(For other news from the Reuters ASEAN Summit, click on www.reuters.com/summit/ASEAN14)
By Fathiyah Dahrul and Andjarsari Paramaditha
JAKARTA, March 26 (Reuters) - Indonesia’s auto market will probably overtake Thailand as Southeast Asia’s biggest in 1-2 years, the CEO of its biggest auto distributor PT Astra International said.
Prijono Sugiarto also predicted that total Indonesian sales next year could hit 1.4 million after being roughly flat this year, and he expects a growing share to be so-called low cost green cars (LCGC), which his country’s car makers started producing last year.
“For LCGC, we are trying to increase production facilities. We are now at about 10-12,000 units per month. That would be nice to increase to 15-20,000 per month,” he told the Reuters ASEAN Summit on Wednesday.
The chief of Astra International noted that car penetration in Indonesia is still only 40 cars per thousand people in a country whose population tops 240 million. The fast emerging middle class is the chief target for LCGC cars.
Sugiarto also predicted that total Indonesian auto sales could be 1.4 million vehicles in 2015, which would be a 17 percent increase from about 1.2 million this year. Low-cost cars could account for up to 20 percent of sales this year, he added.
Astra, Indonesia’s biggest listed company by market capitalisation, distributes cars for Toyota, Daihatsu and Honda, and is controlled by Singapore-listed Jardine Cycle & Carriage Ltd.
Astra accounts for more than 50 percent of all auto sales in Indonesia.
Around 15-20 percent of Astra’s car production is exported to other Southeast Asian countries, as well as the Middle East, South Africa, Mexico and Venezuela.
Indonesia aim to eventually supplant Thailand as Southeast Asia’s biggest automotive production base. Investors from South Korea and Japan are bullish about the outlook for the Indonesian industry, according to Mahendra Siregar, head of the country’s investment board.
Astra also said it is eyeing expansion to Cambodia, Myanmar and Vietnam, focusing on automotive and financial-services industries.
“We have a special team to evaluate business opportunities in Myanmar, Cambodia and Vietnam,” Sugiarto said.
Jardine Cycle & Carriage has entered Myanmar as a distributor for Mazda and Mercedes Benz.
Jemmy Paul, head of investment at Jakarta-based Sucorinvest Asset Management, said sales to other ASEAN countries should drive Astra’s revenue higher.
“I think the idea of exporting the (LCGC) cars is already considered since the Japanese principals have made a huge investment in Indonesia,” said Paul.
Astra’s financing business PT Astra Sedaya Finance plans to sell 2 trillion rupiah ($175.55 million) in bonds and seek bank loans totalling $330 million as part of its financing expansion this year. Another unit, Federal International Finance, plans to issue three-year bonds worth 1.55 trillion rupiah next month.
”The room for improvement in the financing business remains there, however, we believe the impact to the ASII auto division performance will be limited, said Frederick Daniel, an equity analyst at Trimegah Securities. “Nonetheless, it is worth noting that finance division earnings contributed 22 percent of ASII’s total earnings in 2013.”
Shares of Astra International closed up 0.7 percent at 7,300 rupiah on Wednesday, compared with a 0.5 percent rise in the Jakarta benchmark stock index. The shares have risen more than 7 percent this year
($1 = 11,392 rupiah)
Follow Reuters Summits on Twitter @Reuters_Summits (Additional reporting by Eveline Danubrata; Editing by Jonathan Thatcher and Richard Borsuk)