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Indonesian Auto Industry to Zoom Ahead with 500,000 Vehicles
Sep 01, 2008

Auto sales in Indonesia are expected to stand at 500,000 this year but manufacturers and government should work together to maintain the growth momentum.

A Senior Official at Industry Association said that the vehicles sales in Indonesia are expected to reach 500,000 Units this year though the government hiked prices on subsidized fuel in May 2008, as reported by
REUTERS.

The association revealed that the vehicle sales in the country spurt 60% in the first five months of 2008 (January-May 2008). Also, the sales of domestic cars in 2007 stood at 434,449 Units from 318,904 Units in 2006.

The main reason for the expected high growth in automobile sales in Indonesia is low interest rates as majority of vehicles in the country are purchased on loans, making sales dependent on the interest rates.

Besides, factors like strong economic growth, continuous rise in export volumes, and big automotive domestic market are contributing to make Indonesia a potential market as well as a strategic location for automobile manufacturing and assembling.

Also, the rising vehicle and motorcycle sales support in improving and measuring the economic activities in the country as a big proportion of GDP directly comes from consumer expense on automobile sector.

However, the automotive industry in Indonesia is still at nascent stage, with most auto companies indulged in vehicle assembling. The industry has gained expertise in the assembly of minivan. However, the two-wheeler and passenger cars segments largely rely on the imported components raising the production and operation costs.

A Research Analyst at
RNCOS said, “Vehicles sales in Indonesia grew at a rapid pace in last few months owing to low interest rates and high economic growth. However, if the industry needs to achieve the sales target for 2008, then the manufacturers have to focus on synchronizing fuel-efficient technology in new models to save consumers from shooting fuel prices. On its part, the government should chart business-friendly policies that encourage investment in the industry and improve road connectivity to tackle infrastructure-related problems.”

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