MPV answers Indonesian needs for spacious family cars

Rudijanto, Contributor, Jakarta

In spite of an increase in sedan sales, multipurpose vehicles (MPVs) and sport utility vehicles (SUVs) continue to dominate the country's automotive market.

Automotive giant Astra International said MPV and SUV markets continued to show a significant growth, despite the surge in the sedan sales.

Sales of heavy-duty MPVs and SUVs, such as the Honda CRV, Nissan X-Trail, Nissan Terano, Ford Everest and Ford Escape, for example, rose by 10.8 percent to 5,448 units in the first quarter, this year from 4,919 in the same period in 2003.

Meanwhile, sales of light-duty MPVs, such as the Suzuki Carry, Toyota Avanza, Daihatsu Xenia, Mitsubishi T120 and Daihatsu Zebra, surged by 78.3 percent to 22,825 units, from 12,805 last year, and medium-class MPVs and SUVs -- Toyota Kijang, Honda Jazz, Mitsubishi Kuda, Suzuki Escudo, Honda Stream and Daihatsu Taruna -- rose by 11.5 percent to 25,674 from 23,026 units.

As with other categories, sales of medium-class diesel MPVs, such as Isuzu Panther, Toyota Kijang, Mitsubishi L300 and Mitsubishi Kuda, also booked a significant increase during the first three months of 2004: by 46.9 percent to 4,396 units, from 2,992 last year.

The Toyota Kijang has become the favorite among Indonesians. Long favored by a tax system that placed a lower tax on these MPVs, the commercial Kijang has been able to dominate the market.

With such a significant increase, automotive analysts believe that the country's total car sales will be able to meet the targeted 380,000 units this year.

In 2003, total sales rose to 354,331 cars from 317,749 cars in 2002. Sedan sales recorded a hefty increase of nearly 45 percent

According to data from the Association of Indonesian Automotive Manufacturers (Gaikindo), sedan sales increased by nearly 45 percent to 37,873 cars in 2003 after a major drop in 2002, when it declined to 26,714 cars from 35,188 units in 2001. The growth of the sedan sales was higher than those of other categories but in term of sales volume, sedan sales were far below than the others.

Toyota Astra Motor (TAM) has been able to maintain Kijang's dominance during the first quarter with a 50-plus percent market share in the medium MPV segment. In March alone, TAM sold 6,285 units, or a 21.5 percent increase compared to last year.

Many players in the local automotive market have appealed to the government to change the current taxation system that favors MPVs than sedans. For instance, Government Decree No. 7/2002 states that luxury sales tax for a 1,500-cc sedan is 30 percent and 40 percent for 1,500- to 2,500-cc sedans.

In contrast, taxes for MPVs with fuel tank capacities of less than 1,500 cc are 10 percent, and between 1,500 to 2,500, 20 percent. This lower tax for MPVs has enabled them to sell at more competitive prices.

While the 2003 launch of sedans priced at around Rp 150 million (about US$17,650) proved to boost sedan sales by 44.7 percent, it did not particularly affect the market share of MPVs.

Many Indonesians certainly do not look at only prices, and greater seating capacities and more spacious interiors to haul goods constitute some of the key considerations in purchasing cars -- and is why many players have flocked to the MPV segment.

Although Kijang has guarded its domination of the medium-class MPV segment carefully, other players have become increasingly aggressive in entering the MPV market, including the 4x2 heavy MPV segment.

But it seems there will be ample room for all players. PT Hyundai Mobil Indonesia's event & public relations head Lindarto Rahardjo believes that the MPV market is still promising.

"The concept of MPV suits the characteristics of Indonesians who need a car that is able to accommodate more family members. Such cars enable them to socialize with other families," said Lindarto.

New players such as Hyundai, Chevrolet and KIA are struggling to grab more of the MPV market share in their respective segments. No doubt, competition has forced these players to share the market with each other.

Lindarto said while Hyundai sold between 200 to 300 Trajets per month last year, the aggressive competition had cut its monthly sales to between 150 to 200 units.

Hyundai has two types of its monocoque-body Trajet, the eight- seater GL8 and seven-seater GLS, which sell respectively at Rp 185 million to around Rp 210 million.

"The real MPV has a monocoque body and provides comfort to the passengers. It is not like commercial-based vehicles that are made into passenger cars. The real MPV is as comfortable as sedan," said Lindarto.

Another Korea-based manufacturer, KIA, is introducing a new version of its Carens this year. The old version of this MPV was initially introduced in 2002, Carens II has had a body makeover.

Aside from changing its rear lights, the Carens II has also undergone several changes to its interior, in particular the addition of armrests on the front seats and a new air- conditioning system that blows cool air from above and below the seats.

Powered by a 1800-cc Dual Overhead Camshaft (DOHC) engine, the Carens II can accommodate up to seven passengers, and the longer cabin means this MPV still looks spacious and comfortable, even when it is carrying a full carload.

"Our target is to sell 250 Carens II per month, and I think this is possible because the Carens II has the latest technology and features and a more competitive price than its competitors," said Adi Yudistira, KIA promotion manager.

It is not only Asian automakers that are competing for the domestic market share, and even American makers are working hard for a slice. For example, Chevrolet is relying on its Zafira and Aveo models.

PT General Motors Indonesia (GMI) assistant director of public relations Hanum Yahya said the Zafira was positioned as the smart choice for motorists who want a stylish and versatile MPV that was equally practical for home, office and leisure use.

"The Zafira's popularity comes from its exclusive Flex 7 seating system, which allows it to be transformed from a 7-seater to a 2-seater in less than 15 seconds without removing a single seat," said Hanum.

The GMI has also recently launched a new variant, the Chevrolet Zafira Elegance. With a more luxurious and contemporary look, the Zafira Elegance has a full-leather interior and Irmscher accessories, such as its aluminum-like three-spoke steering wheel, gear shift, hand brake and center console.

Smaller than the Zafira, the Aveo is a five-door MPV. Awarded the BBC Top Gear's 2003 Best Choice for the super-mini category, and this MPV is positioned to appeal to smart and adventurous drivers.

The success of the Zafira Elegance and the Aveo will depend on the local market response. Declining to disclose its sales performance, the GMI only said sales for both models continued to be very encouraging.

"We are very optimistic about the future, and believe there is much room for growth because of growing consumer demand for quality, dependable vehicles that are affordable," said Hanum.

With so many MPVs flooding the market, Indonesians will have more choices. Although the more luxurious MPVs do not compete directly with the Kijang because of different market segments, their presence has provided consumers with more options for a family car.

Indonesians are becoming more aware that driving family cars can be as comfortable as driving a sedan. With the economic condition showing gradual improvement, many expect that local demands will shift to more luxurious MPVs.

Market rumors are abuzz that TAM is preparing to launch a new version of the Kijang, one more luxurious than existing models. Some say the new Kijang will resemble a Trajet with a monocoque body.

TAM marketing communication head Hendrayadi Lastiyoso could not confirm the rumor and said only that, as an automotive company, TAM would constantly carry out product improvements.

"But as to when we will launch a new Kijang, we cannot say as yet. As of now, we want to emphasize that we are still concentrating on selling the existing Kijang," he said.

Whether a new Kijang is on the way or not, the market can expect that, as long as the tax system still favors MPVs and most Indonesians continue to prefer spacious family cars, MPVs will still maintain their dominant presence in Indonesian roads.