Sedan market: Tough but it is still workable

Sedan market: Tough but it is still workable

Rudijanto, Contributor, Jakarta

With their continuous surge in sales here, multipurpose
vehicles (MPVs) are expected to grab a larger market share this
year. Surprisingly the market for sedans has also started to look
promising, as more Indonesians opt for features that optimize
comfort for their in or out-of-town mobility.

The dominance of MPVs was reflected early this year when the
sales of MPVs, mostly two-wheel-drive versions, reached 7,103
units, as compared to 1,901 sedans (below 1,500 cc) during the
same period of last year. Sedans with higher cc -- up to 2,500 cc
-- had a lower sales figure of 947 units.

In spite of the sales imbalance between the two types of
vehicles, the Association of Indonesian Automotive Manufacturers
(Gaikindo) predicted last year brighter prospects in the very
near future for 1,500 cc sedans.

This prediction came true not long afterward. The positive
sign for the sedan market was reflected in the January 2004 sales
of small sedans, namely Honda City, Hyundai Accent, Suzuki Baleno
and Toyota Vios/Soluna that totaled 1905 units -- more than
double the 902 units sold in the same period of last year.

The sales of medium-sized sedans with 1800 cc engines also
strengthened in February, with a significant increase led by
Toyota Corolla Altis. From 213 in January, Altis' sales also more
than doubled to 441 units in February.

Though other sedans in the 1800-cc class recorded lower sales
figures in the same month, Altis' success is deemed to be a spark
of hope for this segment. Meanwhile, according to Gaikindo's
forecast, total car sales of all types for this year will reach
380,000 units. This means a steady growth over the past three
years from 317,763 units sold in 2002. Last year saw total sales
of 354,482 cars.

In the premium sedan market, a positive market signal was
shown by a 15 percent increase in sales of BMW cars, from 129 in
January 2004 to 148 in February 2004. Traditionally, the premium
sedan market here has been relatively stable, with approximately
4,500-5,000 units sold per year.

Optimism is currently at an all-time high, especially after
the peaceful general election this month. Car sales in March also
showed encouraging signs as sales increased by 16 percent to
39,286 units, from 33,971 units in February.

Another prediction by Gaikindo is that 75 percent of the total
market will be enjoyed by MPVs and small sedans this year. Hence,
manufacturers and distributors of bigger sedans have to work
harder to increase sales, or at least maintain the current
healthy level.

General Motors Indonesia's director of sales and marketing
Antonio Zara also thinks that the sedan market here may decline
this year. However, the chances of smaller sedans, like the 1500
cc type, are better as they have so far outsold their larger
counterparts.

"Before the economic crisis hit the country in 1997, naturally
bigger sedans were preferred, but, today, out of four or five
cars sold you will find that at least three or even more are 1500
cc sedans," said Zara.

The current record sales enjoyed by MPVs are surprising today,
while yesterday's sedan manufacturers would never have dreamed of
such success. Most car producers are of the opinion that the
government's regulations are discriminating, especially in the
application of higher luxury tax for sedans.

"In all fairness, we, manufacturers, suggest equal treatment
in the application of luxury tax. We propose that we adhere to
the concept of luxury tax itself, which means higher taxation for
more luxurious items," said Zara.

He revealed that certain expensive cars, such as Honda CRV,
are taxed less than the lower-priced Honda City simply because
the latter is a sedan while the former is categorized as a Sports
Utility Vehicle (SUV). According to Zara, the policy reflects an
inconsistency with the true concept of luxury tax.

Gaikindo chairman Bambang Trisulo also expressed the
associations's concerns over the implementation of luxury tax. He
understood why several authorized importing agents (ATPMs) had
requested the government to lower the luxury tax for sedans with
less than 2000 cc. Indeed, Bisnis Indonesia quoted him as saying
that this was probably why the growth of the sedan market here
has lagged behind that of the MPV market.

If the luxury tax policy remains unchanged, players in the
sedan market will have to wrack their brains to come up with an
imaginative way to compete in this comparatively smaller segment.
With sales figures of sedans constituting only a fraction of
total car sales, manufacturers and distributors alike cannot do
much but envy the success enjoyed by MPVs and even some SUVs.

To highlight his point, Zara said that GM is targeting an
overall growth of between 30 percent and 50 percent this year,
while keeping a less-than-15-percent estimate for growth in the
company's sedan sales. Likewise, PT Hyundai Mobil Indonesia is
targeting to sell between 12,000 and 13,000 cars this year, while
the sales target for its New Accent sedan is merely about 15
percent of the total figure.

Albeit small in percentage, some sedan brands still attract
those who prefer convenience and comfort in driving. While
previously perceived as expensive cars, the current prices of
certain small sedans are even lower than those of MPVs and SUVs.
These affordable price tags have apparently boosted the sales of
small sedans, mostly in the range of 1500 cc.

"Driving a sedan is certainly worlds apart from the experience
of driving an MPV, because sedans have better suspension and they
look elegant. These are some of the reasons why people still buy
sedans," said Hyundai's Event and PR department head Lindarto
Rahardjo.

Hyundai has various reasons to be proud of its 1500-cc New
Accent sedan and its 1300-cc Getz. New Accent is the latest
variant of Hyundai Verna. Aimed at young professionals and
executives, it comes with a more aerodynamic, solid, compact and
elegant look than its predecessor.

"We are able to sell 200 units of New Accent per month and
between 200 and 250 units of Getz per month. That is good enough
for a newcomer to this market like us," said Rahardjo.

While Korean carmakers are penetrating the market, long-
established players, like Honda, cannot stay put to safeguard
their market shares. Last month, Honda launched its New Civic
2004.

Coming with a more elegant, luxurious look -- as well as a
sporty interior -- compared to its predecessor, the 1.7-liter-
engine New Civic 2004 is expected to record similar success.
Honda sold 9,967 sedans, including the Honda Civic last year.

The New Civic 2004 is available in five colors: Silverstone
metallic, Satin silver metallic, Nighthawk black pearl, Satellite
silver metallic and Heart red mica metallic. Honda Civic's sales
grew by 16 percent in 2002 and further grew in 2003, by 19
percent.

GM is still relying on its Optra in the sedan segment. Powered
by a 1800 cc engine that promises maximum efficiency and high
speed, as well as a luxurious interior with the Total Noise
Resistance (TNR) system, Optra is also targeted at professionals
and executives.

Meanwhile, in the premium sedan segment, BMW has expanded its
BMW 7 series by introducing the 730 Li in February. BMW also
launched the face-lift of its popular X5 model in early march
2004.

Expecting the success of its 3 series, the company also
introduced a new variant of 325i. Last year, BMW sold 2.149
units, taking a 45-percent share of the luxury car segment in

Another premium car producer, Daimler Chrysler, is also
boosting the sales of the Mercedes Benz E-Class. Aside from the
E-Class, other existing models on the market include the C and S
classes.

With the various brands launched, both in the small and luxury
sedan segments -- as well as the impressive efforts by
manufacturers to lure customers -- it may be concluded that the
future of sedans here is not so bleak after all.