Mini multi-purpose vehicles (MPVs), with a maximum engine capacity of 1,500cc, are expected to continue their dominance in Indonesia's automotive market as buyers still prefer to buy small vehicles, but with a large seating capacity as first family cars, an automotive group has said.

Jongkie D. Sugiharto, the deputy chairman of the Indonesian Automotive Industry Association (Gaikindo) said that the association estimated this year's mini-MPV sales would far exceed their outstanding achievement last year.

In 2010, of the national sales of 764,710 units, mini-MPVs took 51 percent of the market share or a total 389,712 units. "This year, we expect to see an even higher appetite for mini-MPVs," he told a media briefing held by a research company.

He continued that last year, the Toyota Avanza topped domestic market sales by taking 18.5 per cent of the market share, followed by its twin, the Daihatsu Xenia with 6.6 per cent at second place.

If the government can maintain the country's economic and political stability, Jongkie projected that domestic car sales might surpass 850,000 units this year and 1 million units by as early as 2014. That target will be made achievable if the government realizes its above 6 percent annual economic growth target and keeps the central bank benchmark interest rate low or at no more than 7.5 percent, he added.

Jongkie said that the growth of the country's automotive industry would help the government improve the people's standard of living by creating more jobs.

Currently, according to the association's data, 12 automobile manufacturing plants operating in the country employ 26,962 workers, while the component industry absorbs more than 300,000 workplaces.

Indonesia's total car sales rebounded by 57 per cent to 764,710 units in 2010 as the local market successfully recovered from the market slump in 2009 during which sales fell 20 percent to 486,061 units from 607,805 units in 2008.

A representative of the research firm that conducted the media briefing estimated that the automobile sales in Indonesia would grow 4.3 per cent in 2011 to 797,258 units, saying that the launch of new models, growth of commercial vehicles segment and stable economic outlook would be major factors determining the sales achievement.

"Demand for passenger cars is likely to grow 4.1 per cent to 563,000 units in 2011 while commercial vehicles will increase 4.5 per cent to 233,325 units," he explained.

However, the vice president said that the sales might be affected by an increase in car ownership taxes (to between 10 and 15 percent) applied by the government this year. The government's plan to limit the distribution of subsidized fuels, expected to be implemented in April 2011 in Greater Jakarta, was also likely to hamper the country's automobile sales, he added.

He suggested that automakers introduce more fuel-efficient and compact cars in the market to attract new buyers to deal with the restriction. "The subsidized fuel restriction may also result in consumers downgrading to smaller-engine and more fuel-efficient cars," he told the media briefing.

Automakers in Indonesia should expand their low-cost car production capacity as the country's macroeconomic indicators suggest that that type of car is likely to be successful in the country, the research firm recommended.

Jongkie, also president director of Hyundai Motor Indonesia, said that the sales of MPVs with an engine capacity of above 2,000 cc might increase in 2011. With higher economic growth, more people can afford to buy expensive cars, he continued. "We also expect to see a higher sales achievement of commercial vehicles particularly outside Java and Bali," he said.