Indonesia International Motor Show: Indonesian vehicle sales grow 6% y/y in Q1, automakers showcase new models

03 May 2017 Namrita Chow

New-vehicle sales in Indonesia increased in March for the 12th consecutive month, reflecting continued improvement in the economy and strong demand for affordable vehicles.

IHS Markit Perspective:

  • Significance: New-vehicle sales in Indonesia grew by 6% year on year (y/y) during the first quarter of 2017 with vehicle production up 12% y/y.
  • Implications: The expansion in sales during the first quarter reflected continued improvement in the economy and strong demand for affordable vehicles under the government's low-cost green car (LCGC) incentive scheme.
  • Outlook: IHS Markit expects Indonesia's light-vehicle sales to increase by 3.7% y/y in 2017 to about 1.05 million units, with production up 3.4% y/y to 1.17 million units.

Wholesale new-vehicle sales in Indonesia - including passenger vehicles (PVs) and light, medium, and heavy commercial vehicles (MHCVs) - grew by 8.3% year on year (y/y) in March to 101,872 units, according to data from the Association of Indonesian Automotive Industries (GAIKINDO). Of this total, imports of completely built-up (CBU) units rose by 2.7% y/y to 8,045 vehicles. Sales of light vehicles, including PVs and light commercial vehicles (LCVs), went up by 6.5% y/y to 94,049 units and accounted for 92.3% of the monthly total. Sales of MHCVs surged 35.6% y/y to 7,823 units, accounting for the remaining 7.7%. During the first quarter of 2017, total vehicle sales in the country rose 6% y/y to 283,245 units, with light vehicle sales up 4.8% y/y to 262,003 and MHCV sales up 23.6% y/y to 21,242. Imports of CBU units during the quarter dropped 14.2% y/y to 19,654 units.

Vehicle production in the country increased 8.6% y/y to 111,336 units during March. Output of light vehicles went up by 7.3% y/y to 103,246 units and MHCV production surged 28.4% y/y to 8,090. Automakers' exports of CBU vehicles soared 50.3% y/y to 21,803 units but exports of completely knocked down (CKD) kits slumped 76.3% y/y to 3,210. During the first quarter, total vehicle production in the country rose 12% y/y to 319,241 units. Light-vehicle production improved 12.3% y/y to 298,906 units and MHCV output grew by 7.4% y/y to 20,335. First-quarter exports of CBU units jumped 53.4% y/y to 56,371 units but exports of CKD kits fell 35.1% y/y to 17,546.

Indonesia International Motor Show 2017

Automakers are showcasing new models during the 2017 Indonesia International Motor Show from 27 April to 7 May to gain market penetration in the country. Toyota is displaying the new Agya hatchback along with 19 other models. Mitsubishi has launched the new Pajero Sport Dakar 4x2 Ultimate sport utility vehicle (SUV), a facelifted version of the Triton pickup, and the new Triton GLX 4x2 Single Cabin pickup. Honda has launched the refreshed CR-V SUV at the show. The new CR-V is powered by 1.5-litre turbo engine, whereas the outgoing model was powered by a 2.4-litre engine. The vehicle also features various interior and exterior cosmetic and technological updates. Kia is exhibiting the fourth-generation Rio hatchback. Suzuki is showing its Ignis SUV and Chevrolet has launched the new Colorado pickup powered by a 2.8-litre engine mated to a six-speed automatic transmission. Mazda has showcased four models during the show: the CX-3 and CX-5 SUVs and the Mazda 2 and Biante multipurpose vehicles (MPVs). Tata has shown the Ace van and the Xenon pickup. Among the premium brands, Mercedes-Benz has introduced the GLC Coupé SUV along with 18 other models and BMW has featured the locally assembled 7-Series sedan. Mini has displayed the new Countryman SUV. Audi has launched the new A5 Coupé during the show.

Outlook and implications

Indonesia is the largest light-vehicle market in the Association of Southeast Asian Nations (ASEAN) region. It is expected to account for 32.9% of total light vehicle sales in the region in 2017, according to IHS Markit's light-vehicle sales forecast data.

