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INDONESIAN COMMERCIAL NEWSLETTER
August 2010

BUSINESS IN CAR PURCHASE FINANCING IN INDONESIA 2010


Liquidity problem in 2009 forced multifinance companies to be more selective in extending credits. Foreign and local banks providing financial support for multifinance companies chose to wait and see resulting in a decline in car sales.

After the slump in 2009, car sales surged in 2010 with multifinance companies ready with support in credits for customers to finance car purchases.

Until mid 2010, credits for car purchase financing were estimated to reach Rp 40 trillion. Early 2010, the Indonesian Association of Financing Companies (APPI) predicted the assets of multifinance companies this year would reach Rp200 trillion.

Based on data from Bank Indonesia, total credits issued by multifinance companies by April 2010 reached Rp 152.23 trillion or an increase of 16.5 percent from Rp 130.65 trillion in the same period last year. Consumer financing accounted for Rp 103.32 trillion or   67.8% of the total value of financing. Consumer financing included for the purchases of motor vehicles and consumer goods mainly electronic goods.

Car purchase financing business in Indonesia is still dominated by old big players.

Financing expansion by financing companies requires large sources of funds. One of the sources is bond. A number of big players have issued or plan to issue bonds in 2010.


Description of Indonesia's car industry

Liquidity crisis that began to hit toward the end of 2008 until mid 2009 rendered a big blow to the country's industries including auto industry. Production and sales shrank as a result of slump.

According to the Indonesian Association of Motor Vehicles Industries (Gaikindo) car production and sales in 2009 fell from the previous year. Production shrank to 464,815 units in 2009 from 600,628 units in 2008 or a decline of 22.6%. Car sales fell 19.9% to 483,548 units in 2009 from a five year peak of 603,774 units in 2008 although exceeding the target of 450,000 units set by Gaikindo.

In entering the year 2010, car market began to revive with the improved condition of the global and domestic economy.

The implementation of the Asian China Free Trade Area (ACFTA) agreement on 1 January 2010 is expected to result in an increase in car imports from China and Chinese investment in car assembling industry in the country.

Car production up in 2010
The country's car production hit an all time record in 2008 at 600,628 units, exceeding the previous record of 500,710 units in 2005. This year the production is forecast to scale up again to hit a new record. 

Liquidity crisis in 2008 resulted in a slow down in the expansion of the industry in 2009. Car production shrank 22.6% to 464,816 units.

A decline was recorded in the production of almost all categories from commercial to sedan cars. The sharpest fall was recorded in production of car of 4x4 type down 52.5% to 3.560 units from 9,503 units. As a result the capacity utilization of the country auto industry shrank 53.5% in 2009.

The economic recovery resulted in the revival of the auto industry in 2010. In the first half of this year car production already reached 405,133 units or an increase of 67 percent from the same period last year. A strong growth was recorded in the production of almost all categories in the first six months of this year. The sharpest t rise was recorded in the production of Nissan Diesel cars up 164.8 percent from 657 units to 1,740 units.

Toyota , however , by far led in production  totaling 152,860 units in the January-June period , followed by Daihatsu with production of 66,136 (up 65.8%), Mitsubishi  54,185 units  (up 82.9%) ,  and  Suzuki  with  production  of  45,742 (up  59.8%).
Table - 1
Car production in Indonesia, January-June, 2009 and 2010

Car sales up in 2010

In 2009.  Car sales fell 19.9% to 483.548 units from 603.774 units in the previous year.

In the first six months of 2009 car sales in retail market  reached 211.000 units down from 285.431 units in the same period in 2008 as a result of the slump  triggered by global financial crisis .

Car sales in 2010 began to scale up sharply to follow the country's macro economic growth of 5%-5.5%.  With rupiah strengthening against the US dollar and lower interest rates. Meanwhile. The purchasing power of the middle to lower class members of the community also improved.

Car sales on the domestic market in the first quarter of 2010 reached 173.965 units. Up 73.5% from 100.257 units in the same period in 2009. 

