Car Industry Indonesia: Tough Times for Indomobil Sukses Internasional

Fierce competition in Indonesia’s car industry is an important factor why Indomobil’s sales have declined in 2014. Last year, the company’s revenues from car, trucks and heavy equipment sales fell to IDR 14.4 trillion (USD $1.1 billion), from IDR 15.6 trillion in the previous year. Sales of cars, trucks and heavy equipment account for nearly 74 percent of the company’s total revenues. The remainder of its revenues originate from its spare parts and financial services businesses.

Indomobil Sukses Internasional's Financial Highlights:

	2010	2011	2012	2013	2014
Net Revenues	10,935	15,892	19,781	20,095	19,458
Gross Profit	1,405	2,105	2,452	2,490	2,635
Operating Profit	489	1,026	1,049	951	1,009
Net Profit (loss)	449	813	802	532	(128.2)
Total Assets	7,960	12,905	17,578	22,315	23,471
Total Liabilities	6,377	7,831	11,869	15,655	16,744

^{in billion IDR rupiah unless otherwise stated
adjusted to 1:2 stock split
Source: Indomobil Sukses Internasional}

The most important sales item for Indomobil is the Suzuki brand. However, the number of Suzuki cars that were sold in 2014 declined to 154,923 (from 164,004 in 2013), according to data from the Indonesian Automotive Industry Association (Gaikindo). As such, the Suzuki brand fell from being Indonesia’s third-most popular car in 2013 to being the country’s fourth-most popular car in 2014 (after Toyota, Daihatsu, and Honda).

Meanwhile, Indomobil’s sales of the Nissan brand fell 44.7 percent (y/y) in 2014 from 61,119 vehicles to 33,789 cars in 2014. Models such as the Nissan Livina and Nissan March apparently failed to become popular cars in Southeast Asia’s largest economy.

The only car brand among Indomobil’s car sales that showed a positive performance was Renault. In 2013, Renault started sales of locally assembled Duster SUVs in Indonesia through a partnership with Indomobil. In 2013 it sold only 37 Renault cars, but this figure grew to 234 in 2014.

Indomobil Sukses Internasional's Sales Highlights:

	2013	2014
Suzuki	164,004	154,923
Nissan	61,119	33,789
Hino	34,207	28,493
Volkswagen	1,377	1,082
Audi	410	346
Renault	37	234

^{Source: Gaikindo}

Indomobil’s sales of car spare parts improved by 5.3 percent (y/y) to IDR 2.1 trillion in 2014. However, sales of car spare parts only account for 10.8 percent of the company’s total sales.

Most analysts agree that the automotive industry of Indonesia will remain sluggish in 2015 as people’s purchasing power has weakened amid slowing economic growth. This is confirmed by car sales realization at the start of 2015. According to the latest data from Gaikindo, Indonesian car sales (wholesale) declined 14 percent (y/y) to 282,250 vehicles in the first quarter of 2015. Slowing car sales and intense competition will most likely reduce Indomobil’s profit margins. Moreover, as most car spare parts are imported rupiah depreciation forms a problem as well. The company cannot simply transfer these costs to end-users by raising prices due to intense competition.

A positive point is that Indomobil’s partner Suzuki, Japan’s fourth-largest car manufacturer, plans to expand its business in Indonesia and is ready to invest USD $100 million over the next three years in an effort to enhance production capacity of cars, motorcycles and car components in the Suzuki Indomobil plant in Bekasi (West Java).

Since February 2015 Suzuki has started to export its Suzuki Address motorcycles, manufactured at its Suzuki Indomobil Bekasi plant, to 24 destinations in Japan, Europe and the ASEAN region. Total exports have exceeded 30,000 units, consisting of completely built up and completely knocked down motorcycles.

Indomobil’s total sales are estimated to rise slightly in 2015 to IDR 20.5 trillion (from IDR 19.5 trillion last year). It is also estimated that the company will post net profit again (IDR 300 billion). However, Indonesia’s car sector will have difficulty growing in 2015 as people’s purchasing power has weakened amid slowing economic growth and due to the country’s current relatively high interest rate environment.

Stock Quote Indomobil Sukses Internasional - IMAS:

The graph below shows a sharp fall because on 7 June 2012 Indomobil Sukses Internasional conducted a stock split with a ratio of 1:2.

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