Indo Auto, Short term pain, CLSA

We checked with dealers and financing companies to see how things are
post higher down payment regulation (June 15). While sales in 2W had
weakened, we saw loopholes that will help softening the blow. Our
channel-checks also conclude that there is no standout among the new
low-MPV models, but we think Toyota can maintain dominance, given its
strong resale value and good after-sales services (vast dist. network).
While headwinds exist, the auto market had endured multiple crises. We
maintain O-PF on Astra, now at 14.2 PE12 and 12.4x PE13.


Finding loopholes – post higher down payment regulation
 Loophole #1: shariah financing. 2W DP can be as low as 7.5%, with longer tenor.
Higher rate does not matter, as concerns are on the DP and monthly instalment.
 Loophole #2: pushing back the typical up-front payment (insurance + admin fees)
as part of the instalment. This can make up 10% of value.
 Loophole #3: borrowing under “productive” use category for 4W, where min. DP is
at 20% (current norm). This may be 50% of the market.

Loopholes to soften blow, but ST impact exists
 2W demand is more at risk given much lower DP in practice, high penetration,
higher portion of financing vs 4W, and the absent of “productive” use category.
 We expect 4W sales to grow flat, from 24.6% YoY in 5M, and 2W sales may
contract 18%, but with Honda to continue eating Yamaha’s share.
 We think the regulation will result in better quality loan (i.e.better NPL).
 Demand may shift towards multifinance financing from banks, given lower DPs.

Intensifying competition in low-MPV
 Nissan Evalia’s sales pales in comparison to Suzuki Ertiga’s, both under Indomobil
(IMAS IJ). Nissan can still meet its target but also depends on impact of higher DP.
 Not one model stands out in our opinion, hence we conclude that buyers also
consider resale value and after-sales services when buying a car.
 Toyota market share rose to 38% in 5M from 35%, hence Astra’s 4W share rose to
57% from 54% (FY11). We expect a market share of ~55-56% this year.

Short-term pain, long-term gain
 The market had survived multiple crises, due to rising income and low penetration.
 We expect Astra to gain market share in FY12 on both 4W and 2W market, but we
remain cautious in the medium term given the headwinds on DP impact and macro
conditions. We maintain O-PF for long term, now at 14.2x PE12 and 12.4x PE13.
 Astra’s business is also more diversified, with less reliant on 2W. We see upside if
demand unleashes on 4W and as UNTR’s business expansion unfolds.

Download file : Indonesia Auto Sector 270612