The head of Indonesia's largest automobile distributor supports the government's decision to cut fuel subsidies, even though it could impact the company's revenue.
"I've always supported the fuel subsidy to be cut or at least be reduced," Prijono Sugiarto, President Director of Astra International, told CNBC's "Managing Asia." "In the medium to long term, it will [benefit] the country. If the economy is better, you can sell more cars and motorcycles."
On Monday, Indonesian President Joko Widodo unveiled an around 30 percent increase in subsidized gasoline prices to 8,500 rupiah (approximately $0.70) a liter and 36 percent increase in diesel prices to 7,500 rupiah a liter, effective immediately. As such, inflation is expected to jump two percentage points to 7.3 percent this year, according to Minister of Finance Bambang Brodjonegoro.
For the automobile industry, the weakening purchasing power of Indonesia's consumers may dent car sales. But Sugiarto, the winner of CNBC's "Asia Business Leader of the Year", isn't worried.
"There will probably be an impact, but it'll be very short term… around 2 to 3 months and the market will rebound," said the 53-year-old who assumed the top position in Astra in March 2010. "When the Indonesian government raised fuel prices back in 2005, the automobile [market] dropped by 40 percent in 2006. But don't forget, the gross domestic product (GDP) per capita was $1,500 to $1,700. Now its $3,500 per capita."