Tight money policy worries car producer

The Jakarta Post, Jakarta

The Indonesian arm of Japan-based Mitsubishi Motor Corp. (MMC), PT Krama Yudha Tiga Berlian (KTB), has expressed concern that Bank Indonesia's tight money policy will lower car sales in the remainder of this year.

KTB director Rizwan Alamsjah said on Tuesday that Indonesian auto manufacturers might face a decline in car sales in the next three months if the central bank maintained its policy, which included the increase in its benchmark interest rates of up to 10 percent per annum, for a long period.

He said BI's policy would affect the number of automotive loans given by banks and financing companies.

"Declines in loan expansion will significantly affect our car sales, of which 70 percent are financed with loans," he said at KTB's plant in Pulogadung, East Jakarta.

However, he added, KTB would not revise its sales target this year before the Association of Indonesian Automotive Manufacturers (Gaikindo) released its latest projection of this year's car sales.

"We will continue to work hard so that our target sales of 100,000 units can be achieved," he said.

Gaikindo had projected that car sales might reach 550,000 units, higher than last year's 483,000 units. However, the government's March 1 fuel price hike and its proposal to raise luxury tax on cars with an engine displacement of between 1,500 cubic centimeters (cc) and 3,000 cc by up to 10 percent has made it cut its estimate by between 15,000 and 20,000 units.

"The country's total car sales had already reached about 400,000 units during the first eight months of the year," he said. "If Gaikindo's projection for 2005 can be achieved, we expect our target can also be achieved."

He said Mitsubishi's car sales in the January-to-August period reached 75 percent of the 2005 sales target.

According to KTB data, 68,903 Mitsubishi cars were sold from January to August, or the equivalent of 17.4 percent of the country's automotive market.

Rizwan said the data showed that MMC's decision to move passenger car manufacturing to Thailand earlier this year had not affected Mitsubishi's sales.

"Our principal has decided to move passenger car manufacturing to Thailand as part of its strategy to improve efficiency and let us focus only on producing commercial vehicles, but people can still purchase our sedans," he said.

The president director of Mitsubishi assembling plant PT Krama Yudha Ratu Motor (KRM), Manahara Parhusip, said this year, his plant had a production target of 10,000 units per month in order to fulfill the domestic demand in commercial vehicles.

"Hopefully, we can produce no less than 111,500 vehicles this year; a 20 percent increase from last year," he said.

KRM data showed that a total of 81,588 vehicles, mostly trucks and pick-up trucks, were produced last year. (006)