Mr. Dushyant Sinha, Associate Director, Automotive Practice, Asia Pacific at Frost & Sullivan said the company is maintaining its forecast as new developments could make this a watershed year for the Indonesian automotive sector with long term strategic impact.
He added that the growing domestic consumption and aggressive promotional campaigns on the supply side will support overall growth this year. There is a strong likelihood of the Low Cost Green Cars (LCGC) to begin rolling later this year, further boosting sales.
However, Dushyant cautioned that the fuel price hike and the resulting inflationary pressures could curtail household spending, putting a brake on the growth in vehicle sales in Indonesia. He added that an expected interest rate increase coupled with tighter financing is also likely to crimp vehicle sales growth. He also said that the cannibalization of some segments due to LCGC and unlikely improvement in the commodity sector will also hamper vehicle sales growth in Indonesia. The weakening Rupiah, however, could help exports.
"However, despite numerous imponderables and uncertainties, we would like to hold on to our estimate of 7.5 per cent growth this year to 1.2 million units," Dushyant said.
He noted that vehicle sales grew more than 12 per cent in the first half of 2013 due to a growing economy, rising wages and low interest rates. July saw record vehicle sales of over 112,000 units driven primarily by extensive promotional campaigns ahead of Lebaran.
• Dushyant said that the LCE (low carbon emission)-LCGC program could be one of the catalysts to bring the Indonesian automotive sector to greater heights. The new LCGC program is aimed at incentivizing low cost and lower cc cars. It is being bundled with the LCE policy to promote alternative fuel vehicles;
• He added that the Indonesian Government is also slowly rolling back subsidies in its effort to ease subsidy burden through increase in fuel prices and electricity tariffs and restricting usage of subsidized fuel. He added that the increase in minimum wages is part of the Indonesian Government’s initiative to increase purchasing power and private consumption of Indonesians.
Dushyant said that the tightening of vehicle finance, stringent emission standards and increase in vehicle tax rate could impact vehicle sales in the near future, but they are steps in the right direction by the Indonesian Government.
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