Automotive market prospect remains bleak this year

Automotive market prospect remains bleak this year

By Matthew Allen and Russell Williamson

INDONESIA's vehicle market will remain flat until at least the
second half of 1998, putting increased pressure on an already
highly competitive industry.

The secretary-general of the Association of Indonesian
Automotive Industries, F. Soeseno, said the total market this
year would be lucky to scrape through to a total of about 340,000
vehicles after reaching just 320,000 sales last year.

Soeseno said it was not economic factors which were likely to
keep the market flat but rather political uncertainty as the
country looked forward to elections.

"I think we will start gaining our market sales only in the
second semester of 1998 as it is after the presidential and
general elections," he said.

He said even with the pick up in the second half of 1998,
sales for that year would still be about 350,000 vehicles.

This is a far cry from the high of 1995 when total sales
reached nearly 380,000 and well below previous expectations.

Early last year, the Association of Indonesian Automotive
Industries was forecasting sales of about 430,000 vehicles this
year rising to 470,000 in 1998 and 550,000 by 2000 -- based on
economic growth.

However, the introduction of the Timor and the subsequent
speculation about vehicle price cuts, together with severe
flooding early last year caused a virtual standstill in the
market.

This was followed by a long delay before Timor cars actually
arrived in October, which, along with a fall in Category I sales
as Toyota ran out its old Kijang, further exacerbated the
situation.

However, despite these setbacks, Soeseno was confident the
total market could still reach 500,000 vehicles by 2000.

Part of this growth is likely to come from a revival in sales
of Category I vehicles which last year fell by about 20 percent.

With Toyota's new Kijang providing a renewed focus on the
segment and the introduction of competitors from Bakrie and
possibly Mitsubishi next year, sales growth should be assured.

Sales in the sedan market should also increase although
Soeseno remains skeptical about the degree of market penetration
and speed at which this might happen.

"A shift will happen, but it will not be significant because
of the new commercial vehicles being marketed," Soeseno said.

However, those manufacturers with vehicles in the segment
remain optimistic that there will be a significant growth in the
sedan sector.

Indications of this can be seen in the successful launch last
year of the Bimantara Cakra, Honda City -- which enabled the
company to significantly lift its market share -- and the Suzuki
Baleno.

Companies like Timor Putra Nasional and Bimantara are
particularly confident the sedan market will lift, especially the
latter as it slowly increases its local content and domestic
manufacturing operations.

Also the support these companies receive from their joint
venture partners in South Korea would suggest that they too are
expecting the market to grow.

To ensure they are not left behind, the Japanese carmakers
established in Indonesia may also benefit from increased support
by their industry association body, the Japanese Automobile
Manufacturers Association (JAMA).

JAMA recently set up a regional office in Singapore to help
its members in the region.

JAMA spokesperson, Takashi Yasuda, said that JAMA will work to
assist its members with common issues that affect Japanese
automotive companies operating in this part of the world.

"We can help with issues such as the environment, safety,
emission control and social aspects deriving from our history in
the region.

"In some cases we can come up with common goals and if we have
a problem, we can work from a common platform," Takashi said.