New Car Sales Could Plummet Due to Prolonged Protests

KatadataOTO – The automotive industry has been facing very serious challenges lately. Especially after the demonstrations held in various regions of Indonesia.

Starting on Monday (25/08), the demonstrations have continued to expand and spread. There has even been looting at the homes of several state officials.

For example, Ahmad Sahroni, Uya Kuya, Eko Patrio, and Sri Mulyani, the Minister of Finance (Menkeu) of the Republic of Indonesia.

Although the demonstrations in Jakarta have subsided slightly, they are still escalating in several other regions. For instance, in the city of Bandung, they continued until early Tuesday morning (02/09).

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A tense situation erupted in the area of the Islamic University of Bandung (Unisba) and Pasundan University (Unpas). Both campuses were hit with tear gas by the police.

On the other hand, several demonstrations are reportedly still planned for Jakarta this week. Office and business activities are increasingly disrupted.

“The demonstrations increase the perception of income uncertainty, causing households to postpone the purchase of durable goods,” said Josua Pardede, Chief Economist at Permata Bank, to KatadataOTO recently.

Furthermore, Josua revealed that financing companies are showing signs of down-trading. He explained that car loans for used cars have grown by double digits.

Meanwhile, loans for new cars have actually shrunk. Creditors are tending to tighten the selection process for consumers looking to purchase vehicles.

Then, the down payment for four-wheeled vehicle installments has also been increased. This situation automatically suppresses new unit sales.

“At the peak of the protests, many offices switched to Work From Home (WFH) and main roads were closed. This disrupts showroom traffic and daily distribution in Jakarta,” continued Josua.

The unending protests have also caused the rupiah to depreciate, potentially driving up the production or shipping costs of Completely Built Up (CBU) cars.

If this happens, the On The Road (OTR) prices of CBU cars will soar, and manufacturers' margins will be eroded.

“The shock from the demonstrations (also) worsens the consumer ‘wait-and-see’ attitude. Thus, the risk of sales in the (third) quarter becoming weaker increases, especially in the mass-market segment like LCGC and low MPV,” Josua emphasized.

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Seeing the various negative impacts above, the government is urged to immediately restore conducive conditions in a number of regions.

If not, the automotive industry, especially new car sales, will suffer even more going forward.

Of course, in the long term, the threat of mass layoffs increasingly haunts manufacturers and component industry players.