Fuel price hike will stunt Indonesian auto sales: industry head

Indonesian government plans to raise the price of fuel at the pump will force down auto sales in Southeast Asia's biggest economy, the head of the automotive industry association said Wednesday.

"There will be a significant decrease (in sales) if the fuel price hike is followed by higher inflation and central bank interest rates," Bambang Trisulo told AFP.

Indonesian officials have announced plans to raise the price of premium gasoline to as much as 6,000 rupiah (65 cents) per litre, up 30 percent from the current 4,500 rupiah.

Although no new price has been set, many analysts say the expected 20-30 percent jump will lead to a spike in inflation and slow down Indonesia's overall growth for the year.

Trisulo said the association was estimating auto sales -- not including motorcycles -- would reach 400,000 units by the end of this year, significantly down from earlier 2008 sales estimates of 520,000 units.

Even with talk of a fuel price hike weighing on market sentiment, Indonesians were still buying new cars at an astonishing rate, according to figures released Wednesday by the country's biggest car dealer.

Sales of new cars in Indonesia rose 47 percent to 51,639 units in April from a year earlier, according to the figures released by PT Toyota Astra Motor, a joint venture between PT Astra International and Japan's Toyota Motor Corp.

Sales of Toyota vehicles rose 48 percent to 17,913 for the month, while total car sales for the first four months were up 56.6 percent to 187,242, it said.

Industry officials have said that the lower interest rate environment early this year boosted demand for new cars. Most of the new cars purchased in Indonesia are funded by loans.

But in addition to the looming fuel price increase, demand is expected to be hit by the central bank's decision last week to raise its benchmark rate by 25 basis points to 8.25 percent to rein in inflation.

It was the first rate hike in more than two years.

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