Indonesia Automotive Market to experience steady growth in 2018, driven by positive consumer sentiment

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JAKARTA, Indonesia, Jan. 16, 2018 /PRNewswire/ -- The Indonesia automotive market is expected to remain resilient in 2018. Vehicle sales are likely to reach 1.125 million units at a growth rate of 4.6%. Among the sectors, commercial vehicles are expected to be in high demand, along with steady growth in LCGCs and MPV segments.

Mr. Vivek Vaidya, Senior Vice President of Mobility at Frost & Sullivan says the long term factors such as GDP growth rate, favorable demographics and low car parc per thousand point towards a strong long term growth rate. However, we need to focus on 2018 specific factors to understand the dynamics.

He added, "The upcoming car launches with new models, facelifts and variants especially for some key market models in MPV segments are expected to drive the sales. The Commercial Vehicle market will still continue to be fueled by demand in construction and infrastructure segment."

He also added, "There is lot of pent up demand in commercial vehicles segment. Due to production shortage the entire demand in 2017 could not be fulfilled, this demand is going to spill over to 2018 boosting the commercial vehicles sales, further."

The consumer sentiment is expected to remain positive in 2018 largely due to positive economic outlook, stable exchange rate and reduction in prime lending rate. In fact the cut in prime lending rate by 0.5% which took place in 2017 is likely to have strong impact in 2018. Lower lending rate would spur demand and automotive sector would be benefited by this favorable fiscal incentive, he added.

Only negative factors in 2018 are pressure to contain fiscal deficit and likely changes in energy prices. Fiscal deficit still stands at about 2.2% of GDP, which may put pressure on tax revenues prompting stricter compliance and use of other means to boost tax revenues.

2017 Review

Vehicle demand in Indonesia is expected to grow by 1.2 per cent in 2017. The trends in passenger cars and commercial vehicle were quite contrasting. Passenger cars declined by 2.6% despite new model launches and high consumer confidence, on the other hand commercial vehicles increased by whopping 17.1% largely due to demand from construction and mining segment.

Passenger vehicles market share by OEMs in 2017

Despite strong long term growth indicators like GDP growth rate and strong demographics, passenger car sales declined. New exciting launches like Mitsubishi Xpander, Toyota Innova facelift, Suzuki Ertiga facelift didn't help either. Only LCGC segment turned out to be a bright spot in the gloomy passenger vehicles market. LCGC segment grew by 6.3%.

Mr. Vaidya commented that this shows that despite high consumer confidence indicators and long term growth trends, customers are being conservative and are buying value offerings. LCGC MPV models also may be challenging the MPV segments due to attractive pricing.

Commercial vehicles market share by OEMs in 2017

Mr. Vaidya observed that strong demand in commercial vehicles was due to strong show in mining, manufacturing and construction segment.

He added, "Mitsubishi and Hino gained from huge demand for medium and heavy trucks. However, the slowing retail and consumer sectors restrained demand for pick-ups and light trucks."

The Frost & Sullivan Mobility practice provides global market intelligence, prescriptive research to execute market growth opportunities, and tailor-made advisory services within the personal and freight mobility market. To view current and upcoming research, please visit http://www.frost.com/c/10046/sublib/category-index.do?category=industry

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