Indonesia's car sales back on track after steep fall

By Russell Williamson

Indonesia's vehicle sales are returning to normal after falling dramatically following the announcement in February of PT Timor Putra's plans to build a cheap national car.

Timor Putra was granted exclusive tax concessions to enable the company, headed by President Soeharto's youngest son Hutomo Mandala Putra, to build an affordable family sedan and stimulate Indonesia's automotive manufacturing industry.

With the prospect of a cheap family sedan on the market to lure the volume customers away from the commercial-based family wagons such as Toyota Astra's Kijang, the immediate reaction of the market was to stop buying.

Many earlier reports suggested customers would wait for the introduction of the Timor car to see if other car prices fell to remain competitive. The Timor car is expected to go on sale in September for about Rp 35 million.

This reaction was evident in sales figures for February which fell by more than 10,000 cars or nearly 40 percent compared with January figures.

According to official sales figures from the Association of Indonesian Automotive Industries total vehicle sales in February were just 18,429 after January's total of 28,974.

Carmakers were then predicting that sales would continue to remain flat for some time.

March figures, however, have returned to a high of 28,079 with sedans, at 3,473 cars, making up over 10 percent of sales.

This is almost back to the level of January, when sedan sales reached 3,877 and many carmakers are now optimistic about the future.

The director of sales and marketing for PT General Motors Buana Indonesia, Terry Johnsson, said he had been surprised at the level of buying in March.

"The general wisdom was that March was going to be quite soft," Terry said.

"In actuality February was pretty much where we forecast it but March came in at about 28,000 cars and we had forecast about 20,000 so it was much more buoyant than we had imagined," he said.

Terry said that although he had no official figures as yet, sales for April and May appeared to be strong.

He said the carmakers' initial assumption that the Timor Putra announcement would deal a significant blow to sales over a long period appeared to be wrong.

"Our interpretation is that there is not a lot of buyers who are actually waiting (for the Timor car)," he said.

"We expected that maybe up to 20 percent of the market would sit back and make up their minds later but it hasn't been the case so far," he said.

Terry said the market now appeared to be settling down a bit and the speculation about price reductions on cars across the board were subsiding.

He said however, when the Timor car was launched he did expect there to be some effect on the overall market but nobody was really able to predict what might happen.

"When the car comes out and there are dealers and an advertising campaign I am sure then you would expect to see behavior adjusted a bit, but it seems as if the customer is actually looking for more than just a low-priced vehicle," Terry said.

He said the Indonesian sedan buyer was more discerning and was looking for more in a sedan car than just a cheap price.

"I sense that the customer here is a bit beyond just an old model with a new skin and a low price," Terry said.

"The sedan customer here is a little bit more discriminating," he said.