2001: Glittering or gloomy?

By Soeryo Winoto

If the government succeeds in fulfilling its 2001 target to make the rupiah stronger against U.S. dollar -- Rp 8,500 per US$1 -- the domestic market for cars will bloom, meaning that more people will enjoy quality cars. Association of Indonesian Automotive Industries (Gaikindo) chairman, Bambang Trisulo, said. "We expect at least 300,000 cars to be sold this year."

JAKARTA (JP): But if the rupiah remains weak against the greenback, such as Rp 9,500 to $1, and the political situation and security are uncertain, the local market will likely be a little gloomy.

"But we expect that 270,000 cars will be sold," Bambang said.

According to PT Astra's director, Nissan Diesel, the estimated figures did not include 15,000 cars imported by companies which are not under the auspice of Gaikindo.

Despite the (still) economic gloom of last year, data from Gaikindo indicates that 275,000 cars were sold up until November.

The figures sparked optimism and competition among authorized agents. PT Toyota Astra Motor had to increase production of Kijang vans and Soluna sedans last year to answer the unexpected demand.

Until July 2000 more than 35,000 Kijang vans had been sold.

Suzuki producer, Indomobil Group, has also worked hard to produce 5,000 cars to meet consumer demand.

Bambang said the car market had been be cheered by "new players". "Korea is entering the market, and China may follow with its own products, while the old players will push their latest products."

Despite car producers' optimism, many people say the good sales (during the first half of 2000) happened because people had delayed their plan to purchase cars in the previous year due to security reasons.

According to automotive observer Suhari Sargo, this year, the market would not be better than last year. "The country's economy will not be better this year, while the income per capita is still low, about $600."

Suhari said income per capita and economic growth are the keys to car sales, citing that an average of 360,000 cars were sold in Malaysia, where the income per capita was $2,000.

Thailand was a little below Malaysia. About 340,000 cars were sold in Thailand, where the income per capita was $1,500.

"Security will also matter in vehicle sales. If security is not guaranteed, people will be reluctant and discouraged from buying new cars," he said.

Street demonstrations and vandalism have haunted most drivers in major Indonesian cities for the past three years. People, including demonstrators, have been easily provoked to commit anarchy, such as destroying any vehicles passing on the street.

Suhari added that delayed orders last year's should not be recorded as this year's sales, referring to last year's carryover of a total of 30,000 cars.

"Car distributors must also be extra careful. They should not be too vigorous in offering their products. Remember that, practically, people will be working actively only for 10 months this year. Half of this month (January) has been virtually lost, what with the Islamic Idul Fitri and Christian Christmas holidays falling within days of each other in December 2000. Market activities will be very slow," Suhari said.

Taxation

The government's decision to increase sales tax on luxurious goods (PPnBM) (to between 30 percent and 75 percent of prices) is feared to upset the automotive market this year.

Director general of metal industry, machinery, electronics, and miscellaneous industries, Agus Tjahayana, said at a media conference recently that the car market, which has shown a little progress, should not be discouraged by the policy.

Bambang and Suhari also expressed their worry that the tax would trigger an increase in car prices.

"The market has not been so bright that increasing car prices will be unfortunate. Carmakers need to be extra careful before setting new prices for their products," Bambang said.

Suhari said the government should have targeted luxurious cars to collect more money from taxes, instead of increasing the PPnBM for its revenues. "The import duty for high-end cars could be increased from just (the current) 80 percent."

The government of Malaysia imposes 400 percent import duty for luxury completely built up (CBU) cars, he said.

According to the new regulation, the sales tax for a new sedan of between 3,000cc and 4,000cc is 50 percent and for over 4,000cc, 75 percent.

The old regulations ruled that a sedan with an engine capacity of more than 3,000cc was charged 50 percent in sales tax.

The sales tax for double-axle passenger vans did not change, being between 30 percent and 40 percent.

There was no explanation as to why the government increased the sales tax, or what types of car are classified as luxury.

PT Indomobil's managing director, Gunadi Sindhuwinata, said a a clear definition was needed of a luxury car. "If the category depends on engine capacity (cc), the new ruling is not fair. Because there are cars with a big engine capacity but which cannot be classified as a luxury car."

Trend

Many have predicted that Toyota's Kijang van continue to lead the local market this year.

Both Bambang and Suhari agreed.

"Some 60 percent or 70 percent of all cars sold this year will be such a family van," Bambang said. "The prices are relatively reasonable for the middle to lower classes, as most of the vans of this type are produced locally."

Besides Kijang, there are other Toyota sports utility vans (SUV) Prado, Land Cruiser 100, Previa, ready to hit the market.

Jakarta-based DaimlerChrysler's corporate communications head, Wim Ekel, said that his company would also enhance locally assembled vehicles. "People are usually interested in the existing types of vehicles available on the market. Locally assembled vehicles are as superior as those produced in their country of origin, and are cheaper."

Suhari said that Indonesia's "extended family" culture also influenced people in buying a multipurpose van (MPV).

"Yes, about 70 percent of products sold will be family vans like Kijang. There will be no other choice. Fifteen percent will be sedans and the rest will be trucks and other types of cars."

He said that the government's plan to increase fuel prices would not discourage people from buying a second car.

"Diesel-fueled cars are more economic. But, no doubt, comfort and performance are usually taken into consideration by consumers," Suhari said.

The CBU car business will not be bad, as car producers have also been competing in offering family cars.

Korea enjoyed sales of 3,826 imported KIA Carnival MPVs in the first half 2000. KIA is predicted to be a good seller this year.

KIA's Carnival good selling may also have lured big guns like Ford and DaimlerChrysler.

Ford, which controls Volvo, Land Rover, Jaguar, Aston Martin, Lincoln, Mercury and Mazda, will likely depend on its Escape XLT SUV to compete in the Indonesian market this year.

Observers have said the Ford Explorer SUV would also attract Indonesian car lovers.

DaimlerChrysler, which has 18 products, including Mercedes Benz, Chrysler, Jeep and Dodge, will rely on its new C-Class Mercedes Benz sedan during the 2001 market race here.

The new C-Class, launched in the spring of 2000, is extremely popular with customers worldwide. More than 150,000 vehicles of this series were delivered to customers in the first year of production.

Now that the government has lifted the ban on imports of CBU luxury cars with engine capacities exceeding 4,000cc, demand for luxury vehicles, mostly CBUs, has increased.

An abundant variety of vehicles will jostle for places in the Indonesian market.

"That will be okay. It doesn't matter. We are educating consumers, who are becoming aware of the best products. Dealing with DaimlerChrysler is dealing with an established organization, which has reliable dealers," said Wim.

Last year, 2,250 passenger cars and 1,400 commercial vehicles were sold in Indonesia, Wim said.

Expressing his optimism, Ford president of ASEAN operations, Gerald J. Kania, once said that Indonesia was still a promising market.

A Jakarta-based representative official has been appointed by Ford, and dealers and distributors will be named in its effort to reenter the Indonesian market.

Commenting on Ford's plan, Bambang Trisulo welcomed it, saying that rushing to build its own assembling plants might be unnecessary for Ford. "The more players the better. Ford could cooperate with local partners (the ones it had cooperated with in the past) to assemble its vehicles, regardless of its interest to export its CBU cars."

Ford cooperated with local distributor Indonesian Republic Motor Company for almost one year in the 1990s. The cooperation halted after a year as the automotive policy made by the New Order government hindered Ford, when the Timor brand car was the prima donna.