Automomakers announce plans to raise prices

Automomakers announce plans to raise prices

Abdul Khalik, The Jakarta Post, Jakarta

The country's automotive companies will increase the prices of
their car and motorcycle products due to soaring steel prices in
about five to six months from now after existing stocks have been
sold out.

Gunadi Sindhuwinata, a director at the Indomobil Group, said
on Monday that the company's car prices would increase by more
than 20 percent, while motorcycle prices could go up by at least
18 percent starting in August.

"It will take about one semester to sell the existing stocks.
After that, car prices will ultimately be raised. However, the
producers must also consider the limited purchasing power of
Indonesian consumers," said Gunadi, who is also the vice
president of the Indonesian Motorcycle Industry Association
(Aisi).

He told The Jakarta Post that depending on the amount of units
currently in stock, each producer would have a different strategy
on how much they would increase the prices or whether they would
spread the increase over several months.

Gunadi added that the prices of cars and motorcycles had to be
adjusted because the increase in steel prices, especially hot
rolled coil (HRC) and cold rolled coil (CRC).

Worldwide steel shortages due to strong demand from the fast
growing economy of China and reconstruction in Iraq have caused
global prices of steel to more than double to an average of
US$630 per ton from $310 in December last year.

The international price of HRC has increased by 93 percent to
$580 per ton from $300 last year while that of CRC has increased
by 46 percent to $630 per ton from $430.

The domestic price of HRC now stands at about Rp 5,000 (58
U.S. cents) per kilogram, up 53 percent from Rp 3,250 last year.
The price of CRC has reached Rp 6,000 per kilogram, up 33 percent
from Rp 4,500 last year.

Around 70 percent to 80 percent of car components are made of
steel while motorcycles contain around 60 to 65 percent. The
remaining materials are plastic, rubber, aluminum, tin and
copper.

"All of these additional materials have also experienced
increases -- by an average of 25 percent. Don't forget that the
prices of moulding equipment have also risen recently," said
Gunadi.

Indomobil produces and distributes various brands, such as
Suzuki, Volvo, Audi, Mazda, Renault and Nissan.

The chairman of the Indonesian Automotive Manufacturers
Association (Gaikindo), Bambang Trisulo, concurred with Gunadi,
saying that the industry would not adjust the prices until at
least five months from now.

"The increases will vary, depending on the types of the cars
and each company's policy. We hope that the increase will not be
too high," said Bambang, who is also one of the directors at the
Astra Group, the leader in the Indonesian car market.

Friedel Engisch, the president of DaimlerChrysler Indonesia,
and producer of Mercedes-Benz vehicles, said that he planned to
raise prices in about five or six months.

"Most of our cars are completely knocked down from abroad so
we are less influenced by the current steel price increase. The
pressure to raise prices is unavoidable after five to six months
but we plan to raise prices by just 1 percent," Engisch told the
Post.