, which are tagged at around Rp 100 million each, accounted for 13.5 percent of total sales during the first three quarters of this year, slightly lower than its target of 14 percent for the year.

Gaikindo’s data also found out that there had been a shifting trend in recent months, in that those who bought cars were mostly first-time car owners: representing around 70 percent of total car sales. Early this year, only around 30 percent of people purchasing automobiles were first-time car owners.

Sudirman said that Gaikindo would maintain the 14 percent sales target for LCGCs for next year because of the sluggish economy. (Linda Yulisman)