Motorcycle maker sees no major investment

Motorcycle maker sees no major investment

Sandy Darmosumarto, The Jakarta Post, Jakarta

Local demand for motorcycles is expected to continue rising
next year, but local manufacturers have more than enough capacity
to fulfill the rise in demand.

Thus, the Indonesian Motorcycle Industry Association (AISI)
has predicted no additional investment planned by local
motorcycle manufacturers in machinery to expand their production
capacity next year.

Association vice chairman Gunadi Sindhuwinata said the
country's motorcycle industry was now running at between 80 and
85 percent of its capacity. At full capacity, the industry can
produce up to 3.5 million units annually.

"With sales this year to hit around 2.8 million units and 3.2
million next year, the industry has until 2004 or 2005 before
preparing for reinvestment in order to expand its capacity,"
Gunadi told The Jakarta Post.

"Prior to the economic crisis in 1997, the industry and its
suppliers -- which include local components manufacturers --
engaged in major reinvestment to double their capacities
following predictions that local production would rise," he said.

However, sales fell sharply after the economic crisis and
could only recover to near pre-crisis level in 2001, four years
after the economic crisis. That year, a total of 1.64 million
motorcycles were sold in the country, against 1.85 million in
1997.

The lack of reinvestment in basic manufacturing machinery
means there is no reinvestment at all, explained Gunadi.

While all manufacturers who have excess capacity will withhold
investment plans to increase capacity next year, some of them are
expected to invest to alter their production lines to produce new
models.

Gunadi said that with rising per capita income and the
consequent increase in demand, motorcycle manufacturers, who
possess excess capacity, may also invest in extending
distribution and after-sales networks. This includes opening new
showrooms and workshops.

Additionally, local component suppliers are expected to
reinvest to support new motorcycle models, the rise in output and
the demand from spare-part shops.