Astra strives to boost vehicle market share amid rough times
Starting as a trading company in 1957, PT Astra International has become one of the country's conglomerates with a business network extending from automotive assembling and distribution, to financial services, heavy equipment, agribusiness, information technology and infrastructure. Astra's chief executive officer Budi Setiadharma shared his views with The Jakarta Post's Rendi A. Witular in a recent interview on the company's business strategy and projection this year and next year. The following are excerpts from the interview:
Question: How are Astra's vehicle sales this year? Answer: We expect domestic car sales to reach around 340,000- 350,000 units this year, with Astra accounting for 42-43 percent of the sales. In terms of market share, we are declining but not in terms of units.
The increase in total sales is beyond our expectation. Last year, we estimated the sales for this year to reach only 330,000 units. However, the increase is still below the pre-crisis level in 1997 of around 400,000 units.
As for motorcycles, we estimate total domestic sales at 2.8 million units throughout the year with Astra expected to grab more than 52 percent of the sales.
What caused Astra's market share to decline?
You know that early this year the government decided to raise the price of diesel oil above gasoline's. The plan has unfavorably impacted on sales of our diesel-fueled Isuzu van, which is long known to be fuel-efficient. Although the plan was later annulled, Isuzu van sales have yet to recover.
However, the decline has been balanced by the higher-than- expected sales of Toyota cars, which until the end of this year was estimated to reach around 95,000 units. Our initial sales target for Toyota this year is around 80,000-83,000 units.
What's the impact on your total sales revenue?
Our sales revenue growth will not be high this year. We estimate there will be an increase of Rp 1 trillion (US$117 million) to Rp 2 trillion from last year's sales. (Last year Astra booked total sales of Rp 30.68 trillion).
Is the plan by Astra's principals to launch new multi-purpose vehicles (Toyota Avanza and Daihatsu Xenia) in line with the strategy to lift back your market share?
Of course, we hope the new MPVs (multi-purpose vehicles) will help increase our market share. We are also hoping that our customer service product, Astra World, can also help increase the market share.
We expect to launch the MPVs in early next year, hopefully in January. The price range is around Rp 100 million with two engine capacity options of 1,000 cc or 1,300 cc. The MPVs will basically have seven sits with standard and deluxe versions.
Don't you think that the MPVs will hit the sales of Toyota Kijang and Daihatsu Taruna?
To some extent, it will do. But for customers who need a wider MPV, they can still turn to Kijang.
The launching of the MPVs are not intended to counter our competitors, as the plan was prepared around two to three years ago. At that time, we realized that Indonesian customers, due to the economic crisis, needed an inexpensive MPV.
What's your sales projections for 2004?
Sales in 2004 will much depend on the progress of the general elections. We estimate that domestic car sales will be at least the same as 2003, a little bit above 350,000. In that kind of environment, customers will prefer taking a wait-and-see stance. People will be filled with a negative mood which prompts them to hold up demand.
How's about your debt-buyback program this year? Still on track?
We have targeted to trim down our debt to below US$500 million (from around $800 million at the end of 2002) this year, and it is on track. Until the end of this year, our debt to equity ratio is expected to reach 0.4 percent, meaning that our balance sheet will be stronger.
We hope that by accelerating the payment of our debt, we can receive a release date from our creditors by December, in order to pay out dividends of up to 50 percent of our 2003 net profit. If the release date is not issued within the month, we are only allowed to pay an interim dividend of around 20 percent.
Astra recently sold its controlling stakes in auto-making joint venture PT Toyota Astra Motor (TAM) to Toyota Motor Corp (TMC). Will there be any impact on Astra's revenue?
Of course there will an impact to our revenue composition, but for sure we have not yet finished the calculation. We hope to complete the calculation in another month.
Rumors say TMC is planning to take control of its car distribution. What is your comment?
I don't think TMC will do that. At least for the next five years, our control of the distribution (through the Auto 2000 outlet) is still guaranteed based on our agreement with TMC. The agreement will be renewed every five years, but TMC has no plan at all to take the distribution control so far, unless Astra fails to perform in its distribution business.
Astra plans to divest several business sectors managed by its subsidiaries. Can you explain more?
We only plan to divest our non-core businesses in PT Astra Agro Lestari such as cacao, rubber and tea operations. Astra Agro will fully concentrate on crude palm oil production.