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ar and motorcycle distributor Mitra Pinasthika Mustika (MPM) expects lower capital expenditure next year amid a sluggish market but plans to boost productivity and improve its profit margin.

The publicly listed company will allocate between Rp 500 billion (US$38.3 million) and Rp 700 billion in capital expenditure (capex) in 2017,which compares to Rp 800 billion to Rp 900 billion allocated this year. The funds will be sourced from the firm’s cash reserves, which amounted to Rp 1.7 trillion as of June.

MPM planned to spend the majority of the capex funds for its car rental business line and other strategic lines, as outlined in the business plan, said the firm’s president director, Rudy Halim, declining to divulge further details.

“We will also use the funds to enter a new business line. We will announce it in next year’s first or second quarter,” he said after attending the recent ceremony of Forbes Indonesia Best of the Best Awards 2016 for Indonesia’s 50 “best” publicly listed companies, including MPM.

MPM, owned by Indonesian private equity company Saratoga Investama Sedaya that was co-founded by business magnates Edwin Soeryadjaya and Sandiaga Uno, currently has business lines that include car and motorcycle distribution, lubricant oil manufacturing and packaging, vehicle rental, consumer financing and general insurance.

The main distributor of Honda motorcycles held a share of more than 70 percent of the domestic motorcycle market in the period of January to September this year but only a tiny fraction of the car market, through Nissan automobiles.

Rudy, at the helm of MPM since May, remains optimistic that next year’s growth could match this year’s targets when revenue and net profit are expected to grow at 10 percent and 20 percent, respectively.

That is despite sluggish sales of motorcycles and cars nationwide so far this year, with motorbike sales contracting 7.8 percent in September year-on-year (yoy) to 555,820 units and car sales stagnating at around 93,000.

“Consumer sentiment has improved, although we remain concerned about the economy’s fundamental situation,” he said. “But going forward, we will expand our business, which will give us a higher margin.”

From January to June, MPM’s revenue grew 8.5 percent yoy to Rp 8.9 trillion, while net profit contracted 22.7 percent to Rp 180 billion.

The company, Rudy went on, would change its business approach from capex-intensive, like any other firms in the industry, to increasing its productivity, optimizing its business networks and improving its investments into not only physical facilities but also into people capacity-building.

“We need to find new ways to transform the company, which will turn 29 years next month,” he added. MPM was founded in 1987 by William Soeryadjaya, father of Edwin and co-founder of Indonesia’s largest conglomerate, Astra International.

MPM managing director Agung C. Kusumo is of the view that the lower capex will not hamper his firm’s growth, as it plans to focus on cost leadership — a business strategy that describes a way to establish a firm’s competitive advantage by having the lowest costs of operation in the industry.

“Not all of our business lines should be given capex to boost growth,” Agung said. “There are many other ways.”