Southeast Asia’s largest auto market was increasingly growing its quota of new car sales as the country is in the process of switching from two to four-wheel vehicles.
But now the country’s recent petrol-price increase could jeopardize the increase rate of auto sales – President Joko Widodo decided last week to axe the oil subsidies, leading to a 30% raise in gasoline prices, The move was justified by the government’s need to increase the budget and enter new reforms.
Judging by the short-term implications, the decision could put a cap on the new car sales growth rate, while on the long-term, if the reforms are diligently executed, it could strengthen the overall Indonesian economy – which has hit a five-year slowdown. “Motorbike sales will be more resilient,” thinks Leonardo Henry Gavaza, a senior research manager at Bahana Securities, but in 2015 the “car sales probably won’t grow.”
Back in 2010, auto sales had peaked at an incredible 58% increase, but since then the rate had been slowly declining, reaching an increase of just 1.8% for the January to October period from the same timeframe of 2013. Jongkie Sugiarto, co-chairman of Indonesia’s automotive association Gaikindo forecasts that some buyers would be “thinking twice” about making the new car purchase because of the higher fuel price.