|
|
|
|
Full speed ahead for Indonesia's
auto industry
By Bill Guerin
JAKARTA - Indonesia's automotive industry
is booming. Easily obtainable credit and low
interest rates, coupled with a strong increase in
consumer lending by banks and an abundance of new,
low-priced models assembled locally, have fueled a
car boom that shows no signs of slowing down.
Figures from Gaikindo (the Association of
Indonesian Automotive Manufacturers) show that
around 483,000 cars were sold in 2004, up 36% on
2003, with sales growing at a pace second only to
China. Indonesia is now the third-largest car
market in Southeast Asia after Thailand, where an
estimated 620,000 cars were sold, and Malaysia,
with some 485,000 cars sold last year. This year's
first-quarter car sales increased by 38.5% to
93,627 from 67,595 in 2003 and Gaikindo predicts
around 530,000 units will be sold by the end of
the year. Increased demand could see sales reach
1.3 million cars a year by 2010.
Poor
infrastructure, legal uncertainty and a lack of
tax incentives have been blamed for declining
foreign investment in the sector, but still it
remains a key pillar of the economy with
investments totaling more than US$7 billion and
generating employment of over 300,000. The economy
expanded by 5.1% last year, mainly spurred by
consumption, and is expected to continue on track,
spurring hopes of continued demand for cars.
Car manufacturers across the globe are competing
in Indonesia, but domestic manufacturers are
little more than assemblers for foreign car
makers. International players control 90% of
the market, with the rest shared by the US,
European and Korean imports, the majority from
Europe. Like several other regional markets,
Japanese manufacturers have the lion's share of
sales. In 2004, Japanese brands (Toyota,
Mitsubishi