Indonesian Auto Sales To Take A Hit From Recent Fuel Price Hikes |

Automotive

Published on March 7th, 2014 | by Daniel Sherman Fernandez

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Indonesian Auto Sales To Take A Hit From Recent Fuel Price Hikes

Toyota Vios9

Auto sales trends for the first five months of 2013 in key Asian regional markets have been in line with our expectations. The Indian market continues to struggle and we do not foresee any material improvement in the coming months, something we highlighted earlier in the year. While China and Indonesia, two markets on which we remain bullish, posted strong year-on-year (y-o-y) growth rates until May, we expect growth in these markets to slow in the coming months.

The recent 44% and 22% hike in gasoline and diesel fuel prices in Indonesia, which we highlighted as a key risk earlier in the year, has caused us to downgrade our 2013 auto sales forecast, given that we expect some negative impact to consumer demand. We have revised our 2013 vehicle sales growth forecast to 7.2%, from 10.7% previously, to 1.2mn units.

Goodyear 650x85(DSF)

While passenger car sales will suffer a little, we see the country’s spectrum of middle- class to wealthy consumers, who are the main drivers of sales in this segment, easily absorbing this increase in fuel prices in the medium- to long-term.

However, we believe the CV segment will bear the brunt of the fuel price hikes, in lieu of the expected rise in financing costs, as the Indonesian central bank raises interest rates to battle the rise in inflation which the higher fuel prices will bring about. Firms will reassess their fixed asset investment plans and may even put off some of their projects, causing CV sales to suffer. Therefore, we expect CV sales growth to underperform car sales growth in 2013 and 2014.

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