Indonesia car firms pray for rate cuts as sales slump

Posted By:
Subscribe to Oneindia News

JAKARTA, Apr 17 (Reuters) Vehicle sales in Indonesia could slump by more than a quarter this year, threatening jobs in Southeast Asia's biggest economy, after the government more than doubled fuel prices late last year, industry executives say.

Unit sales fell short of 80,000 in the first quarter, nearly 45 percent down on a year earlier, and some in the sector say total 2006 sales will be below 400,000.

Sales of cars and trucks in the world's fourth most populous nation hit a record 533,910 units last year as consumers snapped up motorbikes and vehicles with the help of low interest rates.

But, in October, the government hiked domestic fuel prices to ease pressure on its budget due to a ballooning fuel subsidy bill caused by soaring world oil prices. That move helped push up inflation to a six-year peak and drove up interest rates, curbing enthusiasm for car loans that had fuelled the market.

Firms have trimmed factory output and reduced overtime, which could lead to job cuts, although this would not be industry-wide.

Tony Supatra, general marketing and planning manager at PT Toyota Astra Motor, said that unless interest rates fall sharply, sales this year are likely to fall to below 400,000 units -- sending the industry back nearly two years.

Sales in 2004 were 483,295 units, up from 354,333 in 2003.

''My rough calculation shows (400,000 units) is not something that can be achieved easily, unless there's something extraordinary that can lift sales substantially,'' Supatra told Reuters.

LOWER RATES, GIVEAWAYS With global crude prices near a barrel, fuel prices are unlikely to offer drivers or auto makers much near-term respite, and interest rates are not expected to fall back enough to spur consumer buying, even though Indonesia's consumer price index showed its smallest annual rise last month, of 15.74 percent, since fuel prices were hiked in October.

The central bank has said it might cut its reference rate, known as the BI rate sooner than expected, but industry executives said a likely 25 basis point cut would do little to improve sales. The BI rate is currently 12.75 percent.

''Unless they said interest has been cut to 5 percent ...

that will be an entirely different story,'' Toyota's Supatra said.

Jonfis Fandy, in charge of marketing and sales at PT Honda Prospect Motor, which distributes Honda Motor Co. Ltd. vehicles in Indonesia, said: ''Lower interest rates are always good for us, but the question is whether the leasing companies can quickly adapt to a new rate.'' To try and spur demand, some auto makers are offering low interest rate financing, sharing the burden with leasing firms.

Some distributors are offering a year's free motor insurance or petrol, others are trying to woo buyers by giving away in-car televisions and DVD players or leather seats.

''The question is whether we can make up the first-half (sales) shortfall in the second half. With year-end festivities and holidays, it'll be tough,'' said Supatra, predicting second-quarter sales would not be much better than the first quarter's 79,400 units.

''I think any recovery will be slow and gradual,'' he added.

Another industry executive, who declined to be named, reckoned 2006 sales would only reach 360,000-370,000 units -- down by a third from last year.

FUEL EFFICIENCY Toyota's market share, however, rose to around 43 percent in January-March from 34.2 percent for the whole of 2005, thanks to its fuel efficiency campaign, strong sales of its popular models and solid branding among Indonesians.

The market share of PT Astra International Tbk, which sells Toyota vehicles and is the country's biggest automotive distributor, jumped to 58 percent from 48.5 percent.

Honda, which set the marker for fuel efficiency with its popular Jazz supermini, saw its market share rise to 11.29 percent in January-March from 10 percent last year.

Among those brands hardest hit, Suzuki's market share dropped to around 11 percent in the first quarter from nearly 17 percent, while the combined share of other makes, which include many expensive European models, fell to 6 percent from 8.4 percent.

Shares in Astra, which is controlled by Singapore's Jardine Cycle&Carriage, rose 10.3 percent in the first quarter, underperforming the main Jakarta Composite Index, which gained 13.8 percent.

REUTERS CS

For Breaking News from Oneindia
Get instant news updates throughout the day.

X
We use cookies to ensure that we give you the best experience on our website. This includes cookies from third party social media websites and ad networks. Such third party cookies may track your use on Oneindia sites for better rendering. Our partners use cookies to ensure we show you advertising that is relevant to you. If you continue without changing your settings, we'll assume that you are happy to receive all cookies on Oneindia website. However, you can change your cookie settings at any time. Learn more