Appearance remains prime factor in car purchases

Paulus B. Suranto, Marketing Department Head, PT BMW Indonesia

Remember the Toyota Starlet or the Honda Civic hatchback? Once in the not-too-distant-past of the 1980s, those types of automobiles were considered trendsetters. But by the late 1990s those types of vehicle were rarely seen roaming the streets of Jakarta.

That kind of phenomenon applies also to station wagons such as the Mazda Van Trend, and minibuses such as Daihatsu Espass. They were all popular in their respective periods but have since disappeared. It is interesting to notice that the sedan/saloon has never been out of trend (and demand) in any period.

What really drives customers in their choice of vehicle? Is it necessity, practicality? Or is it purely driven by emotion?

Let us simulate the process and go deep into the customers' minds when they are about to purchase their first car. Let's take a look at a male person. For example, he is a rising star in a company, popularly regarded as a young executive. He is single but has a steady girlfriend. He would like to express himself as the rising star, the young executive. Therefore, he needs a car that can be associated with that. For sure, he is not likely to go for a van or people-mover such as the Toyota Kijang or Isuzu Panther, but would prefer the sedan or a sports utility vehicle (SUV) such as Opel Blazer, the Suzuki Escudo, the Honda CRV, etc.

Now, with those narrowed-down options, his personality and savings will play a bigger role. If he is a sports fanatic, and likes to go driving off-road, he is sure to take the SUV. But, if he likes clubbing and partying, he will probably go for the sedan.

Now, if he is married with children, for his first car he is likely to choose either the MPV (multi-purposes van) such as the KIA Carnival, Hyundai Trajet, Chevrolet Zafira or the people mover.

If the rising star in the simulation above is a woman, she will probably go for a small sedan type such as a Suzuki Baleno, Peugeot 206, Honda City, Mercedes A-Class. When she is married with children the choice will not differ that much to the scenario of the male person above.

The choice of first-time car buyers or single person purchasers will mostly be driven by "emotion", whereas a family persons' choice will be driven by practicality.

In this group of people the Sedan, SUV, the people mover and the MPV will remain in demand.

For second, third and forth car buyers (which means people who have more than one car), the purchase is likely to be based on emotion.

For this group of people the range of car types is wide. The coupe, convertible, roadster and station wagon, will find a place in this group. However, these types of car form a niche market and that makes official car manufacturers (assemblers) or importers (organizations who are officially appointed by major overseas auto companies to be their representatives in Indonesia) reluctant to import them, let alone assemble them here.

The reason is because authorized car manufacturers or importers need to prepare a comprehensive program before they can launch a model.

At the very least they need to invest in special tools and training for their mechanics to manage the after-sales service. Furthermore, with the current import duty and luxury tax structure, imported assembled cars sell at a higher price than those assembled in the market. It is not difficult to understand, therefore, that these type of cars are rarely seen on the streets.

Having said all of the above, it is safe to say that the type of cars that will remain popular for at least another 10 years will still be the sedan, MPV, SUV and people mover, with the first three being the more preferred, the last one being needed, more than it is wanted.

It is also interesting to note that most Indonesian first-time buyers tend to go more on the beauty of the exterior than on other deciding factors. It is therefore understandable that brands or makes that can provide customers with fresher and more attractive looks are more successful than those who cannot.

And nowadays, the fashion for all types of cars is to look sophisticated, aerodynamic and futuristic. Angular or boxy looking cars are out of fashion. Slim, smooth curves, provocative head lamps and grilles, nice-looking rear lamps, innovatively located blinkers, are very much today's fashion.

Beginning in the early 90s, major auto companies entered the domestic market with high expectations as Indonesia was (and is) considered a high potential market.

To name a few, there is General Motors, Honda, Ford, Daimler Chrysler and BMW. BMW and Ford have entered the market at a time when Indonesia is still recovering from the economic crisis. BMW came in early 2001 and Ford in late 2001/early 2002.

In 2001, the total domestic car market was 299,845 units, a slight decrease from the year 2000 when it was 300,963 units. Some analysts predict 2002 to end up with just 280,000 units. It is still lower than then pre-crisis era of 386,691 units (1997) but is has substantially recovered from the worst crisis-hit year (1998) of only 58,315 units.

Expectations for recovery remain strong. When that really happens in the next four or five years, we can expect more major car names to directly enter the Indonesian market.

The next stepping stone will be after AFTA is implemented. One barrier to Indonesia's domestic market -- import duty -- has been removed almost completely. The reduction of import duty from as high as 80 percent (for CBU cars with more than 3000cc) to as low as 5 percent is very attractive.

In the end it will depend on the level of guarantees the Indonesian government is willing to provide potential investors. Otherwise, major auto companies will go elsewhere, like Thailand or the Philippines, make huge investment in manufacturing there and export their cars to Indonesia. And that has started already. General Motors, Toyota, Ford and BMW are already stepping in that direction. Indonesia needs to consider this very seriously.

From the customers' point of view, the implementation of AFTA is very much embraced. They can purchase cars less expensively, and they can expect to be offered a greater range of auto models.

Individualized models of cars will become more available. The coupe, convertible, roadster and station wagon will remain popular vehicles plying the streets of Jakarta.