27 March 2013 Asia Pacific/Indonesia&Japan Equity Research Auto & Auto Parts sector Connections Series Implications of Indonesia Figure 1: LCGC implementation increasing demand for automobiles The Credit Suisse Connections Series leverages our exceptional breadth of macro and micro research to deliver incisive cross-sector and cross-border thematic insights for our clients. Research Analysts Issei Takahashi 81 3 4550 7884 Source: Credit Suisse estimates
[email protected] ■ Implications of Indonesia: Our autos team visited several Japanese OEM Masahiro Akita 81 3 4550 7361 bases in Indonesia that are joint ventures with Astra International or
[email protected] Indomobil. In this report, we review our outlook for the auto industry in Teddy Oetomo Indonesia and present feedback from our recent visit. 62 21 2553 7911
[email protected] ■ Key points: Dian Haryokusumo (1) Automobiles: “Low Cost Green Car” (LCGC) program to be 62 21 255 37974 implemented from as early as May, and we expect this to lead to a rise
[email protected] in demand. (2) Motorcycles: Margins likely a challenge for all makers as growth in motorcycle demand starts to peak out over the medium term and labor costs rise. (3) Trucks: A recovery in dump truck demand remains a way3 off, but we expect overall demand to rise 10–15% YoY in FY3/14 ■ Stock calls: We reiterate our OUTPERFORM ratings on Astra International (ASII.JK, OUTPERFORM, TP Rp9,502), Daihatsu Motors (7262, OUTPERFORM, TP ¥2,310), Hino Motor (7205, OUTPERFORM, TP ¥1,270 for the access they provide to Indonesia’s motorization.