Toyota Astra Motor plans more hikes in car prices starting June

JAKARTA (JP): PT Toyota Astra Motor (TAM), a joint venture between Japan's Toyota Motor Corp., and PT Astra International, plans to raise car prices again in June to stave off more losses due to a weaker rupiah, Toyota officials said on Thursday.

TAM marketing director Alam Wijono said the company planned to adjust its car prices to a rupiah exchange rate of 11,000 against the U.S. dollar.

"It needs two or three more steps (hikes) to fully adjust the current prices to the targeted exchange rate (Rp 11,000)," he told reporters at the launching of Toyota's New Soluna.

Alam declined to estimate the average price increase for Toyota's cars. But for Kijangs, he said, the increase might range between Rp 2 million (about US$181) and Rp 4 million.

TAM general manager for marketing and planning Joko Trisanyoto said the company's current car prices reflected a rupiah exchange rate of between 8,500 to around 9,000 to the dollar.

"The latest exchange rate adjustment was made in March," he later told The Jakarta Post.

TAM's high dependence on imported raw materials, he said, made the company vulnerable to the rupiah's sharp depreciation.

Its parent company, publicly listed PT Astra International, suffered around Rp 239 billion in losses last year, from a net profit of Rp 1.5 trillion in the previous year.

Astra blamed the loss on a weaker rupiah, which it said, had cut into earnings despite a sharp boost in car sales.

Its automotive sales soared by 125 percent last year, to hit Rp 24.7 trillion from Rp 11 trillion in 1999.

Toyota contributes around 60 percent of Astra's sales revenue.

Joko estimated it would be difficult to make a turn around this year, as TAM refrains from hiking prices too drastically for fear it might loose its market leader status.

He admitted the company was still suffering losses. However, TAM's long term strategy requires the company to prioritize its market share.

"For this year, profit could be small or even nil," he predicted, adding: "What's important for us is that we maintain our position as market leader," he added.

Although, he added, a combination of TAM's export earnings and the higher use of local content in raw materials were sure to keep the company afloat.

Joko said that TAM would raise its car prices abruptly only if the government decided to raise tax or import duties.

"Government policies such as taxes and import duties, will force all market players to raise their prices; total car sales volume might drop, but we'll keep our market share," he explained.

Meanwhile, Alam went on to say that TAM expects to sell around 7,000 units monthly.

He added that the company would have to revise its sales target, if the government intends to hike tax or import duties for the car industry.

According to him, the government plans to reap another Rp 2.5 trillion from the car industry to fill the widening gap in the state budget deficit.

He said how the government planned to achieve the revenue hike wasn't clear yet, although it would likely hurt car sales.

"With Rp 2.5 trillion, I'm sure that car prices must go up," Alam said.

"Past experience shows that whenever tax or import duties are raised, car principles shift the burden to consumers," he explained.

He said that total car sales this year were likely to drop to 280,000 units from 300,000 units in the previous year.

"We think the high sales last year were due to the postponed demand of 1998 and 1999," he explained.

He said demand for cars in 1998 and 1999 existed, but had not been realized due to security fears and the then uncertain political climate.

"Of the 300,000 units sold, we think that around 20,000 to 30,000 units represent accumulated demand from the previous years," he said.

Thus, last year's real demand, he added, would have been only between 270,000 to 280,000 units.

Alam said so far monthly car sales hover at 22,000 units; he expects sales to increase toward the end of this year.

"Sales in the second half of the year are usually higher, as demand at the end of the year tends to pick up," he said. (bkm)