Fuel hikes to slow car sales growth

The Jakarta Post ,  Jakarta   |  Wed, 05/14/2008 10:32 AM  |  Business

Affordable interest rates, strong economic growth and fuel efficient cars would sustain car sales growth at a healthy pace despite the government's plan to raise fuel prices, a global market analyst says.

Frost & Sullivan, a global growth consulting company, said the fuel price rises should slow down annual car sales growth from 25 percent, as projected early this year, to 18.7 percent.

At the beginning of the year, the Automotive Industry Association (Gaikindo) projected sales could be 36 percent higher than in last year.

The firm's head of automotive and transportation in Asia-Pacific, Kavan Mukhtyar, said with fuel price increases car sales would reach about 515,000 units, up from 434,499 last year, which saw about 27 percent growth compared to 2006.

When asked about the hypothetical increase in car sales if fuel prices were maintained, Mukhtyar said, "The country would have posted from 530,000 to 535,000 units sold this year".

Considering the significant blow the fuel price increases have had on consumer purchasing power, Mukhtyar said, concluding the year with 18.7 percent growth would show strong market resilience.

He said positives amid the situation included low interest rates on car loans, strong economic growth and an increasing number of fuel-efficient cars, as reflected by the country's sales growth in the first quarter.

From early January until the end of March 2008, Indonesia's car sales rose 61 percent to 135,387 units from 84,337 units during the same period last year.

"When you need a car, you'll get a car, because of the lack of public transportation. And if you own a motorcycle, you probably want to upgrade to a multi-purpose vehicle," Kavan said.

"With the price of crude oil crossing US$120 per barrel, some amount of adjustment in fuel prices is likely, but the rise in fuel prices will benefit models with high fuel efficiency and low cost of ownership," he said.

According to Frost & Sullivan, a fuel price increase will prompt automakers to accelerate the launch of more fuel-efficient models with high tech improvements, including navigation systems, to rise above the competition.

The firm also projected Indonesia's car sales would reach 680,000 units in 2012 with a compound annual growth rate of between 7 and 8 percent.

Frost & Sullivan operates globally, and among its clients are Ford, General Motors and IBM. It consults on various issues, including telecommunication, information technology and healthcare. (anw)

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