Indonesia auto sales to top 500,000, even with fuel price hike

JAKARTA, May 6 (Reuters) - Indonesian vehicle sales should increase at least 15 percent to more than 500,000 units this year, even if the government raises subsidised fuel prices by up to 30 percent, the country's automotive industry association said on Tuesday.

Bambang Trisulo, the chairman of Gaikindo, told Reuters the fuel price hike would not hit the automotive industry as long as the central bank kept the key interest rate BIPG at no higher than 8.5 percent and inflation was below 10 percent.

"If those parameters are met I think we can still top 500,000 units this year. We totally support the plan. What is important for the government is to keep steady (fuel) supply and prevent any shortages," Trisulo said.

Vehicle sales, a a growth driver in Southeast Asia's biggest economy, were pounded when the government more than doubled subsidised fuel prices in October 2005, pushing inflation to around six-year highs and prompting the central bank to increase its benchmark interest rate.

But the industry has recovered as the central bank gradually trimmed interest rates.

Vehicle sales rose by more than a third last year to 434,449 units, and some industry analysts and executives predict 2008 sales will grow to 500,000-550,000 units.

The industry is dominated by PT Astra International Tbk (ASII.JK), which sells global brands including Toyota, Lexus, Peugeot, Daihatsu and Isuzu.

Indonesia's government said on Monday it would raise fuel prices in a bid to reduce hefty energy subsidies.

The issue of fuel and food subsidies is politically sensitive in Indonesia, which is due to hold elections next year. Millions of people live on less than $2 a day, and subsidy cuts have previously triggered social unrest.

Indonesia, Asia's top diesel and gasoline importer, provides heavy subsidies for fuel that help shield consumers from the market price of crude. (Reporting by Harry Suhartono, editing by Sugita Katyal & Ian Geoghegan)