Dominant Astra may face cannibalisation

ASTRA INTERNATIONAL has revamped its dominance in the Indonesian 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 per cent year on year. The growth was considered stellar compared with national sales of four-wheel vehicles, which rose by no more than 2.5 per cent year on year. The increase was mainly generated by Astra’s Toyota and Daihatsu brands, with sales of their newly launched Calya-Sigra compact minivans remaining firm. 
Hence Astra’s market share has increased significantly to 54 per cent from 50 per cent 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. 
According to a recent research report by Mandiri Sekuritas, the impact of cannibalisation from the newly launched Cayla to the existing Agya has been widely anticipated. However, Astra’s policy continues to hamper the sales of non-LCGCs such as the Toyota Avanza minivan, leading to a car-price decline of between 9 and 10 per cent. 
The Toyota Cayla – along with its low-end twin Daihatsu Sigra – was launched in early August. The seven-seater 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 cannibalisation is a potential risk. Nomura Indonesia in a letter sent to clients on October 18 also warned of some risks, such as car oversupply or potential cannibalisation by new LCGC models. 
Meanwhile, CIMB also mentioned a potential cannibalisation risk given Astra’s current product positioning. However, the risk should not materialise in the short term, as each model has its own segment.
The LCGC segment has grown continually in recent years. Astra’s models accounted for 75 per cent of the LCGC market. According to the CIMB research report, the LCGC segment had increased by 14 per cent year on year as of July and accounted for 18 per cent of total market volume. 
The figures showed a wider LCGC market share compared with its contribution of only 16 per cent to the total market volume last year in 2015.