LCGCs shine despite gloomy car sales

March 19, 2016, 02.37 PM | Source: The Jakarta Post
LCGCs shine despite gloomy car sales


JAKARTA. Low-cost green cars (LCGCs) seem to have their own special appeal to consumers, and have recorded a strong performance despite the general trend of declining national car sales in the first two months of the year.

Sales of LCGCs increased by 8 percent to 28,160 units in the first two months of this year. Meanwhile, car sales nationwide dropped by 5.3 percent year-on-year to 173,262 units, according to data recently issued by diversified conglomerate Astra International.

Association of Indonesian Automotive Manufacturers (Gaikindo) secretary general Noergadjito said on Friday that LCGC sales would likely bounce back to 2014 levels this year as the economy was growing more strongly on the back of government spending and stimulus packages.

“Our 2016 prediction is that LCGC sales will head to the 2014 saleslevel, or increase by 5 percent,” he said. 

LCGC sales hit 172,120 units in 2014, an impressive record for a new segment that was launched in September in the previous year.

LCGC sales declined to 161,500 units in 2015, when the country’s economic growth slumped to a six-year low.

The government has fully supported the development of LCGCs by exempting fuel efficient cars from the luxury tax.

It also imposes a price cap of Rp 100 million (US$7,600) in an attempt to boost car sales in the country to 2 million units by 2017 from around 1 million units in recent years.

An LCGC unit is also required to have a petrol engine below 1,200 cc, or a diesel and semi-diesel engine below 1,500 cc.

Toyota Agya, Daihatsu Ayla, Honda’s Brio Satya, Suzuki’s Karimun Wagon R and the Datsun GO and GO+, are among small-engine cars that currently qualify for the LCGC program.

Astra International investor relations head Tira Ardianti said that while the LCGC segment did not significantly contribute to her firm’s total auto sales, it was an important part of the company’s portfolio.

“We’re optimistic that the LCGC segment will remain good in the future, in line with the growing number of middle-class consumers in the country,” she said.

For Astra International, its Daihatsu Ayla and Toyota Agya brands contributed nearly 20 percent to the company’s total car sales in the January-February period this year from 16.9 percent during the same period of last year.

Sales of the two brands hit 16,011 units in the two-month period this year from 14,735 units in the same period of last year.

Tira said, however, that she could not predict yet whether the increasing sales were due to shifting preferences from consumers that were recently reluctant to spend on “luxurious” goods due to economic headwinds.

Frost and Sullivan Asia Pacific automotive vice president Vivek Vaidya said previously that LCGCs were well-placed in Indonesia’s auto market.

“I think it’s going to be a strong segment in Indonesia. We expect the segment will grow. Last year the market declined by 16 percent, but sales in the LCGC segment declined by just 6 percent,” Vaidya said.

Indonesia’s car sales slumped by 16 percent to 1.01 million units last year from 1.2 million in 2014. Gaikindo has projected that car sales will hit around 1.05 million units this year, while Frost and Sullivan has predicted a 4.3 percent decline. (Khoirul Amin)

Editor: Yudho Winarto

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