Motorcycle production seen down to 4.8m units in 2006

The Jakarta Post, Jakarta

The Industry Ministry estimates that Indonesian motorcycle production this year will decline to 4.8 million units from over 5 million last year due to slowing demand.

The ministry's director general of transportation, Budi Darmadi, was quoted by Antara as saying that higher fuel prices and continuing high interest rates had significantly reduced demand for motorcycles as consumer purchasing power weakened.

""If fuel prices had not increased, this year's production level would have at least been the same as last year's,"" he told reporters Sunday.

He said that slowing demand and production came as motorcycle manufacturers expanded their production capacities to 6.5 million motorbikes per year, making Indonesia the world's third largest motorcycle producer after China and India.

""But the current weak market situation will not last for long. Once the economy improves, the motorcycle market will revive again,"" Budi said.

Motorcycle sales rose by 21 percent to 5.5 million last year from 4.2 million in 2004.

Demand this year is expected to drop by 20 percent from last year, according to the Indonesian Motorcycle Industry Association (AISI).

Sales during the first five months of the year only amounted to 1.4 million units.

Elsewhere, Budi urged motorcycle manufacturers to develop local brands by investing more in research and development.

He said that the government was preparing fiscal incentives to encourage companies to spend more on R&D.