Gaikindo conservative on 2001 car sales prediction

JAKARTA (JP): Continued political uncertainties will likely weigh on car sales in 2001, as consumers become more cautious in making new purchases amid fears of social unrest, according to an auto association executive.

Bambang Trisulo, chairman of the Indonesian Association of Automotive Industries (Gaikindo), said he expected car sales to reach only some 300,000 units next year, about equal to this year's estimated total sales.

He said that the industry's prediction of car sales for next year ranged between 270,000 and the more optimistic estimate of 320,000.

"We're conservative about our prediction," Bambang told reporters last week.

The current volatile political situation would likely extend to next year and affect consumers' buying intentions, Bambang added.

Car sales, he said, were quite sensitive to the political outlook.

According to him, consumers usually delay buying cars on signs of political turbulence that could result in social unrest.

The upcoming implementation of regional autonomy added to the political as well as economic uncertainties, according to Bambang.

With regional autonomy in sight, local administrations, for instance, might impose excessively high fees for car ownership transfers, he said.

"It is not clear yet who will be in charge of administering car ownership transfers," Bambang explained.

But the central government, he added, was drafting guidelines for what it saw as appropriate pricing policies for such transfers.

"Regional administrations can then use the guidelines to set their own pricing policy in accordance with their local needs," he said.

The launching of new models could fuel consumer purchasing, but this year's political and security conditions have been generally bleak, he said.

Based on Gaikindo data, car sales plunged to 53,303 units in 1998 when the economic crisis hit its peak, from 386,691 in 1997, but began to rise the following year to 93,843 as the economy slowly recovered.

In 1998, car prices nearly tripled, whereas people's purchasing power dropped by more than half as the rupiah depreciated to almost 80 percent against the U.S. dollar.

Gaikindo has said that a stable rupiah rate and declining banking interest rates would result in a higher demand.

Last January, the association estimated that car sales for this year would reach only 160,000 units, which was considered an optimistic prediction at the time but which turned out to be overly pessimistic.

This year, sedan sales were likely to jump to about 47,770 units from only 11,041 last year, according to Gaikindo data, and light van sales to 211,900 units from last year's 67,718.

Truck, jeep and bus sales would likely reach 40,330 units, up from last year's 14,084 units.

As in previous years, sales of multi-purpose vans take up the lion's share of the national car market.

This segment is dominated by the Toyota Kijang but Daihatsu's Zebra and Espass have also become increasingly popular.

Albeit a newcomer, Korean automaker Kia with its Caravan family van has gained a sizable market share this year, outselling its Japanese competitors.

The year 2000 also saw the entrance of minicars of various makes, with an eye on the potential market created by Jakarta's crowded streets. These include Hyundai's Atoz, KIA's Visto and the A-class Mercedes.

Bambang predicted that consumers' preferences would likely continue to be for Kijang due to the prevailing security concerns.

"The reason is more cultural. A model like Kijang is not seen as luxurious and does not portray an excessively affluent appearance that could incite social jealousy," he said.

However, he warned of new competition next year from the Chinese automakers who have been gearing up to make their debut in the Indonesian market.

According to him, the Ministry of Industry and Trade has registered some 10 importers of Chinese vehicles.

They would penetrate the Indonesian market with vans, priced 10 percent to 20 percent cheaper than existing models, Bambang predicted.

"But this is fine with us, as long as their pricing practices are transparent," he added.

He dismissed worries that Chinese cars would flood the domestic market and severely hurt local assemblers, as Chinese motorcycles did this year.

One year after their debut here, Chinese motorbikes have gained some 20 percent of the total domestic market.

"Consumers have different buying considerations for cars and motorcycles," he explained.

Unlike motorcycles, cars are more sophisticated and offer a richer variety to consumers to choose from, according to Bambang.

"As the motorcycles sold here look very much alike, consumers just go for the cheaper price. But it is different with cars. You really want to get a good look before you choose a model," Bambang noted.

Chinese cars, he added, would depend primarily on their lower prices in their attempt to make inroads into the local market.

As for quality, he added, that would depend on which part of China the cars would be imported from.

Bambang said manufacturers in the northern part of China produced low quality cars and sold them at very low prices, whereas manufactures in the southern part were known for their high quality cars.

"They (Chinese cars) will definitely eat up our market share once they enter, but time will have the final say," Bambang said. (bkm)