The Government's Stimulus Is Judged Not To Raise Four-Wheeled Vehicle Sales In 2020

Four-wheeled vehicles cross a deserted road in Jakarta. (Angga Nugraha / VOI)

JAKARTA - Demand for four-wheeled vehicles throughout this year is expected to experience a contraction due to the corona virus or COVID-19, which is still prolonged both globally and in Indonesia. Meanwhile, sales of two-wheeled vehicles are expected to grow in single digits.

Bahana Sekuritas assessed that sales of motorized vehicles will be difficult to reach the target throughout 2020, because in the first quarter of this year there were many challenges faced by the motor vehicle industry, from flooding that occurred in almost all regions in Indonesia from the end of the year to mid-February. In addition, the number of people infected with COVID-19 in Indonesia is still growing.

"If you look at the developments that have occurred to date, the threat of a slowdown in the economy is increasingly real both globally and domestically during the first quarter of this year and will still have an impact until the second quarter," said Anthony Yunus, an analyst at Bahana Sekuritas, in a statement received by VOI, Thursday, April 2.

Of course this has an impact on the demand for motorized vehicles, which looks like it will be difficult to reach the target even though interest rates have been cut several times.

Even the plan for the prestigious automotive exhibition or the so-called Indonesia International Motor Show (IIMS) which is planned to be held in mid-April, has been postponed until an undetermined time until conditions are more conducive.

Bahana estimates that the sales volume of four wheels will contract or decrease by about 8 percent or an estimated 948,000 units. Meanwhile, sales of two wheels are estimated to decline by about 5 percent or reach around 6.163 million units throughout 2020.

Initially, a subsidiary of Bahana Pembimbing Usaha Indonesia (BPUI), it estimated that sales of four-wheeled motorized vehicles nationwide would reach around 1.07 million units. Meanwhile, the Association of Indonesian Automotive Industries (Gaikindo) estimates car sales to be around 1.1 million units, but the association is recalculating this projection.

Four-wheeled vehicles cross a deserted protocol road in Jakarta during the COVID-19 outbreak. (Angga Nugraha / VOI)

In January alone, car sales were recorded at 79,983 units, down 2.4 percent over the same period last year, which was contributed by sales by the Astra International group of around 40,289 units, an increase of 4.7 percent on an annual basis. Meanwhile, the remaining contribution came from sales outside the Astra group, which decreased annually by 0.1 percent, mainly due to lower sales of Mitsubishi.

The government has made various efforts to provide stimulus to the economy, both fiscal and monetary, in order to maintain the momentum of domestic economic growth amid the threat of a deeper global economic slowdown. Even the Financial Services Authority (OJK) provides relief for low-income people such as taxi drivers, online motorcycle taxis who have motorized credit are given free installments of up to 1 year, in order to maintain people's purchasing power.

Bank Indonesia also provided a stimulus by cutting interest rates in the board of governors (RDG) meeting which took place on March 18 by 25 basis points (bps) to a level of 4.5 percent. In total, BI has lowered the BI 7-Day Reverse Repo Rate by 150 bps from 6 percent since July 2019, as a measure to anticipate maintaining domestic economic growth amidst the global economic recovery due to the onset of COVID-19.

The World Health Organization (WHO) has officially announced that the spread of the corona virus has become a pandemic. WHO also asks all countries to activate and improve emergency response mechanisms, the need for communication to the public about risks and how to protect themselves and the need to immediately find, separate, test and treat every COVID-19 case and trace any related contacts.

Bahana recommended Buy for Astra International shares coded ASII shares, with a target price of IDR 6,000 per share. The Astra group's revenue is estimated to reach IDR 225.8 trillion by the end of 2020, or a decrease of 15.6 percent from its original estimate, with net income expected to fall by around 20 percent to around IDR 19.6 trillion by the end of 2020, compared to the previous estimate of IDR 24.5 trillion. .