Sales continued to scale up in the following months. In April sales hit a record high at 65.555 units. In May sales fell slightly to 60.516 units. But in June sales hit a new record of 70.329 units.

The sales in June brought the total sales in the first half of 2010 to 369.367 units or an increase of 76 percent from the same period in 2009.

The rising trend continued to reach 72.446 units in July. But in August sales dropped to 64.762 units and down again 48.804 units in September.

The sales in September brought the total sales to 555.864 units in the first three quarters of 2010 in the following months sales are predicted to raise again that in the whole of the year sales are forecast to reach at least 650.000 units exceeding the previous record of 603.774 units in 2008.

Toyota maintains a strong lead on the domestic market. In March Toyota car sales reached 26.222 units or a market share of 40%. Following Toyota is Mitsubishi with sales of 9.068 units (13.8%). putting Daihatsu behind with sales of 8.084 units (12.3%). followed by Suzuki with sales of 6.203 units (9.5%) and Honda 5.179 units (7.9%).

Table - 2
Car sales January - September 2009/2010

Business in car purchase financing   dominated by few big players

Consumer financing by multifinance companies accounts for 80% of the purchases of cars both brand new and second hand cars in the country.

There are around 27 financing companies offering credits for the purchases of cars in the country but the business is dominated by a few of them with big assets.  Four of the 27 companies account for 59.3% of the total assets of multi-finance companies offering credits for the purchases of cars. The four companies have assets valued at Rp33.4 trillion as against the total assets of Rp56.3 trillion of all multifinance companies offering credits fir car purchases in 2009. The value of their car purchase financing is also dominant accounting for 61.4 percent of the total value car purchase financing   by multifinance companies in the country.

The four companies also are dominant in financing the purchases of motorcycles.

Astra Sedaya Finance has largest assets

PT. Astra Sedaya Finance is the country's largest multifinance company in assets. In 2009. Its assets were valued at Rp9.89 trillion. Other multifinance companies with assets larger than Rp 5 trillion include Oto Multiartha with assets of Rp 9.83 trillion. Followed by Summit Oto Finance with assets valued at Rp 8.21 trillion and Toyota Astra Financial Services Rp 5.47 trillion.

Those with assets between Rp 1 trillion - Rp 5 trillion include Adira Dinamika Multifinance with assets valued at Rp 4.3 trillion. Followed by Suzuki Finance Indonesia Rp 2.9 trillion. Wahana Ottomitra Multiartha Rp 2.57 trillion. BFI Finance Indonesia Rp 2.4 trillion. BCA Finance Rp 2 trillion.  And Indomobil Finance Indonesia with assets valued at Rp 1.7 trillion.

Most or 16 multifinance companies have assets below of Rp 1 trillion including Multindo Auto Finance with assets of Rp 960 billion. The smallest in assets is Pratama Sedaya Finance with assets valued at Rp 18 billion.


Table - 3
Value of assets of multifinance companies offering credits for car purchases.  2009


Astra Sedaya Finance leads in market of car purchase f credits  

Astra Sedaya Finance. Which is the largest in assets? Also led in the market of car purchasing credits in 2009. The company recorded car purchasing credits at Rp 9.1 trillion that year.

Other than Astra Sedaya Finance there are three other companies with car purchasing credits above Rp 5 trillion. The three companies are Oto Multiartha with credits valued at Rp 8.4 trillion.  Summit Oto Finance with credits totaling Rp 7.2 trillion and Toyota Astra Financial Services with credits totaling Rp 5.1 trillion.

Adira Dinamika Multifinance has a much larger assets but it is behind Suzuki Finance Indonesia in the value of credits. Suzuki leads in the group of financing form with credits from Rp 1 trillion to Rp 5 trillion with credits totaling Rp 2.58 trillion as against Adira's Rp 2.56 trillion. Following is Wahana Ottomitra Multiartha with credits totaling Rp 2.09 trillion.  BFI Finance Rp 2.08 trillion. BCA Finance Rp 1.92 trillion. And Indomobil Finance Indonesia Rp 152 trillion.

Those in the group with credits valued less than Rp 1 trillion total 16 companies as shown in the following table. ........




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