According to the Indonesia Automotive Industry Association (GAIKINDO) vehicle sales in Indonesia perked up in June with the re-opening of production facilities and higher demand for new vehicles. Vehicle production was up from mere 2,510 units in May to 17,616 units in June 2020. Additionally, retail sales increased by 74.8%, reaching 29,862 units in June 2020 from 17,083 units in May 2020.

Speaking exclusively to just-auto, Animesh Kumar, Director of Automotive Consulting at GlobalData, notes that Indonesia has not yet flattened the COVID-19 curve as the number of positive cases remains high in the country.

"Presently, Indonesia leads Southeast Asia in the most number of COVID-19 cases with the country continuing to practise large-scale social distancing measures across many of its regions," he says. "These measures have kept the customers away from the market."

GlobalData expects Indonesia's new vehicle demand to remain subdued in 2020 compared to pre-COVID levels; however, a month-on-month recovery is expected.

"Indonesia auto industry continues to face both supply and demand challenges," Kumar maintains. "Some vehicle and component manufacturing units are still temporarily shut due to COVID-19 and also, there is limited demand for new vehicles both in the domestic and the overseas market."

Kumar believes reaching pre-COVID industry levels will remain a major challenge for the auto industry in Indonesia. First half retail sales are still 42.1% lower than the same period of the previous year.

Besides weak consumer sentiment Kumar cites a tightening of credit rules for customers opting for auto loans as a headwind. However, he also maintains the government's announcement of subsidy on car loans in early May 2020 might keep new vehicle financing afloat.

"The government's push to boost purchasing power coupled with automaker's strategic launch of new products and better customer outreach strategies such as digital sales could help the industry to recover at a faster pace," Kumar adds.