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Automotive sector: Fasten your seatbelt
As we expect a fuel price hike of around Rp 3,000, representing around a 46 percent increase, we have cut our 2015 forecast for four wheel (4W) sales volumes growth to flat year on year (y-o-y) from 10 percent y-o-y growth, and for two wheel (2W) sales volume growth to 3 percent y-o-y from 6 percent y-o-y
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s we expect a fuel price hike of around Rp 3,000, representing around a 46 percent increase, we have cut our 2015 forecast for four wheel (4W) sales volumes growth to flat year on year (y-o-y) from 10 percent y-o-y growth, and for two wheel (2W) sales volume growth to 3 percent y-o-y from 6 percent y-o-y.
In addition, we expect additional policy risks from low-cost green cars (LCGCs) as president-elect Joko 'Jokowi' Widodo plans to add a 10 percent luxury goods tax, resulting in a higher average selling price (ASP) and limiting the growth of sales volumes and margins.
Following our trip to the recent Indonesia International Motor Show (IIMS), we believe the price war in the 4W segment will persist. Based on our price survey of the popular low MPV segment, we believe that the price war (table 1) is continuing, with some models now offering a Rp 19 million discount (11 percent).
We also see more new-model launches, such as the Mitsubishi Delica, the new MPV-SUV model, as well as Honda's new Freed model for the mid MPV segment. On the other side, we expect Astra International (ASII) to respond with a new MPV model to try to limit its market-share loss.
Following the successful launch of the Honda Mobilio in the low-end MPV segment, Honda is entering the low-end SUV segment through the launch of the Honda HRV. This should provide additional competitive pressure for ASII's models, the Toyota Rush and the Daihatsu Terios, as well as Indomobil Sukses Internasional's (IMAS) model, the Nissan Juke. We do not expect the new Nissan X-Trail model from IMAS to gain more traction from customers.
We expect the fuel-hike impact to be milder for the 2W segment than the 4W. Overall, on top of flat 4W-sales volumes in 2015, we expect weak margins to persist on the back of intense competition and a higher tax on LCGC sales.
With more new models to be launched, we expect continued margin pressure for ASII and limited market share for IMAS. We believe aggressive marketing in the low MPV segment will lead to margin contraction for ASII, while several new dealership developments could bring down IMAS's margin.
In summary, we retain our 'underweight' stance on the auto sector due to flat-ish volume growth from several policy headwinds, as well as lower ASPs and margins given fierce competition. Ahead of the government's anticipated fuel-price hike, we also expect an interest-rate sensitive sector like automotive to remain out of favor and underperform the market.
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The writer is the senior research manager in the research department of PT Bahana Securities.
