Current affairs

Impact of the Corona pandemic on the new and used car markets in Indonesia

2020/05/21


The rate of decline in used car prices is currently increasing

Due to the impact of the new coronavirus, PSBB (Massive Social Restriction) was enforced both in Jakarta, the market for automobile sales, and in West Java, the province where Bekasi and Karawang, our production bases, are located.

As a result of the stagnation of both supply and demand, Indonesia's automobile production in April 2020 decreased by 79.6% (104,847 units to 21,434 units) and domestic sales decreased by 90.6% (84,059 units to 7,871 units) compared to the same month last year.

Indonesia's car shipments have been on a downward trend after peaking at 1.22 million units in 2013, with 1.03 million units in 2019 and a significant downward revision to 600,000 units from the target of 1.08 million units this year, which will be affected by the Corona pandemic, but it still looks tough to achieve.

In Indonesia, where the used car market is very active, the price of Japanese cars in the middle and lower classes of the mass market does not fall easily, falling 10% in the first year and then gradually.

However, in the last few years, inflation has remained low at an average of 3.5% per year, and the corona pandemic has increased the supply of cars to meet the cash flow needs of companies and the cost of living of individuals, while demand has decreased due to restrained buying due to uncertainty about the future.

The Toyota Avanza Veloz 1.3 AT that I'm driving right now is a popular car that I bought in 2016 for 202juta, but the current used sales price for 2020 should be able to sell it for around 150juta if I estimate it from my previous senses, but at the current market price it was down to around 130juta.

On the other hand, the price of a new car in the same class has risen to around 230 juta, so even if you make a tukar tambah (sell your current car and pay the difference in cash), you will have to take out more than 100 juta, which will further reduce the demand for replacement.

Until 2016, the rate of decline (amortization rate - inflation rate) averaged about 5% a year, but in the last few years, the average inflation rate has been low at about 3.5%, and now it is calculated to have risen to about 8% a year on average due to a combination of buying restraint resulting from the corona pandemic.

There are some great cars that are unaffected by inflation and whose prices keep going up

Japan is in a long-term deflationary trend and prices have hardly risen in the last 20 years, but living in Indonesia, you naturally become concerned about the effects of inflation and interest rates when purchasing assets such as real estate and cars.

There was a time when it was common knowledge that "cars sell for more than when you bought them", and this was around 1998-1999, when inflation was high enough to push the rate of decline in car prices (depreciation rate - inflation rate) to a positive level, so cars certainly sold for more than their acquisition price in the used car market.

However, regardless of the depreciation rate or inflation rate, there are some cars that continue to rise in price the older they are, and one example is the Toyota FJ-40 Land Cruiser.

A friend of mine once told me that when he sold his car to buy a new one, he sold it for more than the price he bought it for, but if the inflation rate at the time was 30%-35% and greater than the depreciation rate, it's quite possible. But there are cars that keep going up in price regardless of that, and one example is the Toyota Land Cruiser FJ-40, a 1980 model that I bought in 2005 for 65juta, and the price has gone up 3-4 times now. twitter.com/yamazou/status… pic.twitter.com/Hgk0yDQcV7

The price of this car was 65 juta when I bought it from an Australian, but if you look at the current price of the same model, it seems to be trading at 200 juta to 250 juta.

As a Balinese friend of mine who runs a used car agent said, "The hardtop (a.k.a. the Toyota FJ-40 Land Cruiser) never gets old (tidak ketinggalan zaman)," and the 4-liter monster engine is still used to tow accidents, transport generators, and more, and it can easily make its way through steep mountain roads and bad roads on a tour of Mount Bromo in East Java.

What is particularly noteworthy is the impeccable exterior that compensates for the poor fuel economy that goes against the ethical (ethical = environmental conservation and social contribution) era, which is only 4-5 km per liter, and the artistic form that intersects straight lines and curves, which I do not doubt that I still believe that this is the greatest masterpiece miraculously produced by the world's Toyota in the 130-year history of automobiles.