CEIC Data Talk

Wheel Sales Expected to Expand 

Mon, Oct 22, 2012

Growth in Indonesian wheel sales by volume was lower in 2011 than in the previous year. Wheel sales rose by 4.06% during 2011 versus 32.37% during 2010. The subdued trend in wheel sales coincided with reduced growth in wheel production and in motor vehicle production during the same period. Growth in wheel production declined to 3.47% in 2011 from 33.88% during the previous year, while motor vehicle production likewise cooled to a modest growth of 19.28% in 2011 compared to 51.14% during the previous year.

The sharp decline in wheel sales growth during 2011 was largely attributed to 2010’s abnormal growth in motor vehicle sales arising from improved lending standards and expansion in consumer credit. In the context of weaker global growth during 2011 and lower growth in vehicle sales during the 2006-2009 period, the modest growth in 2011 sales may not necessarily represent any immediate threat to the industry.

Indeed, despite reduced sales volume, domestic wheel sales (including wheels sold both as replacements and as original equipment for manufacturers), which represent over 50% of total wheel sales volume since 2007, saw sales amounting to IDR 14.814 trillion in 2011, rising from IDR 12.507 trillion in 2010, representing an 18.44% growth, well above the 10-year average growth of 14.30% from 2001 to 2011. PT Gajah Tunggal and PT Bridgestone Tire Indonesia are two of the largest player in the domestic wheel market, with domestic sales amounting to IDR 6.282 trillion and IDR 3.623 trillion, respectively, in 2011.

The motor vehicle sales trend has been cited as a key driver of wheel sales growth over the years. Indonesia’s motor vehicle sales grew at an extraordinary pace in 2010, surpassing growth in motor vehicle purchases in its regional counterparts, despite contraction in the industry during 2009. Motor vehicle production and sales contracted by 22.64% and 19.91%, respectively, during 2009 before enjoying an explosive recovery in 2010.

Although the strong rebound in motor vehicle sales has been a cause for celebration among industry players in the automotive sector, regulatory authorities have been notably more cautious of these developments as the risk of a consumer credit bubble increases. Motor vehicle loans amounted to IDR 871.11 trillion in 2010 and have since risen to IDR 1,152.12 trillion in 2011, prompting regulators to raise minimum down payments to 30% for cars and 25% for motorcycles as of mid-June 2012.

Indonesia Premium Database                                                                                          Source: CEIC

Bright Prospects Spur Foreign Investment Realisation

Mon, Oct 15, 2012

As a rising economic star, Indonesia has long been on the radar among emerging market investors. Over the years, investors have been encouraged by stable and consistent economic growth over the years; since its recovery from the 2008-2010 economic crisis, growth has averaged 6.48% from the fourth quarter of 2010 to the second quarter of 2012. As a result, foreign direct investment has boomed since the end of 2010, growing to USD 4.48 billion in the fourth quarter of 2010 from USD 2.96 billion during the previous quarter. This has promoted a virtuous cycle of sorts as foreign investment inflows help spur economic growth.

During the second quarter of 2012, Indonesia reported strong growth in investment realisation, amounting to USD 8.47 billion, comprising USD 2.23 billion in domestic investments and the remaining USD 6.24 billion in foreign investments. Indonesia’s investment realisation figures represent a 21.2% year-on-year value-wise increase in overall investment realisation, mostly driven by foreign investors – growth in domestic investment realisation has been relatively erratic. Foreign investment realisation was largely channelled from the Asian region, with USD 2.07 billion realised during the second quarter of 2012, second only to joint countries’ investment, which amounted to USD 2.12 billion during the same period. Major foreign investment from Asian economies – Singapore (USD 831.63 during the second quarter of 2012), Japan (USD 500.51 million during the same period), and South Korea (USD 492.79 million) – has generally been stable over the past few quarters, although investment realisation from Singapore has declined from its peak at USD 2.26 billion during the fourth quarter of 2010.
  
Although the secondary sector has been the major beneficiary of recent foreign investment realisations, the mining sector saw the largest investment realisation during the second quarter of 2012, amounting to USD 1.02 billion, as investors turned their interest towards key commodities. The focus on key extractive commodities, in tandem with the government’s move to increase taxes on raw commodity exports, has nudged investors to process these commodities in Indonesia, leading to some spin-off benefits on the metal, machinery, and electronics industry; foreign investment realisation in the metal, machinery, and electronics sector amounted to USD 509.4 million during the second quarter of 2012. Additionally, the chemical and petrochemical sector and the food industry saw foreign investment spike during the same quarter, amounting to USD 995.17 million and USD 520.96 million, respectively, up from USD 623.2 million and USD 267.6 million, respectively, during the same quarter previous year.

  

Notwithstanding the upbeat sentiments on Indonesia’s investment potential, uncertainties surrounding possible restriction on foreign investments muddied Indonesia’s investment waters. However, the high growth potential offered by Indonesia along with the abundance of untapped resources – even among other emerging markets – has pushed the investment community to brave these downside risks in favour of riding on Indonesia’s wave of growth.

Indonesia Premium Database                                                                                          Source: CEIC