Motorcycle sales drop 32 percent in first half

JAKARTA (JP): Domestic sales of motorcycles dropped 32 percent to 177,558 units during the first half of this year, from 258,000 units sold in the same period of 1998, the Association of Indonesian Motorcycle Sole Agents and Manufacturers (PASMI) said.

Association chairman Ridwan Gunawan said over the weekend that domestic sales slightly improved in June, reaching 35,424 units, from 34,585 units in May.

"But the slight increase could not help the plunging sales during the first semester," he said.

PASMI figures recorded that 870,000 units were sold in the same period of 1997.

Sales of popular Honda motorcycles in June were down 16 percent to 18,337 units in June, from 21,851 in May, while June sales of Suzuki and Yamaha motorcycles rose 38 percent and 30 percent to respectively 7,779 units and 6,179 units.

Ridwan said motorcycle sales could drop below the 1998 figure of 430,948 units this year, as demand remained low amid the economic crisis.

"The country's economic crisis, and lingering fears over unrest due to political instability, are the main contributors to a further fall in motorcycle sales, especially in the first half of this year."

Ridwan predicted the domestic motorcycle market would remain depressed, despite an expected improvement in the country's economy in the second half of 1999.

"During the campaign period (May 19 to June 4) and after the general election, many motorcycle dealers and showrooms throughout the country decided to temporarily close their shops due to lingering fears of unrest. Prospective buyers also delayed their purchases.

"Since there are several other items on the political agenda scheduled for the coming months, sales will continue to decline this year."

The country's motorcycle market recorded outstanding growth in 1997, with sales reaching 1.88 million units, putting Indonesia on the list of the third biggest producer of motorcycles in Asia.

Sales plunged by 80 percent to 430,948 units in 1998, as the economic crisis, which began in the middle of 1997, became more severe, and the country's political situation deteriorated following the downfall of former president Soeharto.

Ridwan said plummeting sales last year had forced most local motorcycle assemblers to operate at below production capacity.

"This year, production may only reach between 500,000 and 520,000 units from a production capacity of 2.5 million units."

Some motorcycle assemblers have turned to the export market to offset the sluggish domestic market. Local assemblers exported 85,000 motorcycles in 1998, Ridwan said.

"Indonesian-made Hondas have been exported to China and Greece, while Yamahas have been exported to the Philippines."

He said the government's new automotive policy was expected to raise the production costs of locally assembled motorcycles by Rp 200,000 to Rp 300,000 per unit, due to the removal of tax incentives.

Previously, locally assembled motorcycles with over 40 percent local content were exempt from import duties, but had to pay a 20 percent luxury tax.

Under the new policy, announced late June by the government, locally assembled motorcycles are liable for a 25 percent import duty, but are exempt from the luxury tax.

"Most of the country's motorcycles have over 90 percent local content. The increased import duty will raise the price of motorcycle components by between Rp 200,000 and Rp 500,000 per unit, depending on the make," Ridwan said.

Investment in the motorcycle assembly business in the country has reached a total of US$5 billion.

Despite the gloomy prognosis, Ridwan said he was optimistic about the long-term outlook for the country's market, citing Indonesia's vast territory and large population.

Meanwhile, the Japan Automobile Manufacturers Association, Inc. (JAMA) predicted that domestic sales of motorcycles would recover faster than car sales, given the price differential.

JAMA's deputy general manager Hiroyuki Nakamura said the association estimated it would take between two and three years for the Indonesian car market to recover, while for motorcycles it would take between one and two years.

"Many Indonesians still have the purchasing power to buy motorcycles, but they are delaying their purchases because of political and security concerns," he said.

He added that most of the Japan-based parent companies had pledged to help their Indonesian motorcycles ventures to pull through the current crisis. (gis)