Indonesia: LCGC program boosts production and sales of compact cars
Toyota and Honda start operations at new plants; GM resumes local production
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New vehicle sales in Indonesia increased by 10.2% year-over-year(y/y) to 1.23 million units in 2013, registering a record high for the fourth consecutive year. Strong sales of MPVs, Indonesia’s largest segment, as well as Low Cost Green Cars (LCGC) program-certified vehicles boosted sales in the country.
In July 2013, Indonesian Government announced the requirements for compact cars to be eligible for the LCGC program. The government aims to expand the demand of vehicles among new middle class and to significantly raise auto production. Toyota, Daihatsu, Suzuki and Honda have released LCGC-certified models while Nissan plans to launch two models in or after mid-2014. The ratio of MPVs, which had accounted for 60% of new vehicle sales, is expected to drop to around 40% over the next three to five years, whereas sales of compact cars including LCGC-certified vehicles will grow.
Vehicle production in 2013 also registered a record high of 1.208 million units, a 13.4% increase y/y. A number of auto manufacturers are enhancing their production capacities and expanding local production, anticipating mid- and long-term growth of the Indonesian market. In 2013-2014, Toyota and Honda have started operations of their new plants while GM has resumed local production. Suzuki and Mitsubishi plan to start running new plants in 2015 and at the end of 2017 or later, respectively. Nissan will increase its production capacity by 2016.
According to LMC Automotive, Indonesian light vehicle production in 2013 rose 12.4% year-on-year (y/y) to 1,082,900 units. In its latest outlook, LMCA forecasts that Indonesian production will increase by 17.3% y/y to 1,270,700 units in 2014. Although growth rate will slow down, production is expected to grow by 8-10% y/y from 2015 to 2017 and will reach 1,640,100 units in 2017.
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