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ublicly listed auto financing firms PT Adira Dinamika Multi Finance and PT Wahana Ottomitra Multiartha (WOM Finance) are bracing for weaker demand as a result of higher subsidized fuel prices that may discourage consumers from buying cars and motorcycles.

According to Adira finance director I Dewa Made Susila, the demand for cars and motorcycles would probably decline in the first three to six months after the new prices were introduced.

'€œThat was the case when the government increased the prices of subsidized fuel in previous years. It will affect people'€™s purchasing decisions and power,'€ he said on Tuesday.

The government decided to increase the price of subsidized Premium gasoline to Rp 8,500 (70 US cents) per liter from Rp 6,500 and the price of diesel to Rp 7,500 per liter from Rp 5,500. The new prices took effect starting Nov. 18.

At present, Adira, which is a subsidiary of private lender Bank Danamon, provides financing for the purchases of cars and motorcycles to 3.8 million customers. Cars make up for 40 percent of its financing portfolio, while motorcycles account for the remaining 60 percent.

Made said the decline in demand could add to the business slowdown that the financing industry had been facing for the past three years due to falling prices in the commodity sector, higher down payment requirements and weaker economic growth.

Data from the industry shows that two-thirds of financing are currently recorded in automotive purchases and one-third is in heavy equipment.

This year, the industry expects to see 1.23 million cars sold '€” unchanged from 2013 '€” and 7.9 million motorcycles sold, 1.7 percent higher than in 2013.

The situation is predicted to worsen in heavy equipment as sales are estimated to drop to 5,000 units only by year-end from a year ago.

Publicly listed Adira has set its growth target at 5 percent in 2015.

During the first nine months of 2014, the company booked a 2.8 percent surge year-on-year in new financing to Rp 25.5 trillion. The new financing drove its total outstanding financing to Rp 49.5 trillion by the end of September.

WOM president director Djaja Sutandar said the motorcycle financing company, a subsidiary of lender Bank Internasional Indonesia (BII), would see its sales fall between 10 and 15 percent in the first two months of the policy'€™s implementation.

'€œThe price increases will surely affect motorcycle sales, similar to what was recorded in previous years ['€¦] but after that, things will return to normal,'€ he said.

A higher Bank Indonesia benchmark interest rate would pose a challenge to the business because the company would be forced to operate as efficiently as possible to maintain profitability, he said.

'€œWe have increased our credit rate by around 0.5 percent to 0.75 percentage points since the beginning of the year. So we will just simplify the current business process and optimize existing outlets for now,'€ Djaja said.

WOM hopes to see its motorcycle financing reach at least Rp 8 trillion by year-end, up around 10 to 15 percent from 2013.

It expects to assist with the purchase of 580,000 motorcycles, both new and used, an increase from 536,141 last year.