0 Indonesia Regulations a Speed Hump for Motorcycles: AISI

The Indonesian Motorcycle Industry Association says that motorbike sales could fall by 20 percent this year as sales are being dragged down by strict regulations and weak commodity prices. Gunadi Sindhuwinata, the head of the group known as AISI, predicted motorbike sales could fall to 5.65 million units this year compared to 7.06 million units in 2012. He added the government’s plan to gradually increase the electricity tariff by 15 percent this year would also hurt low-income consumers, the main buyers for motorbikes. He said consumers will prioritize basic needs over motorbikes in their spending preferences. 

“So the realistic sales target for this year is a 20 percent decline from 2012,” Gunadi said. He expressed doubt that there would be an opportunity to boost motorbike sales this year, potentially prompting companies to halt plans to expand production capacity. Gunadi said several policies introduced by regulators have slowed the industry. “The down payment regulation is for sure slowing down sales. Now it is also being implemented in Shariah financing,” he said, referring to the Finance Ministry’s move to set stricter down payment requirements on Islamic financing for automotive purchases. 

The new rule, which will affect all non-bank Islamic financiers, forces them to take a down payment of 20 percent for motorbike purchases and 25 percent for cars. The purchase of commercial four-wheeled vehicles, such as trucks or buses, requires a 20 percent down payment. Previously, down payments had not been regulated for Islamic financing companies, with firms typically requiring either no down payment or a down payment of no more than 10 percent. The Finance Ministry has, since June 2012, imposed similar down payment requirements for conventional financing of automotive purchases. 

But it initially excluded Islamic financing, leaving a loophole that allowed customers and distributors to disburse loans with lower down payments. The global financial crisis is also expected to crimp sales. The AISI announced last year that 10 million motorbikes would be sold in 2013, but Gunadi said it was no longer a realistic goal. “It is likely to be pushed back to 2014 or 2015,” he said. The down payment rules were introduce to encourage more responsible lending.

Investor Daily
source : the jakarta globe