Cheaper MPVs to drive car market this year

Sari P. Setiogi, The Jakarta Post, Jakarta

Multipurpose vehicles (MPVs) could soar in popularity this year as new economy models are launched with relatively affordable prices of below Rp 100 million (US$11,990).

"Last year, MPV (sales) growth was almost zero percent, but this year I predict it will reach about 5 percent," the chairman of the Indonesian Automotive Manufacturers Association (Gaikindo), Bambang Trisulo, said on Tuesday.

Toyota is launching the Avanza minivan with a retail price of between Rp 80 million and Rp 100 million, while Daihatsu introduces Xenia with a retail price of between Rp 60 million and Rp 90 million. Avanza is equipped with a 1,300 cc engine, while Xenia has either a 1,000 cc engine or a 1,300 cc engine.

Other top car makers are also planning to introduce less expensive MPVs.

"Although MPV sales growth will 'only' be 5 percent, it is large in volume as the MPV segment still holds about 50 percent of the domestic market share," Bambang said.

In 2003, national car sales reached 350,000 units, according to Gaikindo. It is expected that this figure will grow to 390,000 units this year despite the elections.

"The economic indicators are relatively stable and the elections also seem to be more well prepared. I assume there will be no huge, serious troubles during the elections," said Bambang. He is optimistic that people will keep buying new cars, particularly low to mid-priced cars.

Last year, the stars of the market were single utility vehicles (SUVs), commercial cars and mid-class sedans. This year, because of the elections, sales growth for mid-class vehicles is not expected to be too big.

"People will refrain from buying costly cars this year," Bambang said.

Separately, the director general for small and medium industries and trade at the Ministry of Industry and Trade, Aang Tjahajadi, said the growing car market in the country should be followed by a growing local components industry.

For motorcycle components, Indonesia is already the third largest manufacturer in the world after China and India.

"The local content of motorcycles manufactured here now reaches almost 90 percent," said Aang.

However, he said the country still found it difficult to follow the latest technology in the car industry.

"In the global arena, models (of components) are changing very rapidly. For small industries, it is somehow difficult for them to keep up to date," said Aang.

Indonesian Vehicle Component Market Size (US$ million)

Year Revenue Exports Domestic

1999 7.276 336 6.941

2000 16.235 613 15.622

2001 14.400 681 13.719

2002 14.100 629 13.471

source: Indonesian Automotive Parts and Components Industries Association