Motorcycle sales drop 32 percent in first half

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)