Indonesian Motorcycle Industry Fears Sales Drop After Lending Crackdown

Dion Bisara

The Indonesian Motorcycle Industry Association forecasts motorcycle sales to shrink 20 percent this year to 6.5 million units, as tighter rules surrounding vehicle financing crimp demand.

There were 8.1 million motorcycles sold last year, and around 75 percent of the purchases used loans from banks or multifinance companies.

From June, consumers seeking loans to buy motorcycles will have to pay at least 25 percent of the cost up front, as opposed to as little as 5 percent now. The rules are being introduced by Bank Indonesia and the Capital Market and Financial Institution Supervisory Agency (Bapepam-LK) in an effort to curb excessive lending.

“Higher down payments will start hitting motorcycle sales in the second half of this year,” Sigit Kumala, the commercial chairman of the motorcycle industry body known as the AISI, was quoted by Antara news agency as saying on Saturday.

“It’s almost certain that sales will fall to 6.5 million this year unit from 8.1 million unit last year,” he said. “That means the industry will roll back to where it was three years ago.”

The country’s motorcycle industry sold 5.9 million units in 2009, down 5 percent from 6.2 million a year earlier, as high rates of interest on loans at the peak of the international financial crisis deterred many from buying.

Sigit did not comment on whether the new rules would decrease the number of loan defaults, part of the intention of the regulatory change.

In January, the AISI said it was striving for sales growth this year of 10 percent to 15 percent on the back of strong economic growth and low borrowing costs on consumer loans.

However, sales fell to 1.93 million units in the first quarter compared to 1.99 million during the same period a year earlier, AISI data shows.

Sales have been declining since the fourth quarter of 2011, after severe floods in Thailand hit the regional supply chain.
Motorcycle manufacturers therefore plan to cut production in the second half of the year. “It will be massive,” Sigit said, without providing details.

The AISI represents large motorcycle makers including Astra Honda Motor, Inti Kanzen Motor, Kawasaki Motor Indonesia and Suzuki Indomobil Motor.

Honda remained the domestic market leader last year, accounting for 4.27 million units, around 53 percent of the domestic market.
Yamaha came in second with 3.14 million units, a 39 percent market share.