Total motorcycle sales rose to 3.4m in the first nine months of 2007 and are set to reach 4.8m by the end of the year, according to the Indonesian Motorcycle Industry Association (AISI), up from 4.4m in 2006, or 9.2% year-on-year. Continuing this trend, sales are forecast to reach between 5.2m and 5.4m in 2008.
The AISI estimates the current number of motorcycle owners at over 23m. Indonesia's 9.2% sales growth rate outstripped global demand growth, which stands at 5.4% annually.
"Indonesia has a per capita income of $1600, and we will continue to see increased sales of motorcycles [as income grows]," Gunadi Sindhuwinata, vice-president of the AISI, told a seminar in Jakarta on November 5.
The retail financing industry has been growing in line with the motorcycle market. The Indonesian Consumer Finance Association (APPI) recorded growth of 20% in the value of loans disbursed in the first semester of 2007. The association expects 40% growth in the second semester ending in December, averaging 30% growth for the year.
"We believe we will grow remarkably well this year," Wiwie Kurnia, APPI chairman, told local press. "The value of our loans will increase to Rp130trn ($14.2bn) by the end of the year."
Much of the motorcycle market, representing predominantly the lower segments of purchasing power, relies on consumer financing. Automotive loans, which include cars and motorcycles, account for between 80% and 85% of the consumer financing market in Indonesia.
"Between 80% and 90% of our motorcycle sales are financed purchases, rather than paid for with cash," Rico Setiawan, the managing director of dealer PT Tunas Ridean, told OBG. "After a difficult year in 2006 for both automotive sales, which fell around 40% year-on-year, and the consumer finance sector generally, the prospects for 2007 are much brighter."
"There is a lot of competition on the financing side, with certain financing companies demanding only Rp500,000 ($55) in down payments," Setiawan said. "Tunas Ridean has set the bar at Rp1m ($110) for down payments for motorcycles."
The bulk of global demand for light motorcycles comes from the Asia Pacific region, with fierce competition among the three biggest players, Honda, Yamaha and Suzuki. Indonesia is the third largest motorcycle market, following on the heels of China and India. Annual sales in China totalled 14m in 2006, while sales in India reached 8m.
While Honda continues to be the market leader with a 42.9% market share as of end of September, Yamaha has started bridging the gap. While its market share stood at a mere 28% a year ago, this year Yamaha achieved a 40.9% share for the period up to September. In third place, Suzuki cornered 13.4% of the market.
The growth in sales for Yamaha in particular outstripped market growth, with 29% increases in the first nine months of 2007.
"In September, we were forced to deliver 190,000 motorcycles even though our production capacity stands at only 160,000 units per month," said Bambang Asmara Budi, Yamaha's marketing manager in Indonesia. "We had to clean out our stocks."
In light of such strong growth in demand and bright prospects for the motorcycle industry, market players are busy increasing production capacity. Yamaha intends to increase production to 200,000 to 300,000 units per month beginning in 2008 to meet soaring demand.
The takeoff in motorcycle sales is due in part to recovery in consumer demand following fuel price hikes in October 2005. In addition, sales increases stemmed from buoyant growth in Indonesia's economy, which has spurred gradually rising incomes and a recovery in economic expectations.