Cheap Models Boost Indonesia Car Sales

Jakarta Globe, Harso Kurniawan, November 7, 2013

Attendees look at vehicles displayed at the Indonesia International Motor
Show in Jakarta on Thursday, Sept. 19, 2013. (Bloomberg Photo)

Strong demand for cheap cars sent domestic car sales over one million in the first 10 months of this year, bolstering confidence among car producers that initial sales targets may be exceeded.

Car sales rose to 1,018,786 in the January-to-October period, up 10 percent from 923,071 units sold in the same period last year, based on preliminary data from manufacturers and car distributors.

The cheap cars are mostly sold for less than Rp 100 million a unit, thanks to the government’s low-cost green car policy that offers tax benefits if cars can meet fuel efficiency targets.

Such programs provide affordable alternatives for customers, whose purchasing power fell as the rupiah slumped 18 percent on the back of a current account deficit and accelerated inflation after the government raised subsidized fuel prices in June, said Jongkie Sugiharto, deputy chairman of Association of Indonesian Automotive Manufacturers (Gaikindo).

Car sales are on target to reach 1.2 million units this year, above the industry’s initial target of 1.1 million sales in 2012.

“We are seeing a switch from multipurpose vehicles to these LCGCs,” Amelia Tjandra, marketing director at Astra Daihatsu Motor, said on Wednesday.

Manufacturers have introduced six models under the LCGC program, including the Toyota Agya and Daihatsu Ayla, which went on sale in September.

The models are a result of collaboration between the country’s largest car distributor, Astra International, and Japanese carmaker Toyota Motor.

Sales of the new models are forecast at more than 30,000 units this year and 90,000 units next year.

The models qualify for the government’s low-cost green car policy, which excludes luxury tax on such cheap and low-emissions cars by between 25 and 100 percent if the models are 90 percent made of local content and have mileage of 20 kilometers per liter of fuel.

Honda also started selling the Brio Satya in October, with Nissan’s Datsun Go and Go+ and Suzuki’s Karimun Wagon R set to hit showrooms next year.

Neighboring Thailand introduced a similar program in 2010. Dubbed eco-car, the first model to roll off the production line was the Nissan March. The program is said to have changed the landscape of the car industry in the kingdom.

For individual brands, Toyota still dominates the domestic car market with 357,332 units sold in the first 10 months of this year, followed by Daihatsu with 154,156 units.

Suzuki came third with 134,428 units, ahead of Mitsubishi (131,407), Honda (76,888) and Nissan (52,712).

On monthly data, manufacturers sold 110,507 cars in October, up 3.5 percent from the same month a year earlier.

Shares of Astra International rose 2.3 percent to Rp 6,700 In Jakarta trading on Thursday, while Indomobil Sukses International, which distributes brands like Suzuki and Nissan, lost 1 percent to Rp 5,000, compared with a 0.82 percent decline in the composite index.