Market Report, "Indonesia Autos Report Q3 2015", published

Indonesian auto sales have entered into a tailspin over the past few months, with their decline exacerbated by the recent hike in fuel prices in November 2014. While we remain optimistic on 2015 and forecast a recovery for this year, we are tempering our growth forecasts as we see demand conditions remaining soft in the coming months. We forecast vehicle sales to grow 4.3% in 2015 versus 9.6% previously.

The two salient factors, which have eroded consumers' purchasing power and crimped private consumption, are high inflation and elevated interest rates. Our Country Risk team expects this to persist for much of 2015 and this will continue to take a toll on passenger car demand. However, as the market gradually absorbs the rise in fuel prices, we see consumer demand picking up in the latter half of the year; we forecast car sales to rise by 4.0% in 2015.

Full Report Details at
- http://www.fastmr.com/prod/1003990_indonesia_autos_report_q3.aspx?afid=301

On the commercial vehicle (CV) side, government bureaucracy has taken its toll on investment and this is evident in the 17.7% decline in heavy truck sales in 2014. For instance, the mining sector remains in a logjam due to the government's wide-ranging export ban of unprocessed mineral ores, which has no near-term solution in sight. With commodity exports suffering as a result, we believe sales of heavy trucks inevitably declined as mining firms saw a lesser need for them. While our view of a recovery in CV sales in 2015 is predicated on a concurrent modest pickup in economic growth, more structural reforms are needed to spur investment and increase CV demand ( see 'Modest Growth Pick-Up In 2015, But Structural Reforms Still Needed', January 14).

We remain positive on the long-term outlook of Indonesia, and believe that the country's consumer story remains very strong. As such, we forecast domestic auto sales to grow at an annual average of 8.8% over the 2016-2019 period to hit 1.8mn units by 2019. Indonesia will also remain as one of the key auto manufacturing hubs within ASEAN, with the 2015 ASEAN Economic...

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