Covid-19 likely to push Indonesia’s automotive total industry volume in 2020 to 2008 levels, says GlobalData

Following the news that the Indonesian Automotive Industry Association (GAIKINDO) revised 2020 vehicle sales projection to 600,000 units;

Animesh Kumar, Director of Automotive Consulting at GlobalData, a leading research and consulting company, offers his view:

“Indonesia is among the worst hit countries in Asia, having highest mortality rate in the region due to Covid-19. The total cases reached 4,839 on 14 April 2020, with 459 deaths across the country. The Indonesian automotive industry has witnessed partial or complete production halts by OEMs and component manufacturers, disruptions in supply chain, declining domestic sales and export volumes and cash flow pressures, besides witnessing temporary layoffs as an aftermath of production halts.

“According to GAIKINDO, domestic vehicle sales volume in March 2020 declined by 20% as compared to February 2020. The January and February sales were already lower than the previous year. Vehicle production and exports have also been impacted due to the shortage of raw materials and restricted logistic movement imposed by the government. Automotive dealerships witnessed decline in footfalls in March as the government declared a state of emergency, and with the large-scale social restriction period implemented from 10 April across Jakarta and other cities, the footfalls will decline further in April. To add to the woes, it is expected that the months following the end of the crisis will not witness recovery in footfalls as potential customers may remain cautious and prefer to stay away from dealerships to avoid human contact.

“With the automotive industry now encountering both supply as well as demand side challenges, associations, industry participants as well as experts/analysts are compelled to revise the forecasts. GAIKINDO has revised domestic vehicle sales forecast for 2020 to 600,000 units (2008 level) as compared to 1.05 million units projected earlier at the beginning of the year.

“Hampered purchasing power and increased cost of production due to weakened rupiah against US dollar will kick-in and impact both domestic sales as well as exports of vehicles. The automotive industry stands in need of collective efforts from government and industry participants for speedy revival. Fiscal stimuli through relaxation of taxes for six months and non-fiscal stimuli through the reduction of import/export restriction has already been announced by the government. Once the crisis and restrictions are over, demand would have to be stimulated through new customer outreach strategies. Passenger vehicle manufacturers can offer immediate aid to the existing customers by extending warranty period – as done by the CV brand Tata Motors Distribution Indonesia.

“OEMs and dealers can also explore digital platform for new vehicle sales. In the absence of customers coming to showrooms, they can use virtual tours, online negotiations, online discussions on finance options and doorstep deliveries as some of the techniques to source orders.”

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