Motor Vehicle Credit Growth Remains Sluggish at the Beginning of 2024

MULTIFINANCE - JAKARTA. The automotive industry is currently facing various challenges, one of which is related to the sale of four-wheeled vehicles which has been relatively stagnant in recent years. This also has an impact on the sluggish motor vehicle credit (KKB) in the banking sector.

The Association of Indonesian Automotive Industries or Gaikindo recorded a 26.1% decrease in domestic car sales in wholesales, reaching 69,619 units in January 2024, compared to January 2023 which reached 94,270 units.

Meanwhile, retail sales also appeared sluggish with a realization of 78,214 units in January 2024, down 13.9% compared to January 2023 which was 90,892 units.

Based on data from Bank Indonesia (BI), motor vehicle credit in January 2023 grew by a limited 12.6% annually to IDR 134.1 trillion from December 2023 which grew 13.2% to IDR 133.3 trillion.

The President Director of PT Adira Dinamika Multi Finance Tbk (Adira), a subsidiary of PT Bank Danamon Indonesia Tbk, Dewa Made Susila, acknowledged that the automotive industry is currently facing various challenges, one of which is related to the sale of motor vehicles which has been relatively stagnant in recent years.

On the other hand, the rise in the benchmark interest rate, according to Made, also has an impact on KKB.

"The BI Rate is high because The Fed continues to raise its benchmark interest rate. Motor vehicle credit is very sensitive to interest rates," said Made, recently.

However, Made mentioned that the demand for cars will increase, driven by several infrastructure projects that support vehicle users, such as toll roads. On the other hand, according to Made, incentives are also needed, for example with tax relief, so that car prices can be more affordable.

To boost financing, Adira offers several deals to the public, one of which is at the Indonesia International Motor Show (IIMS) 2024, such as car financing with an interest scheme starting from 1.99% per year for a one-year tenor, free provision fees, and a discount on admin fees up to 50%.

Andrew Suhandinata, Transaction Banking Head of Bank Danamon Indonesia, added that the synergy between Danamon and Adira Finance as a subsidiary has increased the distribution of credit and automotive financing for both retail and corporate throughout 2023.

In 2023, Danamon recorded significant growth in credit distribution, with total credit and trade and finance increasing by 19% to IDR 174.9 trillion annually. This increase was driven by the credit portfolio from the Enterprise Banking & Financial Institution segment which grew 15% YoY to IDR 78.8 trillion.

In addition, the value of vehicle financing carried out by Adira Finance for Danamon business customers (fleet financing) has grown by 85% YoY with customer growth reaching 22% YoY. Danamon has also disbursed working capital loans for Adira Finance partner dealers in 2023 with an increase in loan value of 103% YoY with the addition of dealers by 105% YoY.

Andrew also sees the two-wheeler sector will still be a pillar of vehicle credit growth in 2024. Considering, last year, the sale of four-wheeled vehicles also seemed to slow down.

Meanwhile, Antonius Prabowo Argo, Business Director of Bank Sumsel Babel (BSB), stated that the realization of BSB KKB as of January 31, 2024, only increased by 0.44% annually to IDR 8.5 billion compared to the previous year.

However, he is still optimistic that KKB distribution in 2024 will grow by 6% compared to last year. Therefore, in boosting motor vehicle financing, BSB implements a strategy by supporting the government's environmentally friendly motor vehicle program in the form of electric motor financing with low interest starting from 0.46% per month and a down payment starting from 0%.

Recently, BCA President Director Jahja Setiaatmadja also said that several factors affected the growth of KKB throughout 2023, including the scarcity of semiconductors (chips) in the market in 2022, which ultimately caused customers to have to order (indent) for motor vehicles.

"So, at that time, people preferred the secondhand car market or chose another brand. This made the supply of KKB somewhat stalled," he said.

However, Jahja mentioned that the potential for KKB growth will be very large in the future, especially with the emergence of electric vehicles today. "The EV market share at BCA itself has good development, and it also looks developing in the market, so the market share at BCA also grows," he said.

In 2023, BCA recorded an outstanding vehicle credit increase of 20.8% YoY to IDR 56.9 trillion as of December 2023. In detail, the distribution of new credit for BCA's vehicle segment was recorded at IDR 36.6 trillion. This achievement increased by 24.9% annually and grew up to 2.6 times over the last three years.