Indonesia's Auto Sector Continues To Thrive On Domestic Demand, With Sales In H110 Rising 76% Year-On year (Y-O-Y) To 370,208 Units

Indonesia's auto sector continues to thrive on domestic demand, with sales in
H110 rising 76% year-on-year (y-o-y) to 370,208 units, prompting BMI to raise
our full-year sales forecast to nearly 680,000 units, representing growth of
40.6%. 

BMI's forecasts also show sales of 962,830 units by the end of our
forecast period in 2014, based on steady average annual growth of around 9% for
the next five years after this year's correction from a 20% decline in 2009. Our
view for sustained economic growth (and private consumption, in particular)
backs up this projection of strong vehicle sales. 

Indonesia is also gaining ground as the biggest market in the ASEAN region. Despite Thailand's highest
monthly sales for a decade in June, the H110 total of 356,692 units (up 54.1%)
came second to Indonesia's 370,208 units. 

Meanwhile, affordable financing and underinvestment in public transport,
particularly in the capital Jakarta, have been cited as factors behind
Indonesia's thriving motorcycle segment, which BMI expects to grow an annual
average of 14% over the next five years. According to official statistics, there
were 8.09mn motorcycles registered in Jakarta in May, which is just short of the
city's 8.5mn population. Based on BMI's forecast for this year, a total of
1.36mn could be added by the end of the year. Interestingly, the country's
passenger car segment, the largest in South East Asia, has not been impacted by
the growth in motorcycle use. Where some markets have seen a switch from
motorcycles to smaller cars, both segments are booming in Indonesia. 

Despite its strong vehicle sales growth, Indonesia stays in eighth place in
BMI's Business Environment Ratings for the auto sector in Asia Pacific on 53.9
from a possible 100. It is the region's largest passenger car market and as
such, will always have an appeal for investors. Low labour costs, and a
competitive environment with room for new players, increase Indonesia's
attractiveness, as do its regulations on intellectual property rights (IPRs),
which boost its regulatory environment rating. The country's risk scores act as
a hindrance however, with low scores for corruption, bureaucracy and the legal
framework. In terms of the competitive landscape, Toyota Motor has a
considerable advantage, as it led the market in H110 with sales of 140,184
units, up 77.4%. Toyota benefits from competing in the popular MPV segment with
its Avanza and Kijang Innova models, joined by the newly launched Alphard
premium MPV. Any potential incentives for hybrid sales would also open the door
for its Prius and Auris hybrid models. It also has an interest in the compact
segment through its mini car brand Daihatsu, which ranked second overall behind
its parent in H110, with sales of 54,573 units, up 58.1%. Source: Reuters