Mon, 15 Dec 2003

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.