Strengthening private consumption and improvements in key export markets will drive vehicle production in Indonesia that is slated to grow by 5.8% in 2019.

Indonesia's vehicle production growth accelerates to 5.8% in 2019

The car industry is boosted by strong demand from the Philippines, Saudi Arabia, Thailand and Vietnam.

Strengthening private consumption and improvements in key export markets will drive vehicle production in Indonesia that is slated to grow by 5.8% in 2019.

According to Fitch Solutions, increasing global demand, especially in China and EU, for the Indonesia’s EV and SUV production sub-segments will be a contributing factor. Aside from these, Fitch also notes that the Indonesian car production market is also set to receive a boost from the Philippines, Saudi Arabia, Thailand and Vietnam where car sales are tipped to rise 7.8%. These markets accounted for 25.7%, 7.4%, 13.8% and 6.2% respectively in the country’s automotive-related exports in 2017.

“Thereafter we expect vehicle sales growth in these countries to remain robust and average annual growth of 4.3% over the remainder of our 2019-2028 forecast period. This highlights the sustained growth potential that these markets will offer Indonesia's automotive production industry over our forecast period,” Fitch Solutions said.

Meanwhile, Fitch Solutions believes that Indonesia's robust domestic vehicle sales market will aide its automotive production industry by providing automakers with a strong outlet for the vehicles that they produce.

For instance, Hyundai Motor Co aims to manufacture EVs in Indonesia as part of a nearly USD880mn investment in the country. Mitsubishi Motors Corp, on the other hand, also looks to invest US$35m to expand its SUV production capacity in Indonesia to 220,000 units by March 2021.

“We forecast new vehicle sales in Indonesia to expand by 6.0% in 2019, followed by an average annual growth rate of 6.1% over the remainder of our 2019-2028 forecast period,” Fitch added. 

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