'Car sales to drop 30% as Iraq war hits consumption'

Zakki Hakim, The Jakarta Post, Jakarta

Car sales in the country could fall by 30 percent this year as the Iraq war could delay consumer purchasing plans, car industry experts said Friday.

"Total car sales in the country dropped about 30 percent after the 1991 Gulf War. I think this war will have the same impact," Soebronto Laras, president of PT Indomobil Niaga International, said after launching a new model Suzuki Baleno on Friday.

The war would probably raise crude oil prices, which would in turn decrease people's purchasing power and force them to delay buying expensive goods, he said, adding the rise in oil prices would also increase car manufacturing costs.

The war will affect the sales of all types of cars, except for sales of middle-class sedans with the price range of between Rp 130 million (US$14,500) to Rp 200 million, which he predicted to grow from 12,000 last year to 15,000 this year.

That is why, Soebronto said Suzuki believed its new sedan model, called Baleno Next-G, will sell well this year.

Suzuki aimed to sell up to 5,000 units of the new Baleno this year in competition with Toyota, Honda and Hyundai, who planned to launch new brands this year targeting the same market segment, he said.

Soeseno, secretary general of the Indonesian Association of Automotive Manufacturers (Gaikindo), agreed the war could mean a 30 percent drop in car sales in Indonesia this year.

"The war will certainly raise the cost of exports and imports, fuel prices and cause a worldwide recession," he told The Jakarta Post.

All these problems, coupled with domestic ones, including political tension in the runup to the presidential election in 2004, would result in the decrease in the country's car output and the drop in car sales, he said.

After suffering a major setback as a result of the country's financial crisis in early 1998, the Indonesian automotive sector has booked sustainable growth over the last four years.

Total sales, which fell to 59,634 units in the peak of the economic crisis in 1998, recovered to 299,560 in 2001. Last year, sales further increased to 317,788, approaching the peak level of 383,605 in 1997.

Although the Indonesian car market has not yet fully recovered, it is still regarded as one of the most lucrative markets in Asia.

According to Gaikindo, sedan sales in the domestic market dropped 16.8 percent in January last month from the corresponding period last year.