By all accounts, Indonesia's car industry has recovered from the crash triggered by the second fuel hike of September 2005. GAIKINDO, the national automotive manufacturers association, reported 41,470 units sold in August. If sales continue at that level, the recovery will seemingly be complete.
But not quite. While sales of cars jumped last month, including sales to governmental, non-governmental and commercial institutions, consumer demand for new cars is still lagging far behind the highs of 2005.
The Roy Morgan Consumer Confidence index rose three points to 112 in the June quarter, just one point lower than where it was at the end of 2006, but six points below the high of September 2005.
Though the lower income group has not budged at all in recent months, the middle and upper classes have responded positively to the buoyant news on the economic front: strong GDP growth, strong exports of resources and an improvement in commercial investments.
But that confidence has yet to translate into a major fillip from families intending to buy a new car.To understand why, take a look at the bigger picture.
Indonesia has over 150 million people above the age of 14, all legally capable of earning a living. Of them, over 80 million have at least one bicycle in the household, and around 75 million have a motorcycle parked outside.
Just under 7 million lay claim to at least one car in the house. About 4.5 million people have a license to drive a car, around 4 million are regular drivers. In other words, about 4 million households have a car, some have more than one. Sobering numbers.
These observations are based on Roy Morgan Single Source, the country's largest syndicated survey with over 27,000 Indonesian respondents annually, projected to reflect 90 percent of the population over the age of 14. That is a universe of 140 million people. The results are updated every 90 days.
Though they constitute only 3 percent of households, the upper class, comprising the socio-economic group A, own more than 31 percent of all the cars in the country, as some have more than one.
Fifty-three percent of all cars, both new and used, are owned by the middle class, the socio-economic groups B and C, who add up to some 25 million families today. The lower class, comprising the D and E groups, own the remaining cars, used primarily as transportation for their businesses.
No wonder, the average reading on the odometer is well over 250,000 kilometers across the country.
While there are about 2.5 million consumers planning to buy a car "within the next four years", only 230,000 are planning to buy a new one. The rest are planning to buy a used car, second-hand, third-hand or more.
That is the current state of consumer demand for cars, both old and new. While demand for new cars is gradually recovering, used car demand has dipped in recent months. Timeframes for actual purchase may vary from planned intentions, often influenced by economic factors both good and bad. Attractive new car loans can be as persuasive as a fuel price hike can be dampening. The rising price of rice recently took its toll on all of Indonesia.
After all, "middle class" is a relative term and Indonesians have less spending power than their Singaporean counterparts. On the other hand, the price of a car in hard currency is more or less the same everywhere.
While Toyota and Suzuki continue to dominate the car industry, consumer demand is moving in favor of Mitsubishi and Suzuki. The 5-door hatchback, another euphemism for people movers of different shapes and sizes, is still the preferred form of family car in Indonesia.
Private purchase is still the popular norm, but one in four have not yet decided on the type of financing they will use to buy a car. In addition to the growing numbers already taking advantage of car loans, lenders working with manufacturers will gain even more by stimulating conversion to financing as standard practice.
Unless consumer credit becomes more a way of life for all of Indonesia's middle class, no dramatic lift in car sales is achievable in the near-term.
Indonesia's robust economic growth continues to be enjoyed primarily by the affluent, the trickle-down effect stimulating the growing middle class but unable yet to alleviate the pain of the lower classes hurt most by inflation. Conversations about "how the economy is doing" vary dramatically in tone and content, depending entirely on who you are talking with.
That the gap between rich and poor is growing is inarguable the view of the overwhelming majority of Indonesians.
If the top 10 percent of Indonesians are financially comfortable today -- most of whom have a car in the home -- hardly 1 percent could be deemed "liberal" attitudinally.
As in most countries, the desire to get ahead is usually at the expense of others less fortunate. If the housemaid can't afford to send both children to school, what is the real price of that new BMW in the garage?
Occasional acts of charity should not make the giver more powerful, and the taker more humble. Real empowerment will only happen when everybody gets a decent wage to look after themselves. That kind of social change will only begin to happen when Indonesia's elite feel good supporting the less fortunate, not exploiting them.
The writer can be contacted at Debnath.Guharoy@roymorgan.com
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