A car price war?

Who says the prices of cars in Indonesia will never go down? The jolts that have taken place in the past six months are proof that car prices can indeed come tumbling down. The decline was triggered by the launching of the PT Timor Putra Nasional's car. Priced at Rp 36 million, the Timor car is far cheaper than others in its class.

The jolt was amplified when Bimantara launched the Cakra and Neggala sedans, which sell for Rp 45 million and Rp 64 million, respectively. These price reductions were immediately followed by the dealers of other makes which have been on the market for a long time.

But are these price cuts based on the market phenomenon of supply and demand? This is an appropriate question because maybe the other car dealers have reached a silent agreement among themselves to cut prices to beleaguer the Timor, which is able to sell at low prices because of the tax concessions which it has received.

If this is what is happening, for how long can the dealers go on and be content with meager profits?

In order to hold out they make take steps to improve efficiency, possibly through lay-offs and reduced orders from supporting industries. This could affect our employment situation.

We hope that the current phenomenon is based on pure market dynamics. If this is true we could enjoy two advantages simultaneously: cheap cars and a robust national automotive industry.

-- Republika, Jakarta