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.