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Automotive Sector Outlook

Car and motorbike sales fall by 19 and 21% so far this year

Indonesia’s new car and motorcycle sales were reported by the industry association down by 19% YoY to 672k units and 21% YoY to 4.2 mn units, in the first eight months of 2015. This resulted from slower economic growth, depressed commodity markets, weaker Rupiah, and the lack of meaningful new product launches.

Competitive pressure remains intense

The Indonesia’s automobile market is more competitive compared to motorbike market, which is dominated by Yamaha and Honda that hold a combined 96% share in Aug-15. Toyota is still the most preferred car among other brands with 31% market share in 8M15, followed by Daihatsu with 16.8%. We see significant changes in competition car market landscape with Honda gaining market share by 210 bps to 15.4% 8M15, which we believe on account of Toyota’s market share loss.

Expecting a volume recovery in 2016

We believe that some of unfavorable macro would reverse in late 2015 as our economist expected faster GDP growth of 5.05% in 4Q15 and clarity on Fed rate direction. Bank Indonesia has announced more favorable loan-to-value (LTV) ratio for vehicle ownership. We expect these more relaxed requirements could help support automotive sales in 2H15, though we do not expect a significant jump in sales for the rest of the year.

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