The Indonesian new vehicle market rose to its highest level in almost two years in June, with volumes increasing by 60% year-on-year to just under 40,000 units, according to data released by PT Toyota Astra Motor (TAM), the local distributor.

News of the improved market performance, which has picked up momentum since the beginning of the year, followed a further loosening of monetary policy by the Bank of Indonesia with a 25 basis point cut in the overnight lending rate to 8.25% on July 5th. This compares with 12.75 just a year ago.

The economy is beginning to respond to the BI's monetary easing and optimism is increasing. Johnny Darmawan, TAM's president director, released the company's latest forecast for the Indonesian market. The company now expects sales to reach 410,000 units this year, compared with 318,000 last year.

New models, particularly compact passenger vehicles from Suzuki, Nissan, Toyota and Daihatsu, have helped increase buying interest in the marketplace. With fuel prices up to three times the levels they were six years ago, the market has keenly embraced the expanding range of compact vehicles that have come on to the market recently.

Suzuki launched the new Karimum Estilo and the SX-4 Crossover models in the second quarter, which are selling well, as is the newly launched Nissan Grand Livina. The Daihatsu Terios and the Toyota Rush derivative - launched at the end of last year, together with the Avanza and Xenia compact utility vehicles, have come to dominate the market in place of the traditional full-size utility vehicles such as the Toyota Kijang.