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Elections, Demand for Green Cars to Boost Sales in Indonesia

06 February 2014
Jakarta. Global business consultancy Frost & Sullivan is upbeat about the prospects for Indonesia’s car market, expecting sales to grow on the back of this year’s elections and strong demand for cheaper cars.
“We expect another record year in 2104, with sales to increase to about 1.31 million units,” Vivek Vaidya, an executive at Frost & Sullivan, told reporters on Wednesday. It is a 6.5 percent growth from the 1.23 million cars sold in 2013 as reported by the Association of Indonesian Automotive Industries (Gaikindo).
Vaidya’s estimation is higher than the target set by Gaikindo. Jongkie Sugiarto, an executive at Gaikindo, said at the same meeting that the association expects the car sales to stand pat.
He said that even if there was political upheaval during the elections, or if the rupiah weakened dramatically against the dollar, the association still expected car sales to only fall to 1.1 million this year.
But positive factors, such as the election and the low-cost green car (LCGC) are stacking up higher than the negative factors in Indonesia this year, according to Vaidya.
“The elections will increase economic activity,” he said.
The legislative election will take place in April and the presidential election will be held in July. Experts expects campaign expenses to boost incomes in Indonesia and in turn boost consumption.
“Meanwhile, the LCGC is like a magic pill for Indonesia. It will create demand, increase production, create employment and at some point will contribute to exports for the country,” Vaidya added.
Frost & Sullivan estimates sales of green cars to reach 150,000 units this year, which is almost triple the sales of LCGCs in 2013. According to Jongkie, 51,180 units were sold within only four months when sales started in September.
Jongkie said the LCGC is creating a market of its own with its price range of about Rp 100 million ($8,000). However, he does expect some shift away from low-end multipurpose vehicles, with owners opting to downgrade to LCGCs. Low-end MPVs are those with 1,500cc engine or smaller.
Low-end MPVs hold the biggest market share in Indonesia’s car market with about 52 percent of total vehicle sales last year.
Despite the positive factors, Vaidya said Indonesian carmakers still need to watch the impact of a weaker rupiah and higher interest rates. He said tightening financing rules may curb some demand, especially when 75 percent of car sales in the country is through loans from banks or financing companies.
In term of production, Vaidya expects Indonesia to surpass Thailand by about 2018 to 2019.
Source by: The Jakarta Globe


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