2001: Glittering or gloomy?

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.