Indonesia Automotives sales is on the right track at first-quarter 2013

Official March auto sales were released on Friday; both aligned with preliminary data. Performances are relatively on-track with bias upward revision on the 4W segment, but we remain vigilant on the government’s plan in announcing a new policy limiting fuel subsidy, which may give a negative sentiment in the short-term. Maintain Neutral on ASII (TP: Rp7,900) and Buy on IMAS (TP: Rp6,150)

4W sales came at 95,936 units (+9.1%yoy; -7.1%mom). Considering the very strong February sales at 103,284 units, the reduction in March volume should not be considered a weakening trend as it is also still higher than the monthly average volume during the strong 2H12 at 96,828 units. As we all know, 2H volumes are seasonally higher than 1H. Toyota volumes weaken by 1.7%yoy or 7.2%mom, though it reportedly managed to sell 1,289 units of Etios Valco (launched on March 11). However, Astra’s performance was strongly offset by the strong sales of Daihatsu (+19.6%yoy; +15.5%mom). Nissan, on the other hand, booked a very weak sales of 4,648 units (-24.5%mom; -22.5%yoy).
On cumulative basis, 1Q13 4W sales came at 295,909 units (+18.0%yoy; -1.3%qoq), accounting for 24.2% of our 1.2mn units full-year estimate (+9.6%yoy), versus historical realization of 24.3% on average (range: 19.4-27.0%). The strong growth was driven by Honda (+228.8%yoy; +16.7%qoq) and Suzuki (+70.4%yoy; -6.4%qoq), mostly due to strong products launching (i.e. Honda CRV, Honda Brio, Suzuki Ertiga).
On the 2W segment, March sales came at 665,334 units (+7.4%yoy, +2.4%mom), marking the highest sales since February 2012, likely due to the effect of fast-forwarded sales ahead of the effective implementation of LTV ruling for sharia banks on April 1. Industry growth was mostly driven by Honda (+26.0%yoy; +2.4%mom), thanks to its aggressive new products launching and strong dominance in the less-sensitive upper-class 2W models.
Cumulatively, 1Q13 2W sales came at 1.9mn units (+1.5%yoy; +3.0%qoq), accounting for 26.4% of our full-year forecast of 7.4mn units (+5.1%yoy). Honda continued to be the outperformer with sales growth of 13.7%yoy and 17.9%qoq, boosting its market share to 61.7%. That said, Honda’s performance is already ahead as it has achieved 27.6% of our full-year estimates of 4.3mn units (+7.2%yoy). We expect Honda to experience a milder impact from the sharia law.
As we had highlighted in our earlier Sector Report on March 14, regulation noise from the government’s plan to curb fuel subsidy spending remains the concern going forward. If the government decides to raise the subsidized fuel price, historical patterns suggests a short-term negative impact of 3-6 months long for auto sales. In our view, the announcement of fuel subsidy policy would also be the key to pave the way for the release of LCGC regulation, which had been delayed.