Indonesia’s vehicle market continued its strong recovery from last year’s sharp decline, with sales rising by 75% year-on-year in July to 38,400 units compared with 21,891 units a year earlier. The market’s recovery reflects the ongoing loosening of monetary policy by the Bank of Indonesia, which has cut interest rates from 12.75% to 8.0% in the last year.

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Cumulatively, the market has expanded by 37% in the first seven months of 2007 to 235,721 units, from 171,525 in 2006, prompting the industry to revise full-year forecasts upwards – to 400,000 units compared with 318,884 in 2006.


This growing optimism follows the release of second-quarter economic data showing Indonesian GDP growth of 6.3% year-on-year, and by 6.1% for the 12 months to June 2007. Government spending jumped by 24% quarter-on-quarter in the second quarter and rising raw material prices also helped drive exports higher.


In the first half of 2007, Toyota sold 69,075 vehicles domestically, taking a 35% market share, followed by Suzuki with 27,691 units ( 13.9%), Mitsubishi with 27,186 units (13.8%) and Daihatsu with 25,678 (13.0%). Toyota’s Avanza compact MPV continued to be the best-selling car in Indonesia, with 32,333 sales in the first half, followed by the Toyota Kijang Innova with 17,909 units and the Daihatsu Xenia – the base model for the Avanza – with 14,578 units.


Economic Partnership Agreement with Japan
The Indonesian and Japanese governments earlier this month signed a bilateral free trade agreement, or Economic Partnership Agreement (EPA) as it is has been called, which will give 90% of Indonesian products 0%-tariff access to Japan. Japan will also gain improved access to Indonesia’s domestic market.

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As part of the agreement, Japan will assist in the development of Indonesia’s technical and manufacturing skills as a key part of the agreement, so as to improve Indonesia’s prospects of exporting manufactured goods to Japan. The automotive components sector will be a key area targeted for improvement. Japanese automakers also will be encouraged to help Indonesia play a more prominent role in the ASEAN automotive industry.