Astra predicts slump in motorcycle sales

Astra predicts slump in motorcycle sales

Naila Firdausi and Grace Nirang, Bloomberg, Jakarta

Motorcycle sales in Indonesia may fall by as much as 10 percent in 2006 because of higher interest rates and fuel prices, said a unit of Indonesia's biggest car and motorcycle distributor PT Astra International.

The country's motorcycle sales may slow by between 5 and 10 percent from 5.3 million units estimated for 2005, Tossin Himawan, executive vice president director of PT Astra Honda Motor, said yesterday in Bogor, West Java. In 2004, sales were 3.88 million units.

"Consumer purchasing power fell after the jump in fuel prices, while interest rates are climbing, damping demand for loans," Himawan told reporters. About 75 percent of motorcycle sales were funded through loans, Himawan said. "Demand may be shrinking."

The Indonesian government on Oct. 1 more than doubled fuel prices for individual users to prevent fuel subsidies draining the nation's finances. The move sent the inflation rate in October and November to six-year highs and prompted the central bank to raise its benchmark interest rate to a three-year high on Nov. 1.

Higher fuel prices, which doubled for automotive diesel and 88 percent for gasoline, will cut car sales in 2006, Astra said. Sales in November reached a two-year low.

Indonesian car retailers sold 25,600 units of vans, jeeps and sedans last month, said Johnny Darmawan, a director at PT Astra International.

That's the lowest monthly sales since 21,684 units sold in November 2003, according to data compiled by Bloomberg. In November last year, sales were 35,157 units and in October this year 35,103 units.

Last year, carmakers in Indonesia sold 483,295 units of vans, jeeps and sedans, according to the Indonesian Association of Automotive Industries, or Gaikindo. Astra forecast sales of between 525,000 and 530,000 this year.

"Next year, with lower purchasing power and high interest rates, plus higher taxes, they will be between 400,000 to 500,000 units depending on interest rates," Darmawan said. "If interest rates start declining in March, they will likely be in the 450,000 to 470,000 range."