Indonesia's 9M24 4W sales reached IDR232tn (-12% y-y), with 633k units sold (-16% y-y) at an ASP of IDR368mn (+5.5% y-y). The 4W market remains under pressure, with September sales down 9% y-y to 73k units. On the other hand, the 2W market was resilient in 9M24 with 4.3mn units sold, up 3.3% y-y.

Yet, the EV market continues to grow, with 9M24 sales surging 170% y-y to 27.5k units as more models have come within the reach of buyers, specifically after BYD (1211 HK, Buy) started selling in Indonesia. EV penetration stands at 4.3% as of 9M24. In terms of stock picks, we prefer companies that benefit from the downtrading to the 2W market and resilient used car segment. Our top picks are: ASSA IJ, AUTO IJ, MPMX IJ, and DRMA IJ (all Buy rated).

4W sales in September 2024: still challenging

4W wholesales for Sep-24 were at 73k units (-9% y-y), continuing to reflect the weak purchasing power and increasing demand for second-hand vehicles. Astra (ASII IJ, Buy) maintained its 55% market share, while Toyota (7203 JP, Neutral) retained 35%. BYD remained significantly ahead of other new entrants, holding a 3.5% market share despite a slight m-m drop. The EV segment remains a key driver, with September EV sales surging 125% y-y to 4.3k units driven by subsidies, more sub-IDR600mn models, and Jakarta's odd-even traffic policy. At 4.3% in September, EV penetration eased from the 5.3% in August.

2W market faring better — signs of downtrading?

Indeed, the 2W market is faring better than the 4W market which we deem as a sign of downtrading (see our report here). The 2W market was resilient, with overall sales of 4.3mn units for 9M24, up 3.3% y-y. In September, 529k units were sold, up 3.7% y-y, driven by the high-end segment as some consumers moved to premium motorcycles from Low-Cost Green Car (LCGC), in our view. In contrast, the lower-end category still showed a decline, a reflection of the downtrading trend seen across the automotive space, in our view.

Key potential beneficiaries: ASSA IJ, AUTO IJ, MPMX IJ, and DRMA IJ

We believe some companies are at a strategic position to continue benefiting from the downtrading in the automotive sector. Our views on them are as follows:

● ASSA IJ (proxy of ASLC IJ [Not rated]): Poised to gain from the increasing second-hand car market, where more consumers are shifting to purchase used vehicles.

● AUTO IJ: Likely to benefit from higher demand for replacement spare parts, driven by the maintenance needs of used cars; hence, it will add more heft to its trading segment.

● MPMX IJ: Could benefit from steady demand for motorcycles and further supported by good dividend potential as the leading motorcycle retailer in Indonesia.

● DRMA IJ: Interesting case, as the brand has been visibly gaining market share in both 2W and 4W segments, along with the ongoing market dynamics.

Fig. 3: 4W wholesales 9M trend — volume down but average price continues to climb

Fig. 4: 4W retail sales and trends

Fig. 5: 4W market share and trends

Fig. 6: 2W sales

Fig. 7: EV ASP and sales: subsequent EV launches at cheaper price

Fig. 8: EV monthly and annual sales: strong growth trend

Fig. 9: 4W wholesales market share (3MMA): Astra stable at 52-58%

Fig. 10: EV brands market share: BYD controls 49% of EV market

Fig. 11: EV market share by model: M6 as a 7-seater MPV has gained strong traction despite only starting two months back

INVESTMENT RATINGS
A rating of ‘Buy’, indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of ‘Neutral’, indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of ‘Reduce’, indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of ‘Suspended’, indicates that the rating, target price, and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies that are labelled as ‘Not Rated’ or ‘No Rating’ are not in regular research coverage. Benchmark is Indonesia Composite Index (‘IDX Composite’). A ‘Target Price’, if discussed, indicates the analyst’s forecast for the share price with a 12-month time horizon, reflecting in part of the analyst’s estimates for the company’s earnings, and may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market in general. 

GENERAL DISCLOSURE/DISCLAIMER 
This report is prepared by PT Verdhana Sekuritas Indonesia (“PTVSI”) a securities company registered in Indonesia, supervised by Indonesia Financial Services Authority (OJK) and a member of the Indonesia Stock Exchange (IDX).

This report is intended for client of PTVSI only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of PTVSI.

The research set out in this report is based on information obtained from sources believed to be reliable, but PTVSI do not make any representation or warranty as to its accuracy, completeness or correctness. The information in this report is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. Any information, valuations, opinions, estimates, forecasts, ratings or targets herein constitutes a judgment as of the date of this report is published, and there is no assurance that future results or events will be consistent.

This report is not to be construed as an offer or a solicitation of an offer to buy or sell any securities or financial products. PTVSI and its associates, its directors, and/or its employees may from time to time have interests in the securities mentioned in this report or it may or will engage in any securities transaction or other capital market services for the company (companies) mentioned herein.

ANALYST CERTIFICATION
The research analyst primarily responsible for the content of this report and certifies that the views about the companies including their securities expressed in this report accurately reflect his/her personal views.  The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.

RESTRICTIONS ON DISTRIBUTION

By accepting this report, the recipient hereof represents and warrants that you are entitled to receive such report in accordance with the restrictions and agrees to be bound by the limitations contained herein. Neither this report nor any copy hereof may be distributed except in compliance with applicable Indonesian capital market laws and regulations. 

Jupriadi Tan (jupriadi.tan@verdhana.id) 

Gerald Hugo (gerald.hugo@verdhana.id)