Motorbike sales in Indonesia slip 12.8% to 6.6m units

Blame it on lower commodity prices.

According to Maybank Kim Eng, while 4W sales volume reached a new record high for 11M12, 2W sales volume remained weak – around 621k units in November and 6.6m units YTD, representing a slide of 12.8% YoY and in line with their forecasts.

Here’s more from Maybank Kim Eng:

We believe the reasons behind the low sales volume are unchanged, namely, lower commodity prices and higher down payment requirement for conventional and shariah financing. As of 11M12, Honda Astra Motor (HAM) controlled 58% of the market share in the 2W segment and will likely remain the leader going forward. Yamaha, on the other hand, saw its market share shrink to 34% over the same period from 40% a year ago as a result of its aggressive financing programme.

Labour costs look set to climb in 2013 following Indonesia’s implementation of higher minimum wages (Region of Jakarta: +44% to IDR2.2m). Our channel checks indicate that car manufacturers in general pay slightly above the new minimum wage requirement.

But the same cannot be said of the auto component sub-sector, which is highly fragmented and employs more workers. Salaries in this segment are likely below or at best on par with the new minimum wage requirement. An increase in the unit labour cost in the component sector would see car prices going up in 2013. While it is still too early to gauge the actual impact, we believe that the 4W segment will be more resilient than the 2W segment, given less sensitivity in the 4W segment.

Moreover, higher minimum wages would translate to higher purchasing power, thereby providing support for higher car prices if they eventuate in 2013. All said, we will monitor the impact of higher minimum wages on the automotive sector, given the high degree of uncertainty associated with their implementation.

Although preliminary figures showed that just 104k cars were sold in November (-2.9% MoM), 11M12 sales volume realisation was above 1m units (+26% YoY). This marked a new record high for Indonesia, signaling the rising purchasing power of domestic consumers while allaying initial fears that the higher down payment requirement would curtail demand.

As of 11M12, Astra International remained the leader in the domestic car segment with a market share of around 55%. Toyota, bucking the trend of low sales volume in November, reported positive growth of 3.1% MoM to 37k units.

We maintain our Neutral call on the automotive sector as we are cautiously optimistic about 2013. We expect our upbeat expectations for the 4W segment to be countered by unexciting sales volume growth in the 2W segment.

In our view, Astra International (ASII.IJ) will continue to stand out in terms of sales volume growth, thanks to its entrenched position in the domestic auto market and solid brand equity. Reiterate BUY with a slightly lower TP of IDR8,600.