Company Update

09 Februari 2021

Automotive Sector Update - 09 February 2021



Awaiting The Jumbo Stimulus


Sluggish Car Sales due to High Cash Demand

  •  Total domestic car wholesales in December 2020 reached 57,129 units or +5.8% MoM (vs 53,834 units in November 2020).
  •  The total FY20  wholesales amounted to 532,027 units, -48.4% YoY (vs 1,030,126 units FY19).
  •  Car sales have not fully recovered yet to pre-pandemic level as sales in 11M20 only reached 53,844 units (vs 76,811 units in 3M20). Compared to ASEAN countries, Indonesia’s car sales is still much slower. This is reflected by several ASEAN countries car sales with Thailand at 79,177 units in 11M20, Malaysia at 56,489 units in 11M20 and Vietnam at 36,359 units in 11M20.
  •  We see that Indonesian auto sales is still likely to slow down, due to the low people’s purchasing power for discretionary purchase, and people tend to use their funds for their needs or for saving.
  •  We estimate that domestic car sales will grew by 32% YoY reaching 700,000 units in FY21E, lower than Gaikindo’s estimation of 750,000 units as we assume that people will tone down their spending.


Government to Ease Interest Rate and Tax

  •  The government strives to maintain the economy and increase people's purchasing power amid Covid-19 pandemic through several fiscal and monetary policies. Likewise in automotive industry with the issuance of the policy for relaxation of new car loan rates.
  •  In addition, automotive distributors are waiting for a stimulus to eliminate tax for luxury goods (PPnBM). Currently the regulation is still being discussed and awaiting official regulation from the Government.
  •  We believe car sales in FY21E will gradually recover supported by these various efforts that hopefully will run effectively, as well as massive vaccine distribution and PSBB relaxation.


The government is preparing Indonesia Battery Holding for EV

  •  ASII already has environmentally friendly electric car products starting from the Hybrid EV found in the Toyota Corolla Cross and the Toyota Prius PHEV. However, in the midst of the pandemic condition which is still uncertain, we see that automotive industry companies will hold their capital expenditure budget. ASII, lowered its capex budget to only 50% of the usual capex, which is IDR10-15 trillion.
  •  The government is preparing Indonesia Battery Holding which is expected to be formed in 1H21E followed by the start of the construction of an electric battery factory. Preparations EV in Indonesia are still hampered by the pandemic, and the readiness of infrastructure for charging stations which will take 3-4 years to build.


Maintaining NEUTRAL Outlook with Top Pick ASII  (BUY; TP: IDR7,480)

We believe that the automotive sector will be able to grow in FY21E but it has not yet reached the pre-pandemic level, driven by a government stimulus in which automotive sales are one of the factors driving Indonesia's GDP growth. Our top pick remains on ASII (BUY TP: IDR7,480) due to its resiliency in leading the market share as ASII targets 375,000 units of car sales in FY21E. ASII is currently traded at -1STD (5-years Average) with PE at 12.27x. 


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