Indonesia: increased fuel prices could slow down new car sales image

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.

Via Reuters