Domestic sales of motorcycles in Indonesia are expected to have fallen by 20 percent to 550,000 in December 2013 compared to the previous month (688,527). According to the Chairman of the commercial department of the Indonesian Motorcycle Industry Association (AISI), Sigit Kumala, this decline is not the result of slowing demand for motorcycles but due to the limited amount of working days amid the Christmas and New Year holidays. This then led to less production and distribution of motorcycles to Indonesian dealers.
For many Indonesian people the motorcycle is the preferred choice for transportation because it is relatively cheap and an efficient tool to find a way through the frequent daily traffic jams in the bigger cities of Indonesia. Hence, sales of motorcycles in Indonesia show an ever-increasing trend in recent years. In 2013, Indonesian motorcycle sales are expected to amount to 7.7 million units, a 8.4 percent increase compared to total sales in 2012. In 2014 domestic motorcycle sales may grow by another 5 percent to 8 million units.
|Motorcycle Sales in Indonesia
| - Honda
| - Yamaha
¹ January to November 2013 sales only
² future forecast
Source: Indonesian Motorcycle Industry Association (AISI) and Astra International
Similar to Indonesia's car industry, the country's motorcycle industry is affected by the sharply depreciated rupiah exchange rate as well. Starting from June 2013, pressures on the rupiah intensified after speculation emerged that the Federal Reserve would scale back its bond buying program known as quantitative easing. In combination with Indonesia's wide current account deficit and high inflation, it led to serious capital outflows from Southeast Asia's largest economy. The rupiah exchange rate depreciated about 27 percent against the US dollar in 2013. As Indonesia's motorcycle industry imports specific motorcycle components from abroad in US dollars, it thus results in higher production costs. Therefore, several motorcycle producers and dealers will raise prices of motorcycles at the start of 2014.
Also the central bank's higher benchmark interest rate (BI rate) is a significant influence that limits the amount of motorcycles sales as the majority of motorcycles in Indonesia are purchased using a loan. In order to curb high inflation, limit imports and support the rupiah exchange rate, Bank Indonesia gradually raised its BI rate from 5.75 percent in June 2013 to 7.50 percent in November 2013.
Other factors that contributed to limited motorcycle sales in 2013 were the Indonesian government's decision to raise prices of subsidized fuels in June 2013 (which made the government's financial balance sheets more healthy but also triggered high inflation) and the implementation of higher down payments.
Indonesia's motorcycle industry is dominated by Honda. This brand controls about 60 percent of the market. Astra International is the company that has the exclusive right to sell Honda motorcycles in Indonesia.