Wednesday, 27 July 2022 03:23

Indonesian Four-Wheel Vehicle Sales Recover to Pre-Pandemic Levels

Fitch Ratings-Jakarta-25 July 2022: Indonesia's four-wheel (4W) vehicle sales are likely to surpass 900,000 units in 2022, despite the semiconductor shortage and rising inflationary pressure driven by higher fuel prices, due to strong demand and continued government fuel subsidies that alleviate the cost of car ownership, says Fitch Ratings. Automakers' wholesale sales reached 475,321 cars in 1H22. This was 21% higher than in 1H21 and close to the level before the Covid-19 pandemic of 482,097 units in 1H19, after which sales plunged to 260,932 units over 1H20. The spike in sales reflects stronger fundamental demand as economic activities normalize, even as discounts on auto taxes are gradually withdrawn. Average monthly sales remained at above 80,000 units in 2Q22, with the exception of May, when sales dropped to 49,453 units amid a semiconductor shortage and the Eid holiday. Production had also slowed to 72,261 units due to fewer working days during the holiday, but rebounded to 114,213 units in June 2022.

The normalization of business activity to pre-pandemic levels has also boosted the performance of Indonesian transportation company, PT Serasi Autoraya (SERA, AA-(IDN)/Stable). SERA's 1Q22 revenue rose by 10% yoy, driven by higher vehicle-rental revenue, despite a weaker used-car segment. We expect SERA’s credit profile to remain commensurate with its rating, with its annualized net debt/EBITDA of 1.8x at 1Q22 remaining below our negative guideline of 2.0x. The price of Brent oil reached USD106.3/barrel in July 2022, from USD79.0/barrel in January 2021. This will translate into inflationary pressure for Indonesian consumers, but is likely to have little impact on 4W sales because Indonesia’s fuel sales are dominated by PT Pertamina (Persero) (BBB/Stable), which predominantly sells subsidized fuel.

From 1 July 2022 Pertamina encouraged the public to register their vehicles to gain access to subsidized RON-90 fuel, Pertalite, and diesel fuel, Solar, to ensure government-subsidized fuel was distributed to the right target market. However, the government is still formulating the regulations for subsidized-fuel restrictions. Most recently, Pertalite will be prohibited for cars with 2,000cc engines and above; we estimate that these engines will comprise 25% of total car sales in 2022. Pertamina has increased the selling price of non-subsidised fuel to pass on the higher global oil prices. Effective from 10 July, the price of non-subsidised fuel at Pertamina's gas stations rose by an average of 15.5%. However, we do not expect this to have a major impact on 2022 4W sales, as most Indonesian auto sales are driven by cars that remain eligible for subsidized fuel. This is likely to only affect the higher-end of the 4W market, which has less elastic car demand.
 
Source : https://www.fitchratings.com/research/structured-finance/indonesian-four-wheel-vehicle-sales-recover-to-pre-pandemic-levels-25-07-2022

 

 

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