**Decline in Middle Class Triggers Drop in Car Sales to Only 1 Million Units**
In Indonesia, car sales have remained stagnant at around 1 million units for quite some time. Since 2014, the adoption of new cars has not surpassed this number. Last year in 2024, car sales plummeted to only 850,000 units, aligning with the projections set by Gaikindo. Various factors have contributed to the automotive industry struggling to breach the 1 million unit mark in 2024.
### **Economic Impact of Decreasing Middle Class**
One of the primary reasons behind this decline, according to economist Raden Pardede, is the reduction in the middle-class population. This demographic has been a key target for the automotive industry. Raden highlighted a significant drop in the middle-class population from 2019 to 2024, emphasizing their crucial role as the economic engine due to their substantial spending power.
### **Financial Burden on Middle-Class Families**
Each middle-class individual spends between Rp 2 million to Rp 9.9 million on shopping. Considering an average household with four members – a husband, wife, and two children – their monthly expenditure can reach around Rp 40 million. This financial burden impacts their ability to afford car loans or mortgages, hindering the automotive market.
### **Productivity Decline Affects Purchasing Power**
The decline or stagnation in car sales can also be attributed to decreased productivity levels. Since 2019, the growth in labor productivity has failed to keep pace with inflation rates, leading to a deterioration in purchasing power. This shift has steered households towards cheaper alternatives like public transportation and used cars.
### **Multi-Faceted Factors Contributing to Sales Slump**
Raden elucidated that the dwindling car sales stem from multiple factors, including the diminishing purchasing power due to the middle-class decline and the decreasing labor productivity. Additionally, slow per capita GDP growth, high inflation rates, foreign exchange fluctuations, interest rates, limited financing options, and governmental regulations all play a role in this sales stagnation.
In essence, addressing the growth of the middle class, improving job quality with higher wages, and enhancing overall economic conditions are pivotal to overcoming the sales stagnation in the automotive industry, as highlighted by Raden Pardede’s insights on the matter.
