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Indonesia Automotive Market to experience steady growth in 2018, driven by positive consumer

Mr. Vivek Vaidya, Senior Vice President of Mobility at Frost & Sullivan says the long term factors such as GDP growth rate, favorable demographics and low car parc per thousand point towards a strong long term growth rate. However, we need to focus on 2018 specific factors to understand the dynamics.

He added, “The upcoming car launches with new models, facelifts and variants especially for some key market models in MPV segments are expected to drive the sales. The Commercial Vehicle market will still continue to be fueled by demand in construction and infrastructure segment.”

He also added, “There is lot of pent up demand in commercial vehicles segment. Due to production shortage the entire demand in 2017 could not be fulfilled, this demand is going to spill over to 2018 boosting the commercial vehicles sales, further.”

The consumer sentiment is expected to remain positive in 2018 largely due to positive economic outlook, stable exchange rate and reduction in prime lending rate. In fact the cut in prime lending rate by 0.5% which took place in 2017 is likely to have strong impact in 2018. Lower lending rate would spur demand and automotive sector would be benefited by this favorable fiscal incentive, he added.

Only negative factors in 2018 are pressure to contain fiscal deficit and likely changes in energy prices. Fiscal deficit still stands at about 2.2% of GDP, which may put pressure on tax revenues prompting stricter compliance and use of other means to boost tax revenues.

2017 Review

Vehicle demand in Indonesia is expected to grow by 1.2 per cent in 2017. The

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