The growth in new vehicle sales in Indonesia during the first quarter came on the back of continued improvement in the economy as well as an interest rate reduction, a tax amnesty scheme, and a price cut for premium gasoline (petrol) and diesel. The uptrend was further fuelled by the Indonesian government's low-cost green car (LCGC) incentive scheme, under which eligible locally produced models benefit from significant reductions in the hefty 125% luxury sales tax on vehicles in the country. LCGCs are priced at about IDR100 million (USD7,510), have an engine size less than 1.2 litres and a fuel economy of at least 20 km/litre, and must be assembled locally with at least 80% local content. Sales of LCGCs during the first quarter surged 55.5% y/y to 64,224 units, accounting for around 23% of vehicles sold in the country, according to GAIKINDO data. Meanwhile, automakers are using the Indonesia Motor Show to announce their plans to launch new models in a bid to increase sales in the country.

IHS Markit expects Indonesia's light-vehicle retail sales to grow by 3.7% y/y to 1.05 million units in 2017. This improvement will be propelled by a non-taxable income level adjustment that will benefit the lower-middle-income segment. Popular products ranging from affordable LCGCs to MPVs are also expected to spur new demand this year, according to IHS Markit's Indonesia light-vehicle sales forecasting analyst Mayuree Chaiyuthanaporn. MPVs will remain the best-selling body type in the country this year. The body type is likely to post sales of 477,846 units, up 4.4% y/y in 2017, giving it a market share of 45.5%. Sales in the MPV segment will be led by the Toyota Avanza, although its volumes are expected to decline by around 16.2% y/y to 110,535 units, largely on growing competition in the segment.

Indonesia is also ASEAN's second-largest light vehicle production base, after Thailand. It is predicted to account for 29.7% of light-vehicle production in the region in 2017, according to our light-vehicle production forecast data. Indonesia's LCGC scheme is gaining popularity among global automakers, reflected in investment plans announced by companies including Honda, Mercedes-Benz, and Mitsubishi. Expansion in vehicle production during the first quarter was fanned by growing demand for LCGCs. LCGC production in the country grew by 49.4% y/y to 66,052 units during the period, accounting for about 20.7% of total production. Furthermore, the growth in production was also driven by higher exports of CBU vehicles to Vietnam. CBU exports to Vietnam from Indonesia totalled 3,108 units during January-February 2017. This is almost equivalent to total imports of 3,880 units during 2016, signifying strong growth. This surge in CBU exports to Vietnam can be largely attributed to a reduction in import tariffs on CBU units produced in ASEAN from 40% to 30% at the beginning of 2017. Toyota has ended local assembly of the Fortuner sport utility vehicle (SUV) in Vietnam to import the vehicle from Indonesia and reap this benefit.

The Indonesian government expects vehicle output in the country to reach 2.5 million units in 2020, mainly on growing demand for LCGCs and an increase in foreign direct investment (FDI) in the automotive sector. In a bid to reach its target, the government plans to make LCGCs more affordable, which it hopes will lift sales and encourage automakers to expand local production. The Indonesian government also aims to raise local content in domestically assembled vehicles to 90% by 2019, up from a current industry average of 60%. IHS Markit forecasts that light-vehicle production in the country will grow by 3.4% y/y to 1.17 million units in 2017. We maintain a conservative outlook for subsequent years and expect light-vehicle output in Indonesia to reach 1.48 million units in 2020.

Furthermore, the Indonesian government has raised the country's infrastructure budget to IDR387 trillion in 2017, up from IDR347 trillion in 2016. Commercial vehicle manufacturers are bringing in new truck models and investing in their local plants to tap into this growing opportunity.

The emergence of Indonesia as a production hub relates to its plants' capacity utilisation being far lower than at affiliated plants in Thailand, said Jessada Thongpak, senior analyst for IHS Markit's ASEAN light vehicle forecasting. In Indonesia, original equipment manufacturing (OEM) bases tend to have less than 60% capacity utilisation, compared with Thailand's average of more than 65%. The shift to Indonesia will therefore continue as skilled low-cost labour offers a further advantage.

About this article

The above article is from IHS Markit Same-Day Analysis of automotive news, events and trends, and is a deliverable of the World Markets Automotive Service. The service averages thirty stories per day and also provides competitor and country intelligence. Get a free trial.


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