Fierce competition in the lucrative MPV market

Fierce competition in the lucrative MPV market

T. Hidayat, Contributor, Jakarta

The national automotive industry is thriving. The last two
years have seen significant growth in the sales of vehicles, as
recorded by the Association of Indonesian Automotive
Manufacturers (Gaikindo).

The 2001 sales figure of 299,560 units -- already much higher
than previous years -- was overtaken by an all-time high sales
performance in 2002, at 318,000 units.

The sales forecast for 2003 is estimated at 340,000 units, or
an increase of five percent, which is a fantastic figure in the
Southeast Asian region.

The promising automotive market in Indonesia has prompted new
players to enter the country. Tighter competition is now taking
place not only among long-established Japanese car makers like
Toyota, Mitsubishi and Suzuki, but also among Ford and General
Motors from the United States, as well as KIA and Hyundai from
South Korea. The luxury car market here is being targeted by
European manufacturers, such as Maserati and Porsche.

The range of vehicle types has also expanded from the previous
range of sedans, minibuses and commercial vehicles, and a fusion
of these types -- in numerous variations -- is now available.

According to Lukas Subagio, deputy marketing director of PT
KIA Mobil Indonesia, the most lucrative market in the country is
the Multipurpose Vehicle (MPV), which is an ideal combination of
a sedan and a minibus.

The increasing sales of MPVs each year proves that this
vehicle type matches the specific requirements of Indonesian
consumers. Most MPVs on the market have all the pluses of a sedan
-- a classy look and robust engine -- blended with a larger
passenger capacity. These features make it suitable for most
kinds of transportation needs, as one Honda Stream owner, Yvette
Maureen, said: "For business, family outings ... in fact, for
almost any kind of trip, I think an MPV is just right."

According to Lukas' observations, the MPV market will be more
competitive in the future as more players enter this segment.
Next to Japanese and Korean producers, the market is becoming
more crowded with American and European makers like Ford,
Chevrolet, Peugeot and Volkswagen (VW).

Hendrayadi Lastioso, marketing communications manager of PT
Toyota Astra Motor, concurred with Lukas and said that although
the MPV category was relatively new, it is the fiercest market
here, according to the number of players and the variants
available. Next to its Kijang, still the dominant brand in the
category, the company also markets the luxury variant, Toyota
Previa.

"In this lucrative category, the tight competition, I think,
is only natural. The sales figures of MPVs is further proof of
the robust sales I'm referring to. Up to June 2003, out of the
total vehicle sales -- 170,811 units -- 88,663 were MPVs," he
said.

The price range is divided into four categories: Low (under Rp
100 million), medium (Rp 100 to 200 million), high (Rp 200 to 500
million) and luxury (over Rp 500 million).

The most fierce competition is among makers and models in the
medium price category. Here, Toyota Kijang, Isuzu Panther,
Mitsubishi Kuda, KIA Carens, Hyundai Matrix and Hyundai Trajet
are fighting for the largest slice of the pie. Chevrolet Zafira,
Renault Kango and KIA Pregio have recently joined the crowd.
Although Isuzu Panther, Mitsubishi Kuda, KIA Carens and Hyundai
Trajet are performing well, the market leader is still Toyota
Kijang. Currently 75 percent of the non-sedan market is dominated
by MPVs, beating minibuses and Sport Utility Vehicles (SUVs).

The management of Toyota Kijang is becoming more cautious as
consumers are lured by attractive offers from competitors. One of
them, Suzuki, with its successful launch of Aerio -- a
combination of a minivan and a sedan -- in October 2002, seems to
pose a real threat. Still, the optimism of its producer,
Indomobil, was reflected in its monthly sales target of 750

Similarly, KIA Carens is another strong contender with an
almost identical sales forecast. "While KIA Carens fights in the
medium price category, our Sedona is becoming the favorite choice
in the luxury class," said Lukas.

Meanwhile, consumer enthusiasm is also reflected in the
success of Honda's Stream and Odyssey, which are already
crisscrossing the streets of many Indonesian cities. Due to the
high sales of its MPVs, the buzz is that Honda is preparing
another plant in the country.

In the Rp 200 million to 400 million price range are five
players: Peugeot 806, Mazda Premacy, Renault Scenic, KIA Sedona
and Hyundai Trajet. The last two are enjoying better sales,
because they entered the market earlier. However, this niche is
also becoming more fragmented with the soon-to-enter Peugeot 807.
This highly popular model is enjoying instant demand, as
indicated by the more than 50 units ordered in advance. Delivery
takes within two to three months.

Competition lies not only in the area of pricing nor features.
After-sales service, extensive network of authorized workshops,
genuine spare parts etc., are equally important to retain
customer loyalty. Some manufacturers, like KIA, for example, even
imports mechanics and engineers from their home country to ensure
the highest standards of service and vehicle maintenance.
"Everyone is now fully aware that this business is not only about
selling, but is an overall and long-term relationship with
customers," Lukas said.

"Although the prospect for MPVs looks bright in this country,
I think only the most customer-oriented producer with an
excellent service that is incorporated into the marketing
strategy will survive," Lukas concluded.