Motorcycle sales may drop below 1998 figure
JAKARTA (JP): Motorcycle sales may drop below the 1998 figure of 430,948 units, as demand remains low amid the economic crisis, the Association of Indonesian Motorcycle Sole Agents and Manufacturers (PASMI) has said.
The association's chairman, Ridwan Gunawan, said over the weekend the low sales projection was mainly caused by plunging sales in the first half of the year.
"The country's economic crisis, and lingering fears over unrest due to political instability, are the main contributors to the further fall in motorcycle sales, especially in the first half of this year," he said.
Domestic sales of motorcycles were recorded at 142,316 units in the January to May period this year, a 45 percent drop compared to 258,000 units sold in the same period of 1998.
The PASMI figures showed that 870,000 units were sold in the same period of 1997.
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 a few days 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 slated for the coming months, sales will continue to decline this year," he said.
The country's motorcycle market had shown impressive growth in 1997, with sales reaching 1.9 million units.
Sales plunged by 77 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 their production capacity.
"Most motorcycle assemblers are currently operating at 30 percent of their capacity. This year, it may be reduced again."
Some motorcycle assemblers have turned to the export market to offset the sluggish domestic market. Local assemblers exported 80,000 motorcycles in 1998, Ridwan said.
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.
Automotive deregulation
He said the government's new automotive policy was expected to raise the production costs of locally assembled motorcycles by between Rp 200,000 and 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 last month by the Minister of Industry and Trade Rahardi Ramelan, locally assembled motorcycles are liable for a 25 percent import duty, but are exempt from the luxury tax.
"The increased import duty will raise the prices of motorcycle components by between Rp 200,000 and Rp 500,000 per unit, depending on the make," he said.
Asked whether the new policy would result in a price hike for motorcycles, Ridwan said the increase would depend on each manufacturers' pricing policy and the rupiah's exchange rate.
He said it was unlikely that motorcycle prices would increase immediately, because most local manufacturers were currently holding enough stock to meet domestic demand at least until the end of this year.
Ridwan said that on the whole local motorcycle manufacturers welcomed the new automotive policy, because they realized the government had no choice in the matter.
"While this will be a temporarily painful for some inefficient motorcycle manufacturers, it could be beneficial to prepare the manufacturers for the open market in the medium and long-term." (gis)