Gaikindo expects higher car sales

JAKARTA (JP): The association of Indonesian Automotive Industries (Gaikindo) revised its 2001 car sales forecast to 280,000 from 250,000 following higher-than-expected sales in April and May.

Gaikindo chairman Bambang Trisulo said on Thursday that car sales this year would now only be slightly lower than last year's 300,000 units.

"We can expect a better sales figure this year," Bambang said during a media briefing to promote Gaikindo's July 21 to July 29 auto exhibition at the Jakarta Convention Center.

Gaikindo initially forecast this year's car sales to fall to 250,000 units due to a plan to hike taxes, slower economic growth, and domestic political uncertainty.

He said that several members of the association had even predicted that 2001 car sales would reach last year's level.

"But I'm more conservative because their forecasts are based on the results of the last two months when people have been purchasing cars based on expectations that prices would go up in June or July," he said.

Bambang said that car sales in April and March reached 29,000 per month, higher than Gaikindo's forecast of 22,000.

He explained that people rushed to buy cars during the period in anticipation of coming higher prices as the government had earlier announced plans to introduce higher value added tax (VAT), luxury tax and import taxes.

He said that car sales for the first half of this year totaled 148,000 units, a 13 percent growth compared to sales in the same period last year.

The government is determined to use tax as the main source of revenue to help contain the 2001 state budget deficit within a safer level of around 3.7 percent of gross domestic product (GDP).

But the government dropped the plan last month to raise VAT to 12.5 percent from the current 10 percent.

The government has also yet to implement the plan to increase import taxes and luxury tax on car sales.

But Minister of Trade and Industry Luhut Pandjaitan said earlier that the government would proceed with the plan, aiming to raise around Rp 330 billion (US$29 million) in additional tax revenue from the automotive industry.

"Many bad things which had been predicted, did not materialize. We even managed to beat our monthly sales target instead," said Bambang.

Bambang said that car prices were expected to increase by an average of 20 percent to 30 percent this year if the government proceeded with the tax increase plan.

He said that the recent 30 percent increase in fuel prices and 20 percent in electricity rates contributed little to production costs in the automotive industry.

He said that the biggest contributor to the price increase would be taxes and the weakening of the rupiah against the U.S. dollar.

The rupiah has been under pressure, hovering at Rp 11,555 per dollar, due to a combination of domestic economic woes and political instability.

The domestic car industry is heavily dependent on imported raw materials.

"Car prices will be increased gradually, on average 5 percent every month, to maintain a relatively stable sales volume," Bambang said.

He said that with the increase in car prices, sales in the second half would be slower than the first half.

He added that the plan of the People's Consultative Assembly (MPR), to hold a special session on August 1 aiming to impeach President Abdurrahman Wahid would affect sales.

There have been fears that if the MPR proceeded with its plan, it could trigger conflict between the President's fanatic supporters and opponents.

"We're not too sure what the situation will be in August and after August," Bambang said.(03)