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Indonesia Autos Report Q1 2012
Business Monitor International, Nov 2011, Pages: 49
Although Indonesia has one of the largest passenger car markets in South East Asia, commercial vehicles have been outperforming the industry average in recent years and this a trend we expect to continue in the short term. Strong demand for commercial vehicles shows a return to spending for businesses and bears out our view that the tripling in value of the construction sector over the next five years, as forecast by our Infrastructure team, will increase truck demand.
Despite concerns that floods in Thailand would hamper supplies of key components and vehicles to surrounding countries, Indonesia's total vehicle sales in September 2011 rose 62.4% year-on-year (y-o-y) to 79,835 units to keep the market on track for another year of record sales. Sales for the nine months are at 659,857 units. Although the effects are more likely to be felt in the latter months of the year, as production was more heavily disrupted in October, the strong performance of the commercial vehicle market has prompted a slight upward revision in BMI's forecasts for sales and production.
Looking ahead to 2012, we expect car sales to remain on a positive growth path, although we do think some level of slowdown is inevitable, given the pace of growth to date. One of the biggest risks to our forecast for passenger car sales is the potential for new regulations on car financing, which were suggested in October to avoid a credit bubble. If a plan were introduced to restrict vehicle credit, we believe this could lead to a drop in sales similar to that experienced in the UAE in the period immediately after similar regulations were introduced.
Nevertheless, the passenger car segment still attracts investment thanks to clear government policy. Nissan Motor has revealed its localisation targets for Indonesia, where it plans to take part in the government's low-cost green car (LCGC) project. The company held a meeting with around 500 local suppliers to discuss potential business ties, in a validation of BMI's view that the Indonesian government has been one of the most pro-active in the ASEAN region at looking to attract investment in the production segment through industry policy.
China's Geely Automobile has also announced plans to establish its regional production hub for South East Asia in Indonesia. The new plant will increase Geely's local output by five times and improve access to other growth markets in the region. As well as falling in line with BMI's view that carmakers from emerging markets will expand their presence globally, it is also further evidence of Indonesia being chosen by investors over the long-time regional favourite of Thailand.
Business Monitor International's Indonesia Autos Report provides industry professionals and strategists, corporate analysts, auto associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Indonesia's automotive industry.
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