Automotive Sales Improve

Automotive Sales Improve

The growth in car and motorcycle sales in August 2017 improved as commodity prices increased and the public purchasing power recovered. The decline in Bank Indonesia’s benchmark interest rate (BI Rate) is also expected to be a catalyst for the automotive sector.

Based on data from the Association of Indonesian Automotive Industries (Gaikindo), car sales in August grew 5.6 percent to 96,461 units over the same period last year. The sales growth was higher than July 2017 of 4.3 percent to 85,363 units. Total car sales in the period of January to August 2017 reached 715,219 units or up 3.8 percent yoy.

Motorcycle sales in August 2017 also rose five percent to 538,176 units over the same period last year. According to data from the Indonesian Motorcycle Industry Association (AISI), motorcycle sales in the period reached 3.79 million units.

“One of the sectors that benefited after BI cut BI Rate in August and September is the automotive sector, which will help the middle-class purchasing power who buys cars and motorcycles in installments,” said Henry Wibowo, Acting Head of Research at Bahana Sekuritas.

Bahana is predicting sales of cars and motorcycles until the end of this year will grow three to five percent. Growth in car sales is expected to be better than motorcycle sales as energy reforms hit the low-class purchasing power. Decreasing BI Rate to 4.25 percent as of September 2017 will support the recovery of lower-middle-class purchasing power.

Gary Gregorius, Analyst of Bahana Sekuritas, said that the national car and motorcycle sales growth cannot be separated from the contribution of Astra International Tbk (ASII). Car sales for eight months rose 8.7 percent yoy to 398,000 units. The increase in sales was driven by an increase in the low-cost green car (LCGC) by 13.8 percent and low multi-purpose vehicle (LMPV) by 13.7 percent compared to the previous month.

“The market share reached 54.6 percent in August 2017, slightly down compared to July 2017 due to the presence of Mitsubishi Xpander and Wuling, China’s production car,” said Gary. The presence of Xpander and Wuling is not expected to significantly undermine the market share. Bahana projected automotive sales in 2018 will grow eight to ten percent and recommended BUY for ASII with a target price of IDR 10,000 per share.

Meanwhile, Indomobil Sukses Internasional Tbk (IMAS) is not expected to improve its performance because the new car production from Nissan has not existed. IMAS still relies on Datsun sales in the 7-seater LCGC class. This has been anticipated by ASII with the sale of Calya and Sigra. (*)

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