Disruption (as expected) in domestic car production is happening due to components shortage by Sarina - CLSA

Mitsubishi’s sole distributor, Krama Yudha Tiga Berlian Motors expects car sales to drop 20% MoM in April due to a cut in production to 10,000 units per month from 13,000 per month normally. Number of shifts was cut to one from two. Mitsubishi said its local production in Indonesia needs 40% imported components, mainly from Japan.

· Toyota’s main dealer Auto 2000 also expects sales in April to drop 20% from March’s 26,000 units. Auto 2000 also stated that supply of cars have dropped 30%, and expects 2Q target to be hard to achieved.

· Honda’s car sales in April are expected to drop almost 50% due to a drop in components supply in April-May, hence production is cut to one shift. CBU supply from Japan for Honda CRV and Freed has decreased.

· Previously, Astra Daihatsu is reported to have cut production by 20% and expected to last until at least June. Toyota Motor Indonesia (TMMIN) has also cut production by 50%.

· Car manufacturers are not cutting the number of employees, believing this is a temporary issue.

· We have already forecasted a 10% YoY drop in car sales this year. If monthly domestic car sales in Indonesia drops 25% from current level, then we are looking at 56,250 units sold per month, from an average of 75,000 unit sold per month in 3M11. Assuming the same amount of sales until December, then we are looking at a total car sales of 675,049 units this year, which is a 11% YoY drop.

· Key thing is pent-up demand is building, and when things recover, we are going to see a swift recovery in car sales. The upside is if recovery is sooner than expected. For Astra, every 10% recovery in car sales volume translates into 3% impact to earnings. Car penetration is at a low 4%. For long term, Astra remains a compelling consumption story for Indonesia.