Car sales in Indonesia are set for a record high this year, after sales during the first eleven months of 2012 pushed the total beyond one million.
Sales rose 54 percent to 103,699 in November from a month earlier, according to data gathered by the Indonesia Automotive Industry Association (Gaikindo) made available on Wednesday.
But car sales fell 2.9 percent in October compared to September, Gaikindo said.
Buoyant demand amid low borrowing costs have encouraged more Indonesians to purchase vehicles.
Car sales in November pushed the 2012 total to 1,026,758 sales, up 26 percent from the same period last year.
For comparison, 1.1 million car sales were recorded in Thailand, the automotive hub in the region and home to less than one-third of Indonesia’s population, so far this year.
Gaikindo executive Jongkie D. Sugiarto said the industry was on track to book a record 1.1 million sales by year’s end.
“Consumer purchasing power is still strong with the economy growing robustly,” Jongkie told the Jakarta Globe on Wednesday.
Jongkie noted that low borrowing costs coupled with rising purchasing power influenced customers to spend more and buy cars. Bank Indonesia has kept the benchmark interest rates at a record low of 5.75 percent since February.
“There is a lot of liquidity in the banking system currently helping loan interest for car purchases to remain low,” said Jongkie, who is also the president director of Hyundai in Indonesia.
For example, Bank Central Asia’s car financing arm, BCA Finance, cut its interest rate in September by 44 basis points, or 0.44 percentage point, to 3.5 percent per annum for one-year car loans.
The central bank rule introduced earlier this year that increased minimum down payments to at least 30 percent of the car price for purchases using commercial bank loans has had little impact on sales, Jongkie said.
Before the move, Gaikindo had warned of dire consequences for the nation’s automotive sector.
“However, we may see a greater impact on sales with the central bank expanding the down payment requirements to Islamic banks,” Jongkie said on Wednesday.
Bank Indonesia issued a regulation last month ordering Islamic bankers to match the car loan requirements implemented by their commercial counterparts. The new regulation will be effective by April.
Next year, Gaikindo expects car sales in the domestic market to increase by around 10 percent to 1.2 million cars, Jongkie said. “Car production can keep up with demand, [through] association members expanding [their] capacity,” he added.
Indonesia’s economy expanded by 6.2 percent during the third quarter of 2012, slightly lower than the 6.4 percent pace set in the second quarter, according to data released by the Central Statistics Agency (BPS) on Monday.