Gaikindo to cut sales target on weak rupiah

The Association of Indonesian Automotive Manufacturers (Gaikindo) is considering lowering its annual car-sale target this year as the sharp depreciation of the rupiah against the US dollar is likely to further hurt sales

Gaikindo’s chairman Jongkie Sugiarto said in Jakarta on Wednesday that with the sharp drop in the rupiah, new cars would become more expensive as distributors had to adjust prices to the new rupiah-dollar exchange rate.

“Even though more manufacturers are boasting high local content, component prices will still surge as a result of more expensive raw material imports because of the rupiah slide,” Jongkie told The Jakarta Post on Wednesday.

Jongkie said the industry would remain in “wait-and-see” mode until next month before deciding on any changes to this year’s sales target, while hoping that currency volatility was a temporary issue.

“If this goes on for too long, there is the possibility of price hikes.”

The Indonesian currency has been under pressure since early this year due to the strengthening of the US dollar against the world’s major currencies.

The rupiah, which weakened further to 13,192 per dollar on Wednesday, has lost more than 6 percent of its value so far this year .

On separate occasions on Wednesday, Gaikindo chairman Sudirman MR and secretary general Noegardjito both suggested that the group was mulling a correction in its annual sales target of 1.2 million units — the same as the previous year’s target — in April.

Car sales dipped by 1.8 percent to 1.21 million in the past year, the first drop in five years after robust annual sales that analysts described as an “automotive boom”.

The downward spiral of the rupiah has pushed automakers into greater awareness of slight changes in vehicle sales, which will remain stagnant on weaker purchasing power despite the falling prices of fuel amid a global oil glut.

According to Suparno Djasmin, vice president director of PT Toyota Astra Motors (TAM), provisional sales figures in the first two months of the year indicated that the automotive industry would face an uphill battle to achieve even last year’s target.

“Our sales target remains the same as last year, but it is looking increasingly hard to reach judging by the first two months of sales,” Suparno told the Post on Wednesday. “Unless the market becomes bullish in the second half of the year, we are going to struggle.”

According to his estimates, retail sales of four wheelers in January and February reached 163,000 units or a monthly average of 82,000 units, compared to last year’s 100,000 units per month average.

Gaikindo data shows that the industry sold 215,433 units in the same two months last year.

Meanwhile, automotive industry analyst Suhari Sargo acknowledged automakers’ qualms about their reduced bottom line, but insisted that two months of deliberation was not enough to condemn the industry to anything comparable to the 1997–1998 Asian economic crisis, when the rupiah plunged to unprecedented depths. (Tama Salim)