Car Sales Target Dips Below 1m as Economic Reality Bites for Manufacturers
Jakarta. Indonesia's automotive manufacturers' association, Gaikindo, has once again cut its domestic car sales target for 2015, citing weak commodity prices that have undermined demand in regions dependent on resource exports.
Gaikindo now expects full-year sales to fall in the range of 950,000 to 1 million cars. This is the second time the association has cut its growth target this year. In April, Gaikindo revised its sales target from the initial 1.2 million to 1.1 million cars, reflecting slowing household demand that is dragging on the country's economy.
“We must be realistic in looking at sales from January to July, which only reached 581,000 cars,” Sudirman M.R., the Gaikindo chairman, said on Wednesday.
Local manufacturers sold 581,941 cars in the first seven months of 2015, a decline of 21 percent from the 733,444 cars sold in the same period last year. The companies sold 1.2 million cars for the whole of 2014, down from 1.22 million in 2013 and the first annual decline since 2009.
Gaikindo projects sales of 80,000 units a month for the rest of this year, with December, traditionally the slowest month of the year, expected to account for 70,000 sales, Sudirman said.
He noted that demand for cars in Sumatra and Kalimantan, the heart of Indonesia's palm oil and coal-mining industries, respectively, was flagging as potential customers’ income took a hammering from weak palm oil and coal prices.
“That is unfortunate because previously we were optimistic that sales would rise in the second half of 2015, following the government's planned spending on infrastructure projects," Sudirman said.
The export market for Indonesian cars remains limited and insufficient to compensate for the slump in domestic sales, he added. Most of the cars that Indonesia exports are MPVs, which have an increasingly limited global market, Sudirman added.
Gaikindo expects to export 200,000 completely built-up cars and 100,000 completely knocked-down cars thus year, matching last year's exports.
But manufacturers will also have to factor in the impact of the weakening rupiah in their sales projections, Sudirman said, noting that companies would conduct their next round of parts imports in the next three months.
“For now, we are still using an exchange rate of 13,300 to the US dollar. But if the rupiah stays at 13,800 against the greenback, we will have to adjust our prices, which could pressure sales further,” he said.
The rupiah has lost 1.6 percent of its value this week alone, trading at 13,747 against the dollar, after China devalued the yuan. The devaluation triggered a massive inflow to dollar-denominated instruments. Bank Indonesia insists that the rupiah is undervalued, and has vowed to stay in the market to guard the currency from extreme volatility.
Samulo Rahmat, the marketing director of Toyota Astra Motor, said he had high hopes that the inaugural Gaikindo Indonesia International Auto Show (GIIAS), which runs from Aug. 20 to 30 at the Indonesia Convention Exhibition center outside Jakarta, would provide a boost to domestic car sales.
"GIIAS will certainly make the market excited, but the ultimate goal is to get closer to the consumers," he said.
Investor Daily
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