Jakarta Globe | Insight
The 2017 Gaikindo Indonesia International Auto Show (GIIAS) at Indonesia Convention Center in BSD City, Tangerang. (ID Photo/Emral)

New Year, New Models: 2018 Auto Sales Outlook

Jakarta. Indonesia’s major automotive association said 2018 vehicle sales will remain stagnant or grow at a similar pace to last year’s, thanks to weak consumer appetite and lenders being more cautious and adopting a wait-and-see stance in disbursing loans.

Data from the Association of Indonesian Automotive Industries (Gaikindo) showed automotive sales rebounded 2.5 percent year-on-year in October, largely from rising demand for commercial vehicles.

Automotive manufacturers recorded sales of 94,461 units in December, compared to 92,139 in the same period in 2016.

The December sales figure was 7.7 percent higher than September’s 87,645 units.

Auto sales in the first 10 months of 2017 totaled 898,218 units, up 2.6 percent from the same period in 2016.

“Demand for commercial vehicles might be quite similar this year to last year, or even lower, since lenders – both banks and multi-finance companies – are expecting nonperforming loans [NPL] to increase in 2018,” Johnny Darmawan, deputy chairman of trade affairs at the Indonesian Chamber of Commerce and Industry (Kadin), told the Jakarta Globe on Wednesday (03/01).

The NPL figure in Indonesian banks stood at 2.93 percent by October last year, down from September’s 3 percent, according to the Financial Services Authority (OJK).

OJK data also showed the NPL figure for vehicle loans at Rp 1,666 trillion ($117 billion) by October, only 0.4 percent less than what it was in the same month in 2016.

Johnny, a former member of Gaikindo, said rising NPLs make lenders reluctant to approve new loans. Consequently, consumers are discouraged from applying for loans and sales are weakened.

Most of these consumers – around 80 percent to 90 percent – applied for loans from banks or a multi-finance companies when they wanted to buy cars or motorcycles, Johnny said.

He said automotive companies are now relying on exports to boost sales. They produce at least 1.9 million vehicles annually, but only 1 million are sold locally, Johnny noted.

“If banks’ NPL figures improve this year, that might help pick up vehicle sales,” Johnny said, adding that improving commodity prices may also boost automotive sales.

Johnny suggested that heavily discounting vehicle prices may not help sales much anymore as market competition gets even tougher with new car models being released every month.

Gaikindo secretary general Kukuh Kumara echoed Johnny’s opinions. He said automotive sales in 2018 will not improve markedly from 2017.

Unlike Johnny though, Kukuh is of the opinion that the NPL figure will not have much bearing on automotive sales this year.

But Kukuh again agreed with Johnny that offering discounts on new cars and motorcycles will no longer work to entice buyers.

“Discounting, even deeply, doesn’t work anymore. There are so many car models available out there at any given time,” Kukuh said.

The both pointed out that the 2018 simultaneous regional elections may boost automotive sales.

Johnny said the elections will encourage positive sentiment in the market and sales may pick up as a result.

“Elections normally boost consumption. They may very well also increase buyers’ appetite for new cars or motorcycles,” he added.

New Year, New Cars

Ani Retnawati, an employee at a Jakarta bank, said she still wants to buy a car eventually because using public transportation in the city is still a real hassle.

“It is still more comfortable to travel in your own cars instead of using public transportation, which can be more than a little disorganized,” she said.

Ani said she has plenty of low-cost options for a first car, for example the Toyota Agya coupé or Daihatsu Xenia, a small multi-purpose vehicle (MPV).

Manufacturers think there are plenty of people like Ani in Indonesia and they are convinced that demand for cars is still growing in the country.

This is why most of them are already preparing new car models for 2018.

Among them is Datsun, a brand produced by a local unit of the Japanese car giant Nissan.

The brand will launch a crossover vehicle known as the Datsun Cross in Jakarta on Jan. 18. The model already had a brief preview at the Gaikindo Indonesia International Auto Show in 2017.

The automaker introduced its first lineup of crossover vehicles back in 2014, when it tried to target the low-cost green car market with its Datsun Go and Go+ cars.

SGMW Motor Indonesia (Wuling Motors) meanwhile will launch another new MPV model in the first quarter of this year.

The company already launched the Confero and Confero S MPVs in August last year. The Confero competes directly with the already popular Toyota Innova.

Wuling president director Xu Feiyun said the company will introduce a new, smaller-engine version of the Confero S. The current model has a 1,500 cubic centimeter engine.

Meanwhile, Toyota will launch two new models this year: a second-generation Toyota Rush and a new Daihatsu model.

The two cars were introduced in November last year, but will only be available at dealers in February.

Sokon, another Chinese manufacturer, will also launch its latest sport utility vehicle model, the Glory 580, early this year, while Japan’s Suzuki Motor Corporation will launch a diesel version of its popular Suzuki Ertiga MPV and an upgraded version of its Ertiga Dreza.