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Jun 15, 2016 08:54:17
Competition in 7-seater LCGC to Intensify as Astra and SGM-Wuling Join the Fray
Astra International ($ASII)

 
·         Astra will introduce 7-seater LCGC in July – As we have highlighted several times, Astra is on schedule for a July introduction of Toyota Calya, a 7-seater LCGC. Currently, Datsun Go+ is the only LCGC offering a 7-seater. Thus we believe Astra will gain some market share with the introduction of Toyota Calya. Currently LCGCs account for c. 13% of total national volume and 20% of Astra's 4W volume.

·         SAIC-Wuling to introduce 2 LCGCs in 2H17 following plant completion in July 2017 – The US$700m manufacturing facility in Bekasi has reached 50% completion and Baojun 730 and Wuling Hongguang will be introduced shortly after completion of the plant (capacity of 150k units/year). Both are 7-seaters in LCGC categories and they will be priced at around US$5,000/unit, lower than the cheapest LCGC which is currently priced at US$7,520/unit.

·         SGM-Wuling is currently the only Chinese player making significant investments – Their plant is located in Kota Deltamas with production facilities over 60 hectares and they expect to build more than 50 dealerships, spare parts and maintenance service centers across Indonesia over the next two years with the majority located in the greater Jakarta area. They have introduced both Baojun and Hongguang in China and both have been selling well. SGM-Wuling sold 882k cars in 5M16, more than double the Indonesian car volume.

·         We expect better 4W and 2W numbers in 2H16 following tax amnesty implementation – We believe a tax amnesty should boost 4W and 2W sales as buyers will no longer hesitate to purchase 4W while improvement in GDP growth should help 2W sales. The introduction of a 7-seater LCGC for Astra should be seen as a positive catalyst and we maintain our Buy call on the stock. SGM-Wuling will be a serious competitor in LCGC, but more so from 2018.

Bull
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