Motorcycle sales in Asean splutter on falling disposable incomes

Last week, EM Squared noted that the short-term outlook for auto sales in Asean was surprisingly weak given the region's strong GDP growth and a steadily expanding consumer class. Motorcycles, too, are headed for a slow year, though for different reasons.

In the first two months of 2015, motorcycle sales fell 14 per cent year on year in Indonesia, which represents 60 per cent of the Asean 5 market that also includes Malaysia, Philippines, Thailand and Vietnam. Vietnam (18 per cent) and Thailand (13 per cent) account for most of the rest, while Malaysia and the Philippines together represent just 9 per cent.

The downturn in Indonesia coincides with a 15.1 per cent drop in auto sales during the same period, making it clear that Indonesians have not simply shifted from two wheels to four.

One primary cause is the weakness of the rupiah. Since May 2013, when tighter policy at the US Federal Reserve sent emerging market currencies into a tumble, the rupiah has lost about 25 per cent of its value in dollar terms. Consumer prices for goods sensitive to international markets have risen as a result. The end of fuel subsidies under President Joko Widodo has also hurt vehicle sales, as Indonesians have not felt the benefits of plummeting global oil prices.

Consumer survey data from Asean Confidential, an FT research service, indicates that the reduced appetite for motorcycle purchases will persist at least into the third quarter. AC's Motorcycle Purchase Index, based on respondents' plans to buy a motorcycle during the next six months, fell in the first quarter in all Asean 5 countries except Vietnam.

The ubiquity of small-engined motorbikes and scooters in Indonesia, Vietnam and Thailand belies the fact that these markets have to various degrees become saturated. Just about every family that wants a motorbike has at least one, making two-wheelers an extremely easy purchase to delay when fuel prices rise or household debt burdens reduce discretionary income, as is increasingly the case in Thailand.

For this reason, motorcycle sales in these countries can be an effective indicator of discretionary income among the working class.

Japan's Honda and Yamaha dominate the Asean motorbike market and will be the most affected by slower sales. In Asean Confidential's brand survey for the 2014 fourth quarter, Honda was selected by 42 per cent of respondents who plan to buy a motorcycle in the next year, and Yamaha by 28 per cent.

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