But, sales are not up to expectations. This has forced leading automakers in the country to take note of piling stocks. In view of severe competition and added investments to the tune of billions of dollars, auto companies such as Toyota, Honda, Nissan and Suzuki have to resort to discounts to clear stocks.
Economic slowdown, depreciation of Indonesian currency and increased competition in the auto sector has taken a toll on fresh purchases. Auto companies that have invested heavily in the country have been left with piling stocks leaving them with no other alternative than to offer hefty discounts.
Indonesia noted a a huge rise in demand from fast growing middle class segment. Automakers stepped up production in the last couple of years to cater to this demand. Sales increased 11% from 2005-12 and hit 1.2 million units in 2013. Automakers pumped in investments to the tune of $3.3 billion over past two years increasing production capacities from 1.3 million units in 2013 to 1.8 million in 2014.
Seeing rise in demand, automakers such as Honda increased local production from 80,000 units to 200,000 units to compete with market leaders Toyota and their sub-brand Daihatsu. While Nissan launched their sub-brand Datsun for increasing sales.
However winds of change blew the other way in recent months, making automakers see piling stocks in company showrooms. This is making them offer heavy discounts at the cost of their profit margins just so that they are able to support long term strategies in the country.
via Financial Times