Indonesian Motorcycle Sales to Remain Stagnant

Dec 31, 2015

The motorcycle industry has seen a drop in units distributed from factories to dealers this year and it is expected things will not change until the middle of next year.

Indonesian Motorcycle Industry Association (AISI) head Gunadi Sindhuwinata said that the organization had to revise its target twice this year due to low purchasing power amid the fall in commodity prices that lead to an economic slowdown.

“Our industry is not the only one suffering as a result of lower purchasing power. As distribution generally didn’t seem good this year, we had to lower our expectations,” he said recently.

AISI targeted 7.8 million units before scaling that down to between 6.6 and 6.8 million in June and lowering further to 6.5 million in November.

By November, factories had distributed 5.9 million units and are expected to reach 6.5 million by year-end. That figure is 16.67 percent lower than the 7.8 million units channeled to dealers last year.

Gunadi said that next year the industry expected to start seeing a hike in sales only after the second quarter, when the government’s current policies aimed at boosting investment, private as well as state spending, started showing results.

Next year, AISI has set its sales target at between 6.45 million to 6.5 million units.

AISI trade head Sigit Kumala said that by November alone, the industry market had seen a significant decline in distribution performance, by as much as 18 percent.

Out of the big five players in the two-wheeler market, Honda has seen the least fall with 12 percent, followed with Yamaha with 26 percent, Kawasaki with 26 percent, Suzuki with 60 percent and TVS with 69 percent.

The companies’ ranks based on units distributed see Honda remain the winner, followed by Yamaha, Suzuki, Kawasaki and TVS.

Sigit said that with the predicted distribution of 6.5 million units this year, the factories of its six company members — the five above and Kanzen — were only running at 65 percent production capacity, leading to losses. However, no companies are yet to lay off workers and nor are any expected to do so.

“The drop in performance happened from the fourth quarter last year after Idul Fitri festivities [when people usually spend up to finish their budget] up to the second quarter this year before we saw a hike in August and September, when people finally bought new motorcycles after delaying purchases for months. But after that we’ve seen lows again,” he said.

 “As things get more expensive after the government increased fuel prices last year, people are tending to prioritize buying staple foods and delaying buying bikes,” he went on.

Commodities-dependent regions, such as Kalimantan with its mining and Sumatra with its agriculture, have been hit the most by the drop in units distributed with drops of more than 35 percent and over 20 percent, respectively.

“Java has also seen a slowdown, though still better than others, because some of its informal sectors have been hit by the crisis too. Some small businesses have closed down and farmers have waited too long to harvest because of El Niño,” Sigit explained.

Due to the drop, Bank Indonesia lowered the minimum down payment for motorcycle credit arrangements from 25 percent to 20 percent this June. “However, that didn’t really affect sales,” Sigit said.

Producers also raced against each other to give discounts and free services and ran direct promotion events for smaller regional markets but still did not significantly boost sales, again due to lingering pressure on people’s purchasing power.

“Players need to create purchase opportunity but at the same time take note of economic conditions so as to not increase bad loans,” Sigit remarked.

Yamaha marketing general manager Mohammad Maskur said that the company could not fulfill the target of 2.55 million unit sales this year.

“We have issued more than eight new models this year and directly promoted them at district and sub-district levels but the results have not been significant,” he said.

Despite local sales declining, the companies saw some boost in exports with a 400 percent surge in exported units, to 206,000 by November, thanks to surging demand from European countries like the Netherlands, Germany, Belgium and the UK.

 

Source: Jakarta Post