Indomobil upbeat on vehicle sales in 2007 on easing interest rates

The Jakarta Post, Jakarta

PT Indomobil Sukses International, the second largest automotive distributor and manufacturer in the country, says it is upbeat that the central bank's plan to further lower interest rates will help boost vehicle sales.

Indomobil predicts that in 2007, national vehicle sales, excluding motorcycles, will amount to 370,000 units, higher than the Association of Indonesian Automotive Manufacturers (Gaikindo)'s initial forecast of 360,000 units.

"Vehicle sales have begun to show healthy increases over the last two months. We are quite optimistic that the trend will continue next year," Indomobil managing director Wiwie Kurnia said Tuesday.

Vehicle sales dropped sharply during the first semester of this year as the impact of the central bank's tight money policy began to kick in.

The central bank began to ease its monetary policy in May amid falling inflation. Bank Indonesia had reduced its key rate by two percentage points to 10.75 percent by October from as high as 12.75 percent in May. The lower rates contributed to the increase in vehicle purchases during the period between June and September.

In line with continuing macroeconomic stability, analysts estimate that the BI rate will come down further to between 8.5 percent and 9 percent early next year.

The health of the local automotive market is heavily influenced by interest-rate fluctuations as more than 70 percent of vehicles are purchased on credit.

"Last year, with rates of less than 10 percent, sales stood at more than 530,000 units. We hope that this year, with the rate currently above 10 percent, sales will amount to 320,000 units," Wiwie said.

Indomobil president director Makmur Gunadi Sinduwinata said that next year would provide a perfect opportunity for recovery in the automotive industry after poor sales for the last year.

He said the government's plan to boost spending on infrastructure in 2007 would also contribute to an increase in the sales of commercial vehicles, such as trucks.

Indomobil has set aside Rp 100 billion (US$10.9 million) to expand its distribution network in 2007, Gunadi added.(09)
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