Asian Car Sales Racing Ahead – But Not Where You'd Expect

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Automotive, Public Policy

Car sales up by 17 percent from 2010 to 2011, to nearly 900,000 new vehicles, and by 11 percent year-on-year in the first quarter of 2012.

China?

No. Indonesia.

According to the Economist, Indonesians now buy more cars than any other Southeast Asian nation, having overtaken Thailand last year. They also bought 8 million motorcycles in 2011, a number that could rise to 9 million this year. What does this mean for metals?

Foreign carmakers are pilling into what many see as the next big Southeast Asian car market.

Since the beginning of 2011, these seven companies have announced investments in Indonesia totaling $2.2 billion, a record. That would be great if the capital city’s streets could take it, but they can’t. The number of cars is said to be growing ten times faster than the roads they roll on; city officials in 2009 predicted that the Indonesian capital could experience total gridlock by 2014.

It’s interesting what governments can get away with in some countries. Most would expect them to build new and better roads to cope with the growing affluence — in other words, investment that would add to the growth in national GDP in the years to come — but not Indonesia.

From June 15, Indonesia’s central bank says it will require those who borrow money from a bank to buy a car to make a minimum down payment of 30 percent, much like Beijing put limits of banks’ ability to lend for property purchases. For motorbikes, the figure will be 25 percent, in a country where roughly 65 percent of vehicle sales are said by the Economist to be on credit.

Such a move could bring growth of the nascent Indonesian car industry to a shuddering halt. Needless to say, manufacturers are marshaling forces to oppose the move, but as anyone who has experienced the congested traffic of Jakarta will know, pollution is already a problem and extending current vehicle lives rather than encourage cleaner alternatives will only make matters worse.

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