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Cheap cars to form a new segment in Indonesia
Publication Date : 30-09-2013
The presence of more affordable and fuel efficient cars will help create a new segment in Southeast Asia’s second largest auto market, experts say.
Dushyant Sinha, Frost&Sullivan associate director of the automotive and transportation division for Asia Pacific, said that the government-backed “low-cost green car” (LCGC) programme aimed at middle to low income customers would allow established manufacturers with strong brands and models to sell their products at low prices.
Cars sold for less than 100 million rupiah (US$8,862) the benchmark for the low cost category have actually already entered the domestic market, such as the Chery QQ from China.
But its market share has remained small, according to Sinha.
“With more choices, a new segment is likely to emerge, even though some cannibalisation of existing entry level segments is inevitable,” he told The Jakarta Post in an email interview.
Driven by a new government incentive to eliminate the luxury-goods sales tax, several automakers have started to venture into the low cost car market.
Toyota Astra Motor (TAM), Astra Daihatsu Motor (ADM) and Honda Prospect Motor (HPM) are offering the Agya, Ayla and Brio Satya, respectively.
Nissan Motor Indonesia also recently announced that it would deliver its multi-purpose vehicle (MPV) Datsun GO+ and hatchback Datsun GO next year to join the market.
Automakers with products ready are very upbeat and believe that their new vehicles will sell.
Daihatsu, for instance, said it planned to sell 15,000 Aylas until the end of this year, while Toyota, which sourced its Agyas from Daihatsu’s production facility, also had a similar estimated sales target.
Nissan, which will kick off production of the Datsun-brand cars next year, said they would help the brand attain its goal of securing a 15 per cent share in the Indonesian automobile market by 2016, significantly up from 6 per cent at present.
Automotive expert Achadiyat Asiandi Suhadi echoed Sinha’s view, saying that the “inexpensive” cars would mainly capture price-sensitive customers in Indonesia who belonged to the growing middle class.
Citing the presence of city cars and MPVs in the low cost programme, he underlined that it was the price, instead of the products, which determined the market.
“Buyers of this type of cars will mostly be people who are first time buyers. Once they buy this car, they will not buy another car due to limited purchasing power,” he said.
Achadiyat acknowledged that the new type of cars would absorb consumers who currently relied on used cars.
Despite the central government’s optimism about the positive impact on the automotive industry, the policy has sparked criticism from some regional administrations,
transportation experts and consumers who say that more affordable cars in the market will lead to more people purchasing vehicles and lead to heavier traffic jams, particularly in the big cities.
Transportation Society (MTI) chairman Danang Parikesit, for instance, said that the new type of cars might see demand exceed supply, forcing manufacturers to fill the gap. As a result, it would increase traffic congestion markedly, especially in places that lacked proper public transportation.