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Indonesia's largest automotive group sees production recovering

Jakarta Globe - March 16, 2021

Jakarta – Astra International, Indonesia's largest car distributor, has seen its car production picks up pace this year in line with rising demand, giving the company hope for a recovery this year, the company said on Monday.

Astra's car factory utilization has reached 70 percent of its pre-pandemic capacity in the first three months this year, compared to 40 to 60 percent in 2020 as the government's restriction to curb the Covid-19 pandemic disrupted production and dampened demand from consumers.

"Production activities have been increasing slowly, especially in the last three months. It has not yet reached the normal level. Still, this development is quite encouraging," Djony Bunarto Tjondro, the president director of Astra International, told reporters at BeritaSatu Media Holdings during a virtual visit n Monday.

Djony acknowledged that the government's tax incentives in exemption from luxury sales tax (PPnBM) for single axle cars with engine capacities below 1,500 cubic centimeters (cc) starting March 2021 have helped boost car sales.

"Starting March, there is a tick up, but it is not yet significant. We hope that the demand will continue to grow in the future," he said.

The Finance Ministry exempted the luxury sales tax for three months from March 1 to Dec 31, 2021, in a move that the Coordinating Minister for Economy Airlangga Hartato hoped would increase car sales and help the country add 0.9 to 1 percentage point to its economic growth rate this year.

Indonesian Automotive Manufacturers Association (Gaikindo) expected the car sales would increase by 30 percent to 750,000 cars.

"In fact, if the economy recovers faster, vaccinations are effective to curb the spread of Covid-19, and the stimulus works well. This year's car sales figure could be over 750,000 units," Djony said.

Car retail sales plunged 45 percent to more than 578,000 last year from around 1.05 million units a year earlier. Gaikindo data showed. Car shipments from manufacturers to dealers were also down by 48 percent to around 532,000 units last year.

Around 51 percent of total car sales in the domestic market were contributed by Astra International, with total sales of 270,076 units. Astra International provides cars ranging from Toyota, Daihatsu, Isuzu, Peugeot, UD Trucks, BMW, and Lexus, among other brands.

Still, Djony admitted Astra International would not push production to the maximum just yet.

"We will adjust it to the development of demand, especially because we also have to keep implementing health protocols in production units. Hopefully, demand can rebound quickly so that we can prepare the supply," he explained.

The company also implemented a prudent approach throughout 200 subsidiaries in various sectors that include financial services, heavy equipment, agribusiness, information technology, infrastructure and employ more than 190,000 employees, Djony said.

At the same time, Astra International would continue to pay close attention to emerging investment opportunities. The company allocated Rp 11-12 trillion ($764-833 million) in capital expenditure this year, up from Rp 8.3 trillion last year. The company injected Rp 3.5 trillion into Indonesia's largest ride-hailing, food delivery, and digital payment company Gojek Indonesia in 2019.

"We will be careful but do not want to lose momentum to develop. We will continue to pay close attention to investment opportunities because we are supported by a healthy and strong balance sheet," Djony.

Astra International posted a 26 percent decrease in net profit last year to Rp 16.2 trillion compared to Rp 21.7 trillion in 2019. The company shares were traded 1.8 percent higher on Tuesday morning at Rp 5,625 apiece, 14 times higher than its 2020 earnings and 1.5 times its book value.

The $15.8 billion company returns on assets of 4.78 percent and a return on equity of 8.27 percent.

Source: https://jakartaglobe.id/business/indonesias-largest-automotive-group-sees-production-recoverin