Rendi A. Witular
\nThe Jakarta Post\/Jakarta<\/p>\n
Weakened purchasing power -- resulting from the recent economic
\nslump that may continue into the first six months of 2006 -- is
\nlikely to drive a sharp decline in the domestic demand for four-
\nwheel vehicles.<\/p>\n
Car sales next year are forecast to reach between 450,000 and
\n500,000 units as higher inflation and interest rates are likely
\nto slow down demand, Prijono Sugiarto, director for local
\nautomotive company PT Astra International, said over the weekend.<\/p>\n
\"We believe that people's purchasing power will remain low
\nuntil the second half of next year as a result of the recent
\neconomic downturn. It is hard for car sales to surpass this
\nyear's figure,\" said Prijono, who is also vice chairman of the
\nAssociation of Indonesian Automotive Manufacturers (Gaikindo).<\/p>\n
Bank Indonesia's move to raise interest rates to halt the
\nrupiah's plunge against the U.S. dollar and ease inflation has
\nresulted in a surge in lending rates, including those for car
\nloans.<\/p>\n
Currently, interest rates on car loans charged by banks and
\nfinance companies are at about 10 percent for a one-year loan and
\n12 percent for a four-year loan. However, banks and finance
\ncompanies are likely to adjust the interest rate following a Dec.
\n6 BI rate increase to 12.75 percent.<\/p>\n
According to research company ACNielsen, between 80 percent
\nand 90 percent of new car purchases worldwide, including in
\nIndonesia, are financed by loans provided by banks or finance
\nfirms.<\/p>\n
The auto industry has already felt the pinch of the economic
\ndip this year, when car sales declined steadily from an average
\nof 50,000 units per month in the first eight months to 44,000 in
\nSeptember, 35,000 units in October and 26,000 units in November.<\/p>\n
The decline has forced Gaikindo to lower this year's sales
\nforecast by 36 percent from 550,000 units to 530,000 units.<\/p>\n
\"500,000 units are an optimistic figure for the industry.
\nAside from an expectation of a quick recovery in the economy, we
\nare also hopeful that a possible rise in the people's income per
\ncapita next year will at least drive demand,\" said Prijono.<\/p>\n
According to the forecast in the 2006 state budget,
\nIndonesians' income per capita might increase to Rp 8.4 million
\n(US$857) per year from Rp 8 million this year, calculated from an
\neconomic growth of 6.2 percent, which will be made possible by
\nconsumption, investment and exports.<\/p>\n
Lower purchasing power, however, is not the only factor that
\nwill dent demand next year. There is an indication that most
\nmiddle-income people will delay buying a car after putting their
\nmoney first in bank deposit accounts to reap higher interest
\nrates.<\/p>\n
\"With higher interest rates, there is a trend among the
\nmiddle-income people to deposit their money first in banks before
\nbuying cars. The demand is actually there, but there is a delay,\"
\nsaid Astra investor relations manager Richard Santosa.<\/p>\n
Car demand is often used by the government and economic
\nanalysts to measure the purchasing power of people living in the
\nmiddle and upper-income levels, while demand for motorcycle is
\nusually use to measure the middle- and lower-income people.<\/p>\n
Richard said areas with the highest car demand next year would
\nbe more or less similar to this year, in which Jakarta would
\ncontribute around 31 percent of the demand, followed by West Java
\nwith 20 percent and Sumatra with 14 percent.<\/p>\n
Around 11 percent will be from East Java, 7 percent from
\nCentral Java and Yogyakarta, 6 percent from Banten, 4 percent
\nfrom Kalimantan, 3 percent from Sulawesi, 3 percent from Bali and
\nNusa Tenggara, and only 1 percent from Maluku and Papua.<\/p>\n
\"The industry expects growth of the demand will be higher in
\nEast Kalimantan and Riau. This is because of the abundant
\nactivities in the mining and energy sector, which will expand
\nlocal income,\" said Richard.<\/p>\n
Multipurpose van (MPV) will still dominate the market next
\nyear with a market share of more than 50 percent.<\/p>",
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