Motorcycle sales may drop below 1998 figure

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)