The latest data from the Indonesian Motorcycle Industry Association (AISI) show that in April 2015 Indonesia’s motorcycle sales declined by 27.9 percent (year-on-year). AISI now expects domestic motorcycle sales to reach a mere 6.8 million in full-year 2015 on the back of weakened purchasing power. This would mean a 13 percent drop from the 7.8 million motorcycle units that were sold in 2014. Moreover, AISI’s revised target of 6.8 million motorcycles sales in 2015 is considerably below the institution’s initial projection of 7.7 million units.

When we take a look at the production figures of the most popular motorcycle brands in Indonesia for the first four months of 2015, then we see significant drops. Production figures of the three most popular motorcycle brands - Honda, Yamaha and Suzuki - fell 11.7 percent (y/y), 25.2 percent (y/y) and 77.7 percent (y/y), respectively. The only brands that saw production figure rise were Kawasaki and TVS. TVS Motor’s production increase of 26.4 percent (y/y) is remarkable given the current economic context. However, most TVS motorcycles (roughly 75 percent) that are manufactured in Indonesia are exported overseas and therefore the production figure of TVS is less dependent on domestic conditions.

Indonesian Motorcycle Production:

• Total Motorcycle Production
     2,699,761      2,206,914      -18.3%
 - Honda      1,677,087      1,480,323      -11.7%  
 - Yamaha       875,100       654,986      -25.2%
 - Suzuki       103,263        23,029      -77.7%
 - Kawasaki        40,262        43,458       +7.9%
 - TVS         4,049         5,118      +26.4%

Source: Indonesian Motorcycle Industry Association (AISI)

Indonesia's economic growth slowed to a five-year low of 4.71 percent in the first quarter of 2015. This is partly caused by Bank Indonesia's tight monetary stance (with the key interest rate at 7.50 percent) which results in slowing credit growth and reduced economic activity. However, the central bank is committed to maintain a tight monetary approach as it needs to combat higher inflation (6.79 percent y/y in April) and to curtail the country's wide current account deficit. Lastly, a higher interest rate environment is a strategy to limit possibly looming capital outflows ahead of the implementation of higher US interest rates in the USA.

As many spare-parts are imported a weakening rupiah rate (against the dollar) is also problematic for the car and motorcycle industries. So far in 2015 the rupiah has fallen 6 percent against the US dollar. Bank Indonesia's benchmark rupiah rate (Jakarta Interbank Spot Dollar Rate, abbreviated JISDOR) depreciated 0.05 percent to IDR 13,192 per US dollar on Tuesday (26/05).

Indonesian Rupiah versus US Dollar (JISDOR):

| Source: Bank Indonesia