Decline in Indonesian Consumer Purchasing Power Affects Car Sales

2024/06/11
Production & Sales, General News, Market Data
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Indonesia
Malaysia
Jongkie Sugiarto, chairman of the Indonesian Automotive Industry Association (GAIKINDO), assessed that the decline in consumer demand is the main cause of the decrease in domestic car sales. Indonesia's unstable economy and the depreciation of the rupiah have led to rising inflation, which in turn has weakened the purchasing power of the people. Despite Bank Indonesia's benchmark interest rate remaining high at 6.25%, most car buyers still use credit financing schemes. Moreover, although Indonesia's economy grew by 5.11% in the first quarter of 2024, household consumption only increased by 4.91% in the same period. Tauhid Ahmad, a senior economist at the Institute for Development of Economics and Finance (Indef), pointed out that there is indeed a decline in the purchasing power of the middle class, who are now more inclined to consume basic necessities rather than cars, which are still considered secondary goods. Under high benchmark interest rates, the prices of some cars even rose in the last quarter, and consumers face difficult choices as the increase in car prices does not match the improvement in people's purchasing power.
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