Automotive sales may decline next year: Astra

The Jakarta Post, Jakarta

After experiencing rapid growth in the last five years, sales of cars and motorcycles will likely decline next year due to the predicted economic hardship, an industry player says.

Car sales were expected to decline by a minimum of 10 percent while sales of motorcycles could drop by at least 5 percent, said president commissioner of the country's largest manufacturer and distributor PT Astra International, Budi Setiadharma, on Thursday.

Budi explained that lower purchasing power due to the fuel price hike, rising interest rates and a more prudent approach from banks and financing companies in expanding loans contributed to the decline.

"Currently, most people purchase their vehicles on credit from financing companies. The rising interest rates and a more careful loan disbursement would prompt the decline in vehicle sales for next year," Budi explained.

He estimated that in 2006 car sales would decline to 450,000 units from 530,000 units in 2005, while sales of motorcycles would drop to 4.8 million units from 5.3 million.

Data from financing companies shows that 70 percent of motorcycle sales were purchased on credit at present, as well as 50 percent of car sales.

The total vehicle financing is expected to reach Rp 70 trillion (some US$7 billion) this year.

Indonesia recorded its highest car sales in 1997 with 386,691. The number plunged to 68,000 units in the following year before rebounding to around 300,000 in 2000 and steadily climbing since.

Car sales this year are expected to hit a record-high of 530,000 units, while about 5 million new motorcycles are expected to be sold by year-end.

Still, despite the expected declining trend, Indonesia would still be a potential market as its car and motorcycle density is below other Asian countries, Budi added.

For example, 30 percent of Thailand's population currently own a motorcycle, as compared to Indonesia's 10 percent. One in 118 Thais have a car, as compared to one to 415 Indonesians.

Anyway, what might be bad news for the automotive industry might spell relief for the country's busy roads.

Jakartan drivers, for example, already have to contend with a sluggish pace of 14.75 kilometers an hour, with traffic jam- related financial losses estimated at Rp 41.05 billion a day.

There are already 1.3 million private cars on the capital's streets.