Affirming automotive dominance, Astra may face LCGC cannibalization

Bareksa.com | TheJakartaPost.com - PT Astra International Tbk (ASII) has revamped its dominance in the national automotive industry, thanks to the selling-out of low-cost green cars (LCGC). However, there is a risk of competition among the company's internal brands after its launch of new cheap cars recently.

From January to September, Astra managed to sell 422,494 cars, up 10.5 percent year-on-year (yoy). The growth was considered stellar compared to national four-wheel (4W) sales, which rose by not more than 2.5 percent yoy. The increase was mainly generated by Astra's Toyota and Daihatsu brands, with sales of their newly launched Calya-Sigra types remaining firm.

Hence, the market share of Astra has increased significantly to 54 percent from 50 percent a year ago. Astra’s position has been stronger since Mazda Motor was reported to be leaving the Indonesian car market, following Ford Motor, which stopped its Indonesian operations in June.

Astra's 4W Market Share

Source: Gaikindo, Mandiri Sekuritas

According to Mandiri Sekuritas' recent research report, the impact of cannibalization from the newly launched Cayla to existing Agya has been widely anticipated. However, Astra's policy continues to hamper the sales of the non-LCGCs, such as the Toyota Avanza, leading to the car-price decline of between 9 and 10 percent.

As a note, the Toyota Cayla – along with its low-end twin Daihatsu Sigra – was launched in early August. The seven-seater type may be more expensive than Toyota's first LCGC model but it is surely comparable to the mainstay Avanza.

Two other brokerage houses also note that cannibalization is a potential risk. Nomura Indonesia in a letter sent to clients on Oct. 18 also warned of some risks, such as car oversupply or potential cannibalization by new LCGC models.

LCGC contribution to national and Astra car sales

Source: CIMB

Meanwhile, CIMB also mentioned a potential cannibalization risk given Astra’s current product positioning. However, the risk should not materialize in the short term as each model has its own segment.

The LCGC segment has continually grown in recent years. Astra’s models accounted for 75 percent of the LCGC market. According to the CIMB research report, the LCGC segment increased 14 percent yoy as of July and accounted for 18 percent of total market volume. The figures showed a wider LCGC market share compared with its only 16 percent contribution to the total market volume last year.

(Translated by and in collaboration with TheJakartaPost.com)