Automotive Industry 2010 - March2010 page1

INDONESIAN COMMERCIAL NEWSLETTER

March 2010

DEVELOPMENT OF AUTOMOTIVE INDUSTRY IN INDONESIA

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Production down 22.6% in 2009

The country's car production hit an all time record at 600,628 units in 2008, exceeding previous record of 500,710 units in 2005. Growing demand and favorable economic condition contributed to the increase in production in 2008.

In 2009, car production plunged 22.6% to 464,816 units on weak demand following the global financial crisis. In 2009, car assembling plants operated only at 53.5% of their capacity. Declines were recorded in the production of virtually all categories. The sharpest fall was recorded in the production of cars of the 4x4 type - down 52.5% to 3,560 units from 9,503 units.

PT Indomobil Niaga International cut its production to 2,000 units in December 2009 from normally 5,000 units.

PT. Honda Prospects Motor plans to cut its production by 30% in 2010. In 2009, its production was in line with the plan.

Meanwhile, there was a surge in market demand in the first two months of 2010, encouraging producers to increase production. Car production in 2010 is forecast to rise 50.5% to more than 700,000 units. Around 600,000 units of the production would be disposed of on the domestic market, and the rest for export.

Gaikindo said with production capacity of 868,000 units, the producers would not be in problem to reach the production target. Currently there are 12 brands of cars produced in the country including nine Japanese brands, one South Korean brand and two German brands.

The Astra Group is the largest producer, followed by Indomobil Group, which is agent for 10 brands including new one Cherry Motor from China with ATPM, PT. Indomobil Prima Niaga.

Sales down 19.9% in 2009

Around 70% of cars sold on the domestic market are local products with the rest imported products. In 2009, car sales dropped 19.9% to 483,548 units from 603,774 units in 2008. Though declining the sales exceeded the Gaikindo's target of 450,000 units.

In January through June 2009, car sales to the end users reached 211,000 units down from 285,431 units in the same period in 2008.

Though declining in the whole of 2009, sales scaled up from month to month - from 31,000 units in March to 34,000 units in April and to 35,000 units in May. The trend continued especially as the financing firms cut their interest rates.

Increases were recorded in the sales of major brands including Honda, Mazda, Suzuki and Toyota .

Car producers sought to maintain sales in 2009 by offering discounts during an exhibition of Jakarta Fair in July. Daihatsu offered a discount of Rp6 million and Rp 4 million each for Luxio and Sirion respectively. Mitsubishi Grandis offered a discount of Rp 5 million, Toyota Innova Rp 4 million, Yaris Rp 5 million, and Avanza Rp 5 million and Honda with discounts of Rp 2 million - Rp 9 million.

The discounts succeeded in pushing up sales in July. sales of Toyota cars rose to 17,473 units that month from 16,814 units in the previous month. Honda car sales also shot up 34.8% to 3,546 units driven also by the release of its new product Freed.

The cut in the Bank Indonesia key rate to 6.5% also contributed to the increase in car sales.

Car market began to show relative stability in the second half of 2009 and a significant increase in sales was recorded in October until December, 2009. The trend continue through the first months of 2010 with the improved condition of the economy in general. Stability of the local currency rupiah at the level Rp 9,500 - Rp 9,800 per US dollar also contributed to the increase in demand for cars. Meanwhile, car makers and agents were more aggressive in promoting their products.

Car sales in the second half of 2009 reached 220,000 units or averaging 40,000 units per month. Toward the end of the year sales grew. In December sales rose 22% to 48,329 units from 39,651 units in the same month in 2008.

Sales growing in 2010

In 2010 , car sales began to grow sharply to follow the economic revival marked with the stability of macro economic indicators and decline in interest rates. Increases were recorded in demands for almost all types of cars.

Gaikindo estimated cars sales could exceed 700,000 units in 2010 or an increase of 13.7% from last year.

A sharp increase was recorded in sales in the first three months of this year. In January sales reached 52,707 units - up to 55,483 units in February.

In March 2010, TAM recorded sales of Toyota cars at 25,782 units or an increase of 18.52% from February's 21,753 units, bringing its total sales to 68,333 units in the first quarter of 2010. With sales at 13,000 units, Toyota Avanza was the largest contributor to total sales of Toyota cars in March, followed by Innova with sales at 4,500 units. Toyota's share of the market in 2010 is predicted at 53%.

PT Krama Yudha Tiga Berlian Motors also recorded an increase in its sales of Mitsubishi cars - up 9.97% to 9,068 units in March from 8,246 units in February, bringing its total sales to 24,169 units in the first quarter of 2010. Commercial cars dominated sales of Mitsubishi cars. Sales of Mitsubishi colt diesel and L300 led sales. Sales of Pajero Sport also increased. Mitsubishi car agent is set to see an increase in its market share to 15% in 2010. Sales of SUV product Pajero Sport , which was first launched in June 2009 rose significantly in the first two months of 2010 to 1,764 units. In 2010, total sales of Mitsubishi cars are forecast to reach 90,000 units.

PT Honda Prospect Motor, the agent for Honda cars recorded sales at 5,179 units, or up 16.88% from February's sales of 4,431 units. Honda Jazz was the largest contributor to the total sales of Honda cars . Sales of Honda Jazz reached 1,649 units in March up 20% from the previous month . Honda Jazz regained the lead in sales from Toyota's Yaris . The largest in market share, however, was Honda CR-V with sales reaching 6,682 units or 22.03% of the total sales of cars of the category of SUV-MPV. So far, PT. Honda Prospect Motor imports CR-V in completely knocked down (CKD) form to be assembled in the country.

In the first three months of 2010, sales surged 73.5% to 173,965 units from 100,257 units in the same period last year.

MPV the largest in market share

The best seller in the country are cars of the 7-seat multiple purpose vehicles (MPV) type. MPV cars are considered more efficient as family cars with price relatively low, more fuel efficient and could carry larger number of passengers.

Almost all ATPM have a share in the MPV market. Toyota Astra Motor (TAM) with products of Toyota Kijang, Toyota Avanza and Daihatsu Xenia has maintained strong lead in the market in the country.

In 2009, MPV and SUV dominated the market with sales totaling 337,267 units or 59.7% of the total sales.

Leading in the market was Toyota Avanza with sales reaching 100,065 units in 2009, followed by Daihatsu Xenia with sales totaling 43,409 units, Honda Jazz with sales of 15,713 units, and Suzuki APV with sales of 12,555 units. In medium MPV market, Toyota Inova led with sales at 35,989 units, followed by Nissan Grand Livina 10,028 units, Honda Freed 8,900 units and Isuzu Panther 4,443 units.

Honda with its CRV series also led in the market of SUV cars CRV car sales totaled 10,110 units in 2009. ......

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