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INDONESIAN COMMERCIAL NEWSLETTER
March 2010
DEVELOPMENT OF MOTORCYCLE INDUSTRY IN INDONESIA
Introduction
Indonesia's motorcycle industry suffered a setback in 2009 with shrinking sales as a result of tight money policy adopted by the government that forced banks and leasing companies to put a brake on credit expansion. In 2008, motorcycle sales reached 6.28 million units, down to 5.88 million units in 2009. The sales in 2009, however, were still higher than sales in 2007.
In 2010, sales of motorcycles began to pick up with improved condition of the country's economy to follow the global economic trend.
The country with a population the fourth largest in the world is a highly potential market for motorcycle. Indonesia is now the third largest market of motorcycles in the world after China and India.
Seeing the market potential, a number of producers have expanded and plan to expand their production capacity. A number of new investors have invested in the industry.
Meanwhile, competition is sharper in the market of motorcycles. Two market leaders Honda and Yamaha were compete closely in 2009 leaving other brands far behind. Honda has so far maintained lead in annual sales, but in 2009, Yamaha sometimes stole the lead in monthly sales.
The fast growing sales have encouraged producers to expand their production capacity. The Association of Motorcycle Industries (AISI) predicted sales would continue through the years until 2015 before the market is saturated. Saturation is expected when the population ratio to motorcycles in the country is 2:1.
The availability of road infrastructure and traffic congestion especially in urban areas is also a factor determining saturation.
Production capacity increases
The country's motorcycle industry has continued to expand over the past years marked with the increase in the production capacity. The trend is expected to continue in the coming years.
The capacity expansion is thanks mainly to large producers, which have greater chance of expanding sales and dominate the market.
Demand for motorcycles in the country is expected to continue to rise as motorcycles are still vital means of public transport. In addition to being cheaper, motorcycles are more efficient.
The country's motorcycle production capacity was 7.93 million units/year in 2009. AISI members accounted for 7.7 million units of the total capacity with non AISI producers accounting for the rest. The production capacity of the AISI members rose from 7.3 million units / year in 2008.
The expansion of the production capacity in 2009 was contributed mainly by two largest brands. The Yamaha's production capacity rose from 2.4 million units /year to 3.2 million units per year. The capacity exceeded the production capacity of Honda, which was the largest in capacity until 2008.
Despite the general expansion in production capacity, factories of two brands Kymco and Piaggio were closed on shrinking sales.
PT. Kymco Surya Raya, which produced Taiwan's automatic scooters with the brand of Kymco closed its factory in Cikarang with a production capacity of 50,000 units / year on failure in market competition. Piaggio factory with a production capacity of 90,000 units /year was also closed on the same reason. Meanwhile, PT. Dan Motor, long known as a producer of Vespa scooter, has now become an importer of Piaggio motorcycles.
The production capacity is expected to continue to rise in the coming years with a number of producing companies planning capacity expansion. Large producers like Honda, Yamaha, Suzuki, and Kawasaki plans capacity expansion this year and next year.
Producers invest in new factories
PT. Astra Honda plans to invest US$30 million to increase the production capacity of its factory in Cikarang, Bekasi. The company wants to expand its production capacity from 3 million units / year in 2009 to 3.5 million units in the middle of 2010. The increase in the production capacity is all for automatic scooters to meet growing demand.
Expansion of production capacity is also planned by PT Yamaha Motor Kencana Indonesia (YMKI). Yamaha production capacity will be increased by 500,000 units to be implemented in the middle of this year.
Currently the company's factory has an installed capacity 3.2 million units per year. YMKI will build a new production line including welding, mould and dice, and pointing that it will have a capacity of around 3.6 million -3.7 million units . Investment for a production line is estimated to reach US$30 million.
The capacity expansion is planned believing demand would increase sharply in the coming years. YMKI predicted that motorcycle production would reach up to 9 million units per year in the next five years.
PT Suzuki Indomobil Motor (SIM) is the third largest producer of motorcycles in the country with the brand of Suzuki. It also plans to expand its production capacity by 40% this year.
The installed capacity of SIM was around 1 million units in 2009. The company will invest an estimated US$50 million for the capacity expansion.
PT Kawasaki Motor Indonesia (KMI) plans to invest US$ 60 million to build a new production facility as its factory has operated almost at full capacity.
In 2009, Kawasaki's production capacity is 150,000 units per year. The factory already operated at 80% of its capacity. Its production capacity would be expanded by 300,000 units per year to 450,000 units in 2011.
The new production facility will be built in Cikarang, West Java. .....
MONTHLY REPORT
INDONESIAN COMMERCIAL NEWSLETTER (ICN)
Related Topics
ICN - March 2010
- Backgrounds
- Structure of Motor Vehicle Industry
- Production down 22.6% in 2009
- Sales down 19.9% in 2009
- Sales growing in 2010
- Third largest in market share
- MPV the largest in market share
- Toyota leads in the market
- Exports down
- MPV type dominates Indonesian car exports
- Imports down in 2009
- Investment growing
- Government policy
- Competition
- Marketing aspects
- Production cost rising
- Conclusion and Prospects
- Introduction
- Production capacity increases
- Producers invest in new factories
- Producers increase Production capacity for automatic scooters
- Production down
- Production of automatic scooters
- Sales down in 2009, predicted to shoot up in 2010
- Yamaha and Kawasaki gaining in market
- Sales of Honda sustained by cub type
- Market down in Jakarta and West Java in 2009, up outside Java
- Exports remain small
- Launch of new models strategy to attract buyers
- Variation in engine capacity a strategy to expand market
- Strategy of 3 S
- ACFTA's effects on Indonesian motorcycle industry
- Prospects and Conclusion
