Indonesia automotive industry expects recovery after hitting brakes in first quarter

11, Mar. 2020

Gaikindo Indonesia International Commercial Vehicle Expo in Jakarta on March 6, 2020. (NNA)
Gaikindo Indonesia International Commercial Vehicle Expo in Jakarta on March 6, 2020. (NNA)

JAKARTA, NNA – Key players have expressed high hopes that Indonesia automotive industry would see a turnaround in the second half of the year despite the worsening coronavirus outbreak and the sudden collapse of oil prices threatening the world economy further.

Indonesia's Industry Minister Agus Gumiwang Kartasasmita is confident that the industry would remain to grow as one of the pillars of the economy.

Speaking at the opening of Gaikindo Indonesia International Commercial Vehicle Expo (GIICOMVEC) last Thursday, he said the automotive industry has enormous potential to contribute to reducing the trade balance deficit by increasing exports.

He noted the robust performance of exports last year and the positive trend for vehicles with four or more wheels as growth opportunities.

Exports of such vehicles that are Completely Build-Up (CBU) showed a 25.5 percent jump to 332,000 units from the previous year. Exports of Completely Knock-Down (CKD) vehicles were even more impressive, soaring to 523.5 percent or 511,000 units exported in 2019, Kartasasmita told reporters.

Locally, Indonesia's commercial vehicle market faced many challenges in 2019. Among the chief factors were a sluggish growth of the national economy impacted by global uncertainties and its current account deficit.

The global coronavirus outbreak spreading to over 100 countries and regions and crude oil price war are posing new threats.

While acknowledging that the market in early 2020 would still be difficult, President Director of PT Isuzu Astra Motor Indonesia (IAMI) Ernando Emily has urged stakeholders in the industry to strive even harder and have the confidence that the Indonesian economy "will return to normal shortly.”

He was speaking to reporters at the commercial vehicle expo, which was held over four days from March 5 to 8 at the Jakarta Convention Center to boost sales for the segment.

The business-to-business (B2B) expo, which showcased vehicles of 36 brands, had set sales target amounting to 2.5 trillion rupiah ($174.4 million).

The organizers are still tallying up transaction figures, Yohannes Nangoi, Gaikindo chairman told NNA over the phone on Tuesday.

However, Nangoi hopes that the Covid-19 crisis would not cause a big disruption to car manufacturing and supply of materials from affected countries to Indonesia.

He believes it would still have a small impact on the supply chain of industrial raw materials.

He also expressed concern that the government's 6 percent growth target for the auto industry is setting the bar too high for manufacturers.

Some are taking that as a challenge

Donny Saputra, marketing director of 4W PT Suzuki Indomobil Sales (SIS) told NNA that Suzuki is confident sales can continue to grow positively amid economic pressure.

He explained, “I believe the government can maintain economic stability. Hopefully, this situation won't have a big impact, especially on the automotive industry. We are optimistic that sales will remain stable."

"We have targeted sales of our latest Suzuki Carry Luxury Pick-Up products to be around 250 units per month consistently until the end of the year," he told NNA on March 5.

Meanwhile, Piter Abdullah Indonesia's research director for the Center for Reform on Economics, told NNA the decline in world crude oil prices would add to the woes of the global economy, which has already been impacted severely by the Covid-19 epidemic in a growing number of countries.

"This condition encourages correction in global financial markets and is expected to influence investment sentiment in the financial markets of developing countries, including Indonesia. All industries will be affected and encounter a decline, including the automotive industry,” he said on Tuesday.

But Abdullah is confident that the situation will improve when market fears over the Covid-19 menace come to an end and crude prices go up again.

"My prediction is things will slowly return to normal - the fastest in the second quarter of 2020," he told NNA.