The dearth of adequate public transportation helped boost motorcycle sales in Indonesia by 9 percent last year, but manufacturers are bracing for slowing sales this year due to higher interest rates for vehicle loans and an increase in production costs.
The Indonesian Motorcycle Manufacturers Association (AISI) reported on Wednesday that shipments of motorcycles from producers to dealers reached 7.77 million units last year, up 8.8 percent from 7.1 million a year earlier. The figure is higher than AISI’s 2013 target of 7.3 million to 7.5 million units.
Sigit Kumala, AISI’s deputy chairman for commercial affairs, said that motorcycle sales remained strong last year despite higher interest rates and tighter lending requirements.
“As long as public transportation remains chaotic, motorcycle sales will continue to grow,” Sigit said recently. He said that motorcycles remained the cheapest and most efficient mode of transport in Indonesian cities, where traffic congestion is growing progressively worse.
Throughout 2013, Bank Indonesia, the central bank, increased its benchmark lending rate by a total of 1.75 percentage points to 7.5 percent, in a move to anchor inflationary pressure and to halt the rupiah’s decline.
Since June 2012, the central bank has required a minimum 25 percent down payment for motorcycle purchases using loans from banks or financing companies, in order to curb growing bad loans among motorcycle debtors.
Most of motorcycles purchased in Indonesia are acquired through loans, with banks and financing companies willing to accept small down payments or sometimes no down payment at all.
This year, AISI expects motorcycle sales growth to slow to 5 percent, reaching eight million units, as interest rates are expected to remain high and production costs to rise with the weakening rupiah, Sigit said.
Economists expect Bank Indonesia may increase its benchmark lending rate to as high as 8 percent this year in order to maintain investors’ appetites for Indonesian assets as the US Federal Reserve winds down its bond-buying stimulus program.
The rupiah, which declined 26 percent last year, was traded at 12,262 against US dollar on Thursday, compared to 8,910 on the same day last year, according to data from the central bank.
A weak rupiah raises the price of imported goods. While most motorcycle parts are produced domestically, their raw materials, such as steel and plastic, are imported. Sigit said that manufacturers planned to pass on these higher production costs to customers starting early this year.
“We hope that there will be no more regulations that can hurt our sales this year,” he added.
The AISI data showed that Honda motorcycles — manufactured by Astra Honda Motor, a joint venture between Astra International and Honda Motor — dominated the domestic market with 60 percent sales, with 4.7 million units sold.
Yamaha came second with 2.4 million units and Suzuki came third with sales of 400,000 motorcycles.