New vehicle sales in Indonesia, including passenger cars and light, medium, and heavy commercial vehicles declined 5.5% year on year (y/y) in March to 93,990 units, according to data released by the Association of Indonesian Automotive Industries (Gaikindo). Of this total, imports of completely built-up (CBU) units slipped 22.3% y/y to 8,297 units. Total vehicle production in Indonesia also fell during the month, by 5.2% y/y to 102,496 units. Of these, original equipment manufacturers (OEMs) in Indonesia exported 14,430 CBU units, down 20.4% y/y, while shipments abroad of completely knocked-down (CKD) kits surged 61.4% y/y to 13,548 units. In the first quarter of 2016 (January–March), industry sales sagged 5.4% y/y to 267,227 units, while vehicle production declined 5.1% y/y to 285,093.
Significance: Indonesia's new vehicle market is struggling in the face of rising inflation, fluctuating exchange rates, an increased benchmark interest rate, and changing government policies. These factors are sapping consumer sentiment amid an unstable economic outlook. Sales declined for two consecutive years in 2014 and 2015). During the first two months of 2016, total industry sales dropped 5.3% y/y to 173,262 units. But IHS Automotive forecasts that Indonesian industry sales will grow during 2016, mainly on a low base of comparison, expected public infrastructure projects, and rising demand for low-cost green cars and low-cost multipurpose vehicles (MPVs). We expect light-vehicle sales in the country to gain 1.4% y/y to around 974,508 units in 2016. We also forecast that production of light vehicles in the country will expand by 1.4% y/y to 1.07 million units in 2016.
