Astra sees flat growth in car sales

Rendi A. Witular, The Jakarta Post, Jakarta

Indonesia's largest carmaker, PT Astra International, expects flat growth in car sales this year due to a decline in the sales of its diesel-fueled Isuzu multipurpose vehicles and overall weak market demand.

Astra president Budi Setiadharma said on Monday that sales of Isuzu vans had been hurt since early this year by the steep rise in the price of automotive diesel as the government cut the expensive fuel subsidy to help ensure fiscal sustainability.

The price of automotive diesel fuel is currently Rp 1,650 per liter compared to Rp 600 in 2001.

Many people have been reluctant to purchase diesel cars since the second part of last year, particularly amid the prospect that the price of automotive diesel fuel could surpass that of gasoline.

Speaking to reporters on the sidelines of the launch of the Astra World service unit here, Budi said that Astra was trying hard to regain the image of the Isuzu brand as being a "low cost" vehicle.

Isuzu had been Astra's second best selling vehicle after the popular Toyota Kijang vans. But last year, sales of Isuzu vans dropped to 26,335 from 31,299 in 2001.

Budi did not provide a sales figure for the first quarter, but said that Astra's car sales performance so far this year had been helped by an increase in the sales of Toyota cars and other brands.

Nevertheless, the overall weak market demand pushed Astra's car sales in May down by 2.7 percent to 11,971 vehicles.

Last year, Astra's car sales reached 135,740 vehicles, down from 138,192 the previous year.

Analysts have said that the weak market demand, as people's purchasing power has been reduced by the slow pace of economic recovery, is hurting car sales in the country.

They also predict that domestic car sales this year will grow only slightly to around 350,000 vehicles from 317,000 last year.

However, Budi hoped that there would be progress in the company's sales in the second semester of this year following the drop in the central bank's benchmark interest rate and the sharp appreciation of the rupiah against the U.S. dollar.

The lower Bank Indonesia interest rate is expected to prompt banks to provide more loans, which in turn would help trigger car sales.

The long holiday at the end of the year is also expected to become a positive factor in increasing car sales.