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Indonesia?s Car Industry on Acceleration Mode
Feb 15, 2008

The car industry in Indonesia is in throes of resurgence in car sales on the strength of various factors, mainly the liberalization of the region’s car industry.

Car sales posted a revival in 2007 following a dismal 2006, as total sales were closed at 434,449 units, high by 36.2% the 2006 total of 318,904 units, reported The Jakarta Post.

Gaikindo (Indonesian Automotive Industry Association) declared 4x2 non-sedan to be Indonesia’s best-seller with variations including 4x2 low Multi Purpose Vehicles (MPVs) that resemble van, 4x2 medium MPVs and 4x2 high Sports Utility Vehicles (SUVs).

Behind the acceleration of the Indonesian car industry are the forces like easily available credit, low interest rates and greater consumer lending by banks. The spurt in the availability of new affordable locally-assembled models has also triggered an explosion in Indonesia’s car industry with no signs of slowdown in near term.

Also filliping car sales were better economic factors like lower inflation rate that facilitated more modest prices for cars. Admirers of imported cars also benefited from the availability of low priced imported cars due to the stability of Rupiah currency against the US dollar.

Total implementation of ASEAN Free Trade Area (AFTA) led to liberalization of the region’s car sector as tariff barriers disintegrated, allowing Southeast Asian countries to combine their economies for a single production base. The result was the creation of a regional market of more than 500 Million consumers, sending car sales soaring.

The government did its part in facilitating growth for the car industry with measures like bringing down expenditure on subsidies and raising domestic fuel prices.

In the opinion of some industry experts, efforts are underway by car makers in the country to step up production capacity at pace with demand apart from making the most of the market potential given a fairly low ratio of car ownership in a country with the fourth biggest population in the world.

A senior research analyst at RNCOS said, “This year is set to witness an escalation of car sales in Indonesia due to availability of the affordable credit, improved economy and introduction of wider variety of new models. With the complete liberalization of the regional car sector in Indonesia, the country’s car industry will result in greater competition which will compel manufacturers to resort to more aggressive promotion tactics to boost sales.”

Related Market Research Reports:
Vietnam Automobile Industry Forecast (2007-2010)
Asian Automotive Industry Outlook (2007-2011)
Indian Automobile Sector - A Booming Market