November 28, 2019 / 11:23 AM / 3 months ago

Indonesia car sales should recover in 2020, association says

JAKARTA, Nov 28 (Reuters) - Car sales in Indonesia are likely to recover next year, but not by much, after plunging this year during an economic slowdown, an industry association executive said on Thursday.

The auto industry is an important part of Indonesia’s economy and car sales are often used to gauge private consumption.

This year, 849,609 cars were sold from January to October , down 12% from the same period a year earlier.

The automotive industry association Gaikindo has cut its sales estimate for this year to around 1 million from 1.1 million, co-chairman Jongkie D. Sugiarto said.

“In 2019, there were political campaigns, elections — for nearly six months people’s concentration was on other things and they didn’t think about buying or changing cars,” he said.

The association expects sales to rise by 5% next year, with economic conditions stable and interest rates lower, he said, adding that he hopes gross domestic product will grow around 5%.

Indonesia’s central bank has trimmed interest rates four times by a total of 100 basis points this year to counter the global economic slowdown, measures that eventually will make car loans cheaper.

This year, GDP growth is set to slow for the first time in four years to 5.05%, from 5.17% in 2018, according to government estimates. The government targets 5.3% growth in 2020, though its targets have rarely been achieved.

Gaikindo’s sales outlook is in line with a forecast by Fitch Solutions, a think tank affiliated with the ratings agency Fitch Ratings. It foresees sales of 1.07 million cars this year, down 7% from 2018, led by passenger car sales. Its 2020 outlook is slightly bleaker: 3.4% growth from 2019’s level.

“We believe new vehicle sales will face significant pressure for the rest of 2019 and into early 2020 in Indonesia as a slowing economy results in used vehicle sales become increasingly attractive for consumers looking to cut back on spending,” Fitch said in a report this month.

“We however remain confident that Indonesia’s automotive industry will rebound amid measures to stimulate loan growth, which will feed into higher vehicle sales throughout the year,” it said.

Indonesia’s car market is dominated by Japanese brands, with Toyota and Daihatsu leading sales. (Reporting by Tabita Diela; writing by Gayatri Suroyo; editing by Larry King)

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