Indonesian Car Sales Plunge by 13.7%

Illustration. (Image courtesy of Praisaeng at FreeDigitalPhotos.net)

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Jakarta, GIVnews.com – In a recent sign of slowing economic growth, the 2015 number for car sales have plunged by 13.7 percent in May. This is according to the Chairman of the Indonesian Automotive Association (Gaikindo), Sudirman M. Rusdi.

"Last year, sales (have reached) 1.2 million units. This year, we have revised (the number after) observing that in May, there is a decreasing sales of up to 13.7 percent. We expect there is only 1.1 million (units sold)," said Sudirman in Jakarta after a meeting with Vice President Jusuf Kalla as quoted by Tempo.co on Monday (22 Jun 2015).

The decreasing number of car units sold is probably a sign of a weakening consumer's purchasing power. "We know there is a decreasing trend of export of commodities. In a number of regions, the economy is weakening," Sudirman was quoted as saying.

From January to May 2015, car wholesales to distributor companies have reached 443,000 units, a 16.6% drop compared to the same period last year, which have reached 531,000 units of car sales.

Despite the drop, Gaikindo had previously shared that creditors are still experiencing significant growth, which has reached Rp 246.9 trillion in June 2015, compared to a total of Rp 230.81 trillion last year.

Meanwhile, in contrary to the slow growth of new car sales, there is a significant increase in financing activities for the purchase of used cars. The trend is experienced by several multi-finance companies, such as PT Al-Ijarah Indonesia Finance (Alif Finance), which sees a 100 percent increase in financing value in May 2015.

"Till May 2015, the composition of used cars (financing) is 78 percent," said Krisdianto Soedarmono, Marketing Head of Alif Finance, a shariah based financial company, Tempo.co reported.

His company's recent addition of distribution channels, Krisdianto said, contributed to the increasing volume of used cars financing. This is despite the decreasing purchasing power, which does not notably affect used cars financing. Alif Finance is targeting to disburse up to Rp 400 billion worth of financing by the end of the first semester, less than half of the 2015 target of Rp 1 trillion.

The same experience is also shared by another used cars financing company, PT Magna Finance Tbk, which is not affected by the recent slow growth of new car sales. Magna Finance conducted 95% of its finance disbursement activities for the purchase of used vehicles.

"The drop of new car sales will effectively increase the sales for used cars. The current condition is not a problem for us," said Marcia M. Rahardjo, the General Director of Magna Finance, which has disbursed Rp 145 billion worth of financing for used cars in the first quarter of 2015, a 40 percent increase compared to the same period last year.

Currently, the market for used cars is more stable compared to its new vehicles counterpart, a view that was shared by the General Director of PT Andalan Finance Indonesia (AFI), Sebastianus H. Budi. Up till May 2015, his company has accumulated Rp 1.7 trillion worth of funds for financing purposes, 30% more compared to the same period last year.

Source: Indonesian Car Sales Plunge by 13.7%