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otorcycle distributor PT Mitra Pinasthika Mustika (MPMX) remains confident over East Java, currently its major market, considering that the province shows higher-than-average economic growth. President director Tossin Himawan recently talked to The Jakarta Post's Raras Cahyafitri about his company's current focus. Below are excerpts from the interview.

Question: What are the reasons behind MPMX' focus market in East Java and East Nusa Tenggara?

Answer: East Java is an agribusiness-based area, but it is different from other areas (producing agriculture products). In places outside Java Island, the agribusiness usually relates to prime commodities such as palm oil and rubber. In East Java, agribusiness is more about things related to consumer goods such as tobacco and sugarcane.

Beside agribusiness, East Java also has a manufacturing industry. In lifestyle, it has a very popular tourist site called Jatim Park.

And don't forget that Banyuwangi (one of the regencies in East Java) is just like the backyard of Bali. There are many handicrafts sold to foreign tourists that are made in Banyuwangi.

I heard that Blitar, Tulungagung and Kediri (other regencies and municipalities) send around 300,000 people to work overseas particularly in Hong Kong and Taiwan. There are also many people working in North Kalimantan for rubber or oil palm refineries.

The money sent by the workers to their families in East Java contributes to the increase in motorcycle demand. The national demand for motorcycle is 6 percent (in the first half of the year) However, we have achieved 26 percent, which we have to be grateful of.

We also see that other business sectors, such as hotel, restaurant, trade, manufacturing and services grew above the [national] average. The province's population is around 38 million, slightly lower than West Java. However, the motorcycle sales in East Java are far higher than in West Java.

I have to check the whole growth of East Java motorcycle sales, but I see it around 18 to 20 percent. And of course, most of our sales are in East Java market. East Nusa Tenggara is usually around 5 to 8 percent of our total sales.

How's East Java's market outlook and how long do you think the positive trend will continue?

We have to consider many things. First, the strength of its economy. Second, the density of the motorcycle market. Third, the age of the motorcycles.

Regarding the age of the motorcycle, I'm talking about the higher the people's income, the more they are inclined to replace their motorcycles (with a new one) frequently.

For example, a motorcycle's usage is up to 10 years. However, if the money is there and new model comes up, it will only need four years before someone purchases a new motorcycle. More replacement is in sight.

The fourth point relates to the usage of the motorcycle. Currently, we have sporty motorcycles, under-bone type and Scootic models (an automatic scooter) such as Beat and Vario.

Under-bone motorcycle type used to be very popular. It was introduced in 1972 and the sales were up to 50 percent of total (national) sales. Today, however, its sale is only around 17 percent.

The sport type, whose sales used to be very small, gives higher contribution by about 17 percent, thanks to the growing per capita income.

What I want to say is that the change in function and the opening of new segment caused a better motorcycle coverage.

When Honda introduced Scootic models in 2006, it created a new market where females can use the Scootic because it is easier and the model is aesthetically beautiful. It is a means of transportation answering the need of quick moving in cities as public transportation takes too long and is unsuited for short routes.

There are also many motorcycles used as production tools, for example, to deliver pizza or medicine.

We are sure that the need of motorcycle. We remain sure that the industry will give good contributions in the next 10 years. We can say that motorcycle distribution is an industry that has become our cashcow, giving good inflow with steady growth.

At this moment, your main market is East Java and East Nusa Tenggara. Is there any plan to expand to other areas with good growth?

We are the arm of Astra Honda motor. Our job is to follow Astra Honda Motor's direction as best as we can. Our 67 percent in market share is far higher than Honda's market share nationwide.

The company recently increased its stake in lubricants producer Federal Karyatama (FKT). What's next expansion plan?

In our initial public offering prospectus, it was said that we will purchase stake in FKT from other shareholders as they were no longer sharing the company's future plan.

In the prospectus, it was also said that we have our own objective for FKT and beyond 2013. We will conduct a feasibility study and hope that it can be completed in this third quarter and when the time comes, we will inform the public.

What kind of feasibility study?

For the Federal Oil [FKT's lubricants brand]. Motorcycles in the road are quite a lot, more than 55 millions yet the market is growing. We hope that as people's income is becoming higher, they will replace their lubricants more frequently. We hope that, after they receive the salary every month, they will also buy lubricants for their vehicles.

MPMX also runs in financing business. As we see the financing market is quite competitive, how's the business situation?

We cannot deny that there are several banks holding stakes in multifinance companies. However, the most important thing [in this business] is cost of fund, the availability and interest rate. We also have to take a look at where the firm comes from and who the players are.

For Sasana Astra Finance, we only have 60 percent stake. The remaining 40 percent is owned by Japanese financing company JACCS Co. Ltd., which is 20 percent owned by Mitsubishi Bank. Therefore, we will have access to Japanese banks. Moreover, under the Abenomics, which is quite expansive, we hope to be able to tap the market.

If we can get (loans) from Japanese banks in rupiah with low yen rate and with hedging or swap cost, we will get certain cost of funds and manage interest rate charged to the clients. Therefore, we hopefully could be competitive compared to other multifinance owned by domestic banks.

We will also be more selective and look for customers with good solvability so that we can get small non performing loan (NPL) number.

There are now more than 35,000 vehicles sold with financing from Sasana Artha Finance nationwide. The NPL stood at 1.7 percent as of the end of the first semester, declining from 3.1 percent year on year.