Motorcycle sales projected to jump by 14% next year

Motorcycle sales projected to jump by 14% next year

Sandy Darmosumarto, The Jakarta Post, Jakarta

Political stability, low inflation, higher economic growth,
and plenty of consumer loans from banks are expected to drive up
motorcycle sales next year, the Association of Indonesian
Motorcycle Industry (AISI) said.

AISI vice chairman Gunadi Sindhuwinata said that sales in 2004
were projected to increase by more than 14 percent to 3.2 million
units from an estimated 2.8 million units this year.

"With per capita income expected to rise due to the estimated
five percent growth in the economy, and inflation to hover around
7 percent, the post-general elections market is expected to drive
up sales," he told The Jakarta Post in a recent interview.

"It is hoped that the elections (in 2004) will bring in
political stability which will push economic activities," said
Gunadi, who is also president of automotive company PT Indomobil
Sukses Internasional.

Motorcycle sales in the country plunged to 517,914 units in
1998 from 1.9 million units in 1997 following the regional
economic crisis. But since 1999, sales have steadily rose, with
the sales figure reaching around 2.3 million units in 2002.

The rising motorcycle sales have been a significant
contributor to the country's economic growth, which has been
primarily driven by domestic consumption during the past couple
of years amid weak investment and export performances.

Gunadi played down the threat coming from cheaper Chinese-made
motorcycles.

"Imported Chinese motorcycles are estimated to take only five
percent of the total local market," said Gunadi. "Our motorcycle
industry possesses years of market experience, with substantial
networks for distribution and after-sales services. There is no
way imported motorcycles can take over the local industry."

The director for land and air transportation at the Ministry
of Industry and Trade, Muhammad Setiono, quipped to the Post that
"There will be an increase in sales of imported motorcycles, but
the amount is marginal. It depends on whether the Chinese
motorcycle companies have some kind of magic formula to capture
the local market."

"Ultimately, price is not the main factor. Instead, quality
and delivery are also looked upon (by consumers)," he claimed.

Hundreds of local spare part manufacturers will surely benefit
from the growing motorcycle market.

"The strength of the motorcycle industry is in the component
industry. With each motorcycle containing thousands of
components, the 170 firms locally producing spare parts are
expected to gain from the expected rise in the sales of
motorcycles," Gunadi said.

Currently, about 80 percent of components are produced
locally.

Being the world's third largest motorcycle producer, the rise
in production is hoped to increase the local contents of each
motorcycle produced and, thus, absorb additional labors.

Despite the growing domestic market, Gunadi lamented the weak
export opportunity.

"Motorcycle exports have declined," he said.

"Local absorption is still the main target. Countries in the
Indo-China region like Vietnam and Cambodia (now) have their own
motorcycle industries, and hence their demands for foreign
assembled motorcycles have decreased. Similarly, China has been
taking care of most of its local demand," he said.

Local motorcycle makers enjoyed higher exports in 1998 thanks
to a weaker rupiah which help improved the price competitiveness
of local export products. However, export has continuously
declined in the past three years.

Motorcycle Production, Sales and Exports

Year Production Sales Exports

1996 1,425,373 1,426,902 50,255

1997 1,861,111 1,852,906 51,816

1998 519,404 517,914 84,363

1999 571,953 587,402 99,651

2000 982,380 979,422 115,278

2001 1,644,133 1,650,770 74,948

2002 2,318,241 2,317,991 52,517

2003 (July) 1,261,012 1,256,981 9,355

Source: AISI