Automobile sales slump following deregulation
JAKARTA (JP): Last month's deregulatory measures, which cut back tariffs on imported vehicles, has caused a decline in automobile sales of up to 30 percent.
Chairman of the Indonesian Automotive Industry Association Herman Z. Latif told reporters after a hearing with the House of Representatives here yesterday that the situation is temporary, with sales likely to increase again in coming months.
"As we predicted, tariff reductions are almost immediately followed by a decline in demand as consumers become doubtful and even confused of new situations," he said.
Herman said that consumers might expect prices to continue to fall.
He is sure that in the long run, demand will recover and automobile prices will be market driven once again.
Under the May deregulatory measures, the import tariff on sedans and station wagons, the types of which are assembled domestically, has been lowered from 175 percent to 125 percent and will be further reduced to 40 percent by 2003.
The tariff on pickups has been reduced from 60 percent to 50 percent and will be further cut to 30 percent by 2003 and the tariff on minibuses from 100 percent to 75 percent and 30 percent in 2003. The tariff on heavy-duty trucks is set to remain at 5 percent.
Herman refused to make a detailed prediction yesterday as to how long the sales decline would prevail, saying it could be between three and six months, depending on market developments.
He said that the market slump will not halt automobile sales altogether -- particularly the sales of sedans and station wagons which are most effected by the deregulation.
He said sales of vehicles have fallen by about 10 percent to 30 percent, depending on their types and makes.
Sales
Data from the association indicate that total automobile sales fell from 274,603 units in 1990 to 263,073 in 1991 and to 171,898 in 1992, before rising back to 214,298 in 1993 and surging to 326,471 in 1994. During the first four months of this year, 88,777 vehicles were sold, comprising 74,941 commercial vehicles, 1,680 jeeps and 12,156 sedans.
Shortly after the deregulation, a number of car assemblers announced that they had cut sedan prices by up to six percent.
Herman also said that automobile prices might increase in the future if the Japanese yen continues appreciating against the U.S. dollar.
Herman said in the hearing with House Commission VI, which oversees industrial affairs, that last month's deregulation, which will gradually cut backs tariffs on vehicles, might discourage prospective investors from getting involved in the automotive industry.
"The government, therefore, should offer incentives to encourage investors to help develop the country's automotive industry," he said.
Herman said the incentives could include tax exemption for the manufacture of certain strategic components.
He said Indonesia lacks small- and medium-scale component plants to supply producers of automotive vehicles.
He cited that South Korea's Hyundai company had over 1,250 suppliers for its car manufacturing plant and Volkswagen of Germany had some 16,000 suppliers.
"Indonesia has only about 135 component suppliers," he said.
The association currently groups 22 sole agents of 27 automobile brands, 14 assembling companies, seven component manufacturers and one distributor. (pwn)