Analysts open fire on tax breaks for new carmaker
Analysts open fire on tax breaks for new carmaker
JAKARTA (JP): Several stock analysts criticized the import duty and luxury tax exemption given by the government to a newly- established automaker, PT Timor Putra Nasional, as unfair and discriminative.
The research director of PT HG Asia, Jonathan Harris, told The Jakarta Post yesterday that foreigners view any kind of protection negatively.
"Most of the foreign investors were upset yesterday. That is why there was strong selling pressure on the Jakarta Stock Exchange (JSX) yesterday soon after the announcement of the new car policy," Jonathan said.
He said that the new regulation has not only affected publicly-listed carmaker PT Astra International, but the entire market.
The regulation, according to Jonathan, will have a long-term impact on Indonesia's car industry, as well as other industries as foreigners will now think "investing in Indonesia is less predictable".
On the future prospect of the automobile industry, he said "This is the first time Astra gets a real competitor, particularly in passenger cars."
Astra, according to Jonathan, may be able to maintain its sales volume this year but expects its sales to be affected next year.
An analyst with a foreign brokerage told the Post that the worst aspect of the regulation is that the huge price difference will put competitors, who do not enjoy any tax exemptions, in a very difficult position.
"Although the success of the newly established company will still depend on the extent of its distribution network and service centers, cheaper prices are a strong cutting edge to beat its competitors," she said.
The analyst, who preferred anonymity, said that Timor's partner, KIA Motor company of South Korea, is actually not the biggest carmaker in its home country.
She said that KIA's best products in Korea are trucks. KIA is also known for its jeeps.
"But I don't think that KIA's sedans, like those to be produced by PT Timor, have competitive quality as compared to Japanese cars," she said.
However, she noted that it's still too early to estimate the future performance of other carmakers like Astra.
"What we are now waiting for is a reaction from the Indonesian auto assemblers association. We also wonder if it could have a significant effect," she added.
Jonathan foresaw that KIA's commercial cars will become the Astra's most significant competitors.
"In the longer term, I would say that Astra will be forced to revise the ratio of its passenger and commercial car production," he noted.
The analyst said that Astra, as the most dominant player in the country, had a 56 percent share of the commercial car market last year with total sales of 85,000 vehicles. Toyota alone accounted for 25 percent.
Mitshubishi and Suzuki respectively have 21 percent and 20 percent market shares.
For passenger cars, Astra has approximately 74 percent of the total market with the brands of Toyota, BMW and Peugeot, followed by Honda with 13 percent, Mitshubishi with 8 percent and Suzuki with 5 percent.
A dealer from a local brokerage told the Post that Astra's share prices declined further yesterday as the market reacted to the new car industry regulations.
Astra's local price, according to the dealer, dropped by four points on Wednesday to Rp 3,075 (US$1.30) and another four points yesterday to close at Rp 2,875.
Astra's foreign price fell Rp 300 to Rp 4,675 on Wednesday and continued to drop by eleven points or 16 percent to Rp 3,850 yesterday.
He added that in yesterday's trading, Astra's turnover was estimated at 13 million shares.
Jonathan noted that although the general market was weak yesterday as the JSX index plunged 10 points to 585.20, that was not the main reason for Astra's share price drop.
"On the contrary, it was the entire market which was affected by the regulation," he contended.
He also forecasted that Astra's share prices will continue to decline.(08)