Indonesia overtakes Thailand in car sales

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Indonesia has hit the fast lane in terms of auto sales and has overtaken Southeast Asian pace-setter Thailand for the first time, according to a Nikkei survey from the first six months of the year.

Officials and auto executives attending the 18th Indonesia International Motor Show in Jakarta told AFP the outlook for sales in the archipelago of 240 million people had never been brighter.

"Since late 2009 and early 2010, all auto brands and producers have been trying to increase production capacity in Indonesia" to meet demand, industry ministry official Budi Darmadi said.

"Compared to other countries in the region, we have the fastest growth of car sales."

Sales peaked in Indonesia at 600,000 units in 2008 but slumped 20 percent last year due to the global financial turmoil. This year's figures are expected to top 700,000 for the first time, ahead of Thailand.

The Indonesian Automotive Industry Association (Gaikindo) said auto sales in Indonesia jumped 76 percent to 370,206 vehicles in the first half of 2010, driven by strong demand for minivans with engine outputs of 1.5 liters.

Sales in Thailand rose 54 percent to 356,692 units during the same period, according to the Nikkei survey released Wednesday.

Some 1.18 million new vehicles were sold in Indonesia, Thailand, Malaysia, the Philippines, Vietnam and Singapore during the period, it said.

This was an increase of 41 percent and put the industry on track to surpass the 2008 sales record of 2.09 million units for the six key Southeast Asian markets.

The news will be music to the ears of Toyota executives - Japanese cars account for about 80 percent of sales in these countries.

Multipurpose models like Toyota's Avanza - a four-door family hatchback - make up 30 percent of total sales in Indonesia, Nikkei said.

"Indonesia may hit its first million annual car sales in the next two years," industry analyst Suhari Sargo said.

Sargo said more and more Indonesians would trade in their motorcycles for cars as wealth was more evenly distributed outside the economic centre of Java island.

"But before it can achieve more well-balanced wealth distribution, the government must improve infrastructure such as roads," he said.

Gunadi Sindhuwinata, the chief of prominent distributor Indomobil, said most vehicles were purchased through credit so low interest rates were crucial.

"Considering the country's population of 240 million, sales of 700,000 units a year doesn't mean much," Sindhuwinata said.

Indonesia weathered the global liquidity crunch and is forecasting growth of around 5.7 percent this year, among the fastest in the G20 group of rich and developing countries.

Its potential has caught the eye of Japanese carmaker Nissan, which plans to invest 20 million dollars in its Indonesian assembly plant to double production capacity to 100,000 cars from 50,000.

"Today we have about five percent market share. This is far below our potential," chief executive Carlos Ghosn said while visiting Jakarta in June.

Mercedes-Benz booked remarkable growth although competition in the luxury segment was tough, Mercedes-Benz Indonesia chief executive Rudi Borgenheimer said.

"Our sales have increased about 46 percent to June this year compared to the same period last year. I'm very proud," he said.

"Per capita income has risen. More people can afford cars now compared to when I came to this country four years ago."

Rising car sales may be good news for some, but residents of the traffic-choked Indonesian capital could be forgiven for hoping the additional vehicles end up on other cities' roads.

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