[Kabar-indonesia] Astra's new joint venture puts pressure on auto finance firms

[Joyo at aol.com]

The Jakarta Post 
Saturday, August 5, 2006

Astra's new joint venture puts pressure on auto finance firms

Andi Haswidi, The Jakarta Post, Jakarta

Indonesian automotive giant Astra International and Japan's Toyota Financial 
Services Corporation (TFSC) launched a new joint-venture consumer finance 
company in Jakarta on Friday in a move that will pile more pressure onto the 
country's existing finance companies amid tight market conditions.

With a start-up capital of Rp 2 trillion (about US$216 million), the 50-50 
joint venture, which trades under the name Toyota Astra Finance (TAF), will 
provide inclusive financing services for the purchase of all Toyota four-wheeled 
vehicles.

"The idea behind the establishment of the new consumer finance arm is to 
provide a one-stop shop for our customers. They won't have to think about finance 
issues as credit options will already be available on the spot," TA Finance 
president director Buntoro Muljono said during the official launch of the new 
company.

"We hope that within the first year, 50 percent of all Toyota credit sales 
will be made through TA Finance and that in three years time we will have 
branches in every big city in the country," Buntoro said.

Currently, the company has three offices, two in Jakarta and one in Surabaya. 
Nevertheless, its services have been available since May in hundreds of 
Toyota dealerships throughout the archipelago.

Given the large market for Toyota cars in Indonesia, the establishment of the 
new financing arm will undoubtedly threaten existing consumer finance firms.

Total Toyota sales, including passenger and commercial vehicles, reached 
about 182,767 units last year, accounting for 34 percent of the country's total 
vehicle sales -- excluding motorcycles -- which stood at 533,910 units. 
Meanwhile, Toyota sales totaled 61,806 units in the first semester of this year, 
accounting for about 40 percent of overall vehicle sales.

According to a survey by Info Bank, at least 10 consumer finance firms have 
been "incative" due to their inability to compete under current trading 
conditions, while most of the firms that are still trading have suffered sharp drops 
in earnings.

"With the entry of the new player, the competition will become even fiercer 
as most of the existing companies are struggling to survive," said consumer 
finance analyst Eko B. Supriyanto of the InfoBank research bureau.

Commenting on the continued existence of Astra's other financing arm, Astra 
Credit Companies (ACC), Buntoro said that as TAF only focused on Toyota 
products, it would compete head to head with ACC, which also provided financing for 
the purchase of other vehicles sold by Astra.

Besides Toyota, Astra also sells Daihatsu, Isuzu, Nissan and Peugeot vehicles.

As for funding, apart from relying on its share capital, the company would 
also raise funds from Japanese banks, he said. "Besides Japan, we also have the 
support of some European, American and Indonesian banks," he added. 

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Joyo Indonesia News Service
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