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Indonesia car sales should recover in 2020, association says

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Car sales in Indonesia are likely to recover next year, but not by much, after plunging this year during an economic slowdown, an industry association executive said on Thursday.

[JAKARTA] Car sales in Indonesia are likely to recover next year, but not by much, after plunging this year during an economic slowdown, an industry association executive said on Thursday.

The auto industry is an important part of Indonesia's economy and car sales are often used to gauge private consumption.

This year, 849,609 cars were sold from Jan to Oct , down 12 per cent from the same period a year earlier.

The automotive industry association Gaikindo has cut its sales estimate for this year to around 1 million from 1.1 million, co-chairman Jongkie  Sugiarto said.

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"In 2019, there were political campaigns, elections - for nearly six months people's concentration was on other things and they didn't think about buying or changing cars," he said.

The association expects sales to rise by 5 per cent next year, with economic conditions stable and interest rates lower, he said, adding that he hopes gross domestic product will grow around 5 per cent.

Indonesia's central bank has trimmed interest rates four times by a total of 100 basis points this year to counter the global economic slowdown, measures that eventually will make car loans cheaper.

This year, GDP growth is set to slow for the first time in four years to 5.05 per cent, from 5.17 per cent in 2018, according to government estimates. The government targets 5.3 per cent growth in 2020, though its targets have rarely been achieved.

Gaikindo's sales outlook is in line with a forecast by Fitch Solutions, a think tank affiliated with the ratings agency Fitch Ratings. It foresees sales of 1.07 million cars this year, down 7 per cent from 2018, led by passenger car sales. Its 2020 outlook is slightly bleaker: 3.4 per cent growth from 2019's level.

"We believe new vehicle sales will face significant pressure for the rest of 2019 and into early 2020 in Indonesia as a slowing economy results in used vehicle sales become increasingly attractive for consumers looking to cut back on spending," Fitch said in a report this month.

"We however remain confident that Indonesia's automotive industry will rebound amid measures to stimulate loan growth, which will feed into higher vehicle sales throughout the year," it said.

Indonesia's car market is dominated by Japanese brands, with Toyota and Daihatsu leading sales. 

REUTERS