The Indonesian new vehicle market expanded by 11.5% year-on-year in November to 47,000 units, according to industry-wide wholesale estimates released by PT Toyota Astra Motor - the local distributor. If these volumes are confirmed, sales in the first eleven months of the year will have reached a record 569,293 units - more than 43% higher than in the same period of last year.

However, the market is beginning to show sings of weakness, however, with the discrepancy between wholesale and retail data widening significantly in October. The overnight interest rate has risen from 8.0% to 9.5% this year, but was cut back to 9.25% earlier this week in response to weakening domestic demand. Slowing global and regional economic growth has also affected exports and private sector investment.

Vehicle wholesale volumes peaked at a monthly record of 60,830 units in July, but have weakened progressively since. The Indonesia automotive manufacturers association, Gaikindo, still expects the wholesale market to reach an unprecedented 610,000 units this year.

But the celebrations are likely to be short-lived as vehicle manufacturers look to the year ahead with some dread. The major vehicle manufacturers, including Toyota, Suzuki and Honda, expect wholesale deliveries to amount to just 350,000-400,000 units in 2009 - or 35-40% less than in 2008. One industry insiders said that dealer inventories are rising rapidly and could reach 80,000-100,000 units by year-end.

The sharp depreciation of the rupiah against the US dollar and the Japanese yen in the last two months means that automakers will be left with no choice but to hike prices in January. Inevitably, all manufacturers are preparing for significant production cutbacks.

Tony Pugliese