Firmer rupiah no effect on automobile prices: Analyst

JAKARTA (JP): Although the recent strengthening of the rupiah will not bring skyrocketing automobiles prices down, it revives hope in the industry, automotive analyst Suhari Sargo said on Thursday.

Automotive industry insiders remained unsure whether the rupiah's revival would continue, he added, and thus automotive firms would not respond by cutting their sales prices.

The industry is still burdened by extremely high bank interest rates which most automotive firms could not afford, he said.

"The strengthening of the rupiah gives only a little hope. The overall situation remains dull as interest rates remain so high."

Most local automobile firms have raised sales prices by at least 100 percent following the drastic fall of the rupiah against the U.S. dollar.

But the rupiah has appreciated to 7,600 from 12,000 in early September, still a 67 percent drop from the 2,450 level in July 1997.

Bank Indonesia, the central bank, has cut benchmark interest rates of its one-month promissory notes to 56 percent now from 70 percent in early September.

Suhari argued that most companies could not operate normally with interest rates above 50 percent.

"As the monetary situation remains relatively tight, the strengthening of the rupiah does not give much benefit to the real sector, including the automotive industry."

Indonesia's automotive sector would not rebound in the next two years, he said.

Suhari said the automotive sector was battered and would remain in a bad condition until the economy started to grow.

Even then, auto sales would not automatically pick up as it would need much more time for people to regain the level of early 1997.

After experiencing a drastic plunge this year, automobile sales are expected to grow by about 10 percent next year, "but a 10 percent increase from a small number".

According to data from Association of Indonesian Automotive Industry, sales of automobiles in the domestic market slumped 83.2 percent to 54,289 units during the first nine months of this year, from 323,276 units recorded in the same period of last year.

Total production fell 87.4 percent to 40,284 units from 319,191 units.

Meanwhile, exports of automobiles decreased 13.4 percent to 3,827 units from 4,421 units.

The worst monthly automobile sales were recorded in May and July during a momentous change in leadership following massive rioting in Jakarta and other cities.

Automobile sales in May and June were only 2,220 vehicles and 2,251 vehicles respectively. Sales improved in June to 5,113 units, and increased again to 6,115 units in August before decreasing to 5,966 units in September.

The highest monthly sales were recorded in January when 14,400 vehicles were sold.

Automobile sales in 1997 averaged 32,000 vehicles per month. (29)