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