Tuesday, April 14, 2009

Optimism in the midst of crisis

THE world's automotive market is under the shadow of the global economic crisis, with liquidity and economic pressure still having negative effects on the automotive industry. JD Power and Associates of the US, the most influential research body in the world, predicts that the sales of light vehicles will drop to 13.2 million units in 2009 from 13.6 million last year. It also forecasts that it will take the industry more than 18 months to recover. “As long as the financial crisis has more of an impact on developed countries than on developing ones, no country will be immune to the global economic downturn,” said Jeff Schuster, director executive of JD Power.

It is not surprising, therefore, that Nissan has postponed the Indonesian launch of the Infiniti. PT Nissan Motor Indonesia (NMI) president director Takayuki Kimura said the Infiniti is one of the most popular brands in the US. "Of course, we can introduce the Infiniti here, but we have to gauge the economic situation first," he said.

Indeed, the global financial crisis has affected Indonesia's automotive industry and slowed down its growth. The year 2008 saw robust sales, which were well above 600,000 units, but it seems the figure will decrease this year. One of the problems faced domestically is the high exchange rate between rupiah and the US dollar, which has increased the prices of cars, components and other raw materials. Hence, importers and sole agents have had no choice but to adjust their prices. PT Toyota Astra Motor, for instance, increased the prices of its products as of Jan. 1, 2009.

Meanwhile PT Honda Prospect Motor increased its prices at the end of 2008. Its Honda All New City, for example, was launched in December 2008, with a price tag of Rp 260 million for the most sophisticated variant, which has reclining seats and automatic transmission. However, PT Honda Prospect Motor marketing and after sales service director Jonfis Fandy commented that the price was high because it was an entirely new product. "The price of All New City was increased not in anticipation of the financial crisis but because it was a totally new product, and so the cost and other expenses went up," he said.

Indeed the automotive industry in Indonesia is facing tough challenges. In March, car sales dropped drastically. Toyota's sales, for example, plummeted 60 percent, while Nissan's sales dropped 9 percent. "We had already predicted a drop in sales as a result of the global economic downturn. Even though BI (Bank Indonesia) has reduced its interest rate to 7.5 percent, banks and finance companies are still hesitating to provide loans. What makes things worse is the rupiah's low value, which has caused the price of cars to go up," said Association of Indonesian Automotive Industries (Gaikindo) secretary-general Freddy A. Sutrisno.

Freddy also said it was hard to make any forecast concerning the local automotive industry, except that second quarter sales were likely to improve during the largest automotive exhibition in Indonesia, the Indonesia International Motor Show (IIMS) 2009, which will be held in July.

However, according to Gaikindo chairman Bambang Trisulo, this year's automotive exports would be unaffected because export destinations were not economically impacted countries, such as the US, Japan or European countries, but were Mediterranean countries. He therefore expressed confidence that exports would exceed the predicted 60,000 vehicles this year. Bambang also voiced optimism about domestic sales, predicting that they would increase due to the favorable BI interest rate. "While it is true that banks have not reduced their lending rates, to a certain extent it will boost consumer interest and purchasing power," he said.

While American car manufacturers and sole agents seem to be pessimistic, their Indonesian counterparts feel there is a ray of hope for 2009. This can be seen in the number of new models or variants being launched, while others are maintaining production to meet indent orders from customers.

Indomobil Group president director Gunadi Sindhuwinata said that this year's growth trend was not an indication of next year's sales. In fact, he said that car sales in the country would increase by 10 to 15 percent this year. The Industry Ministry also predicts that automotive sales will increase by mid-2009 after slowing in the first few months of the year. “The impact of the global economic crisis here is not as bad as in Western countries, because our consumers still have sufficient purchasing power and at the same time interest rates are quite favorable,” said the Industry Ministry's director general of transportation and telematics equipment Budi Darmadi.

Budi claimed car sales would improve due to various reasons, such as lower lending rates and numerous projects in the private sector that would generate more funds in the market. “Once the numerous projects are realized there will be fresh money in the market,” he emphasized. (Burhanuddin Abe)

The Jakarta Post, April 14, 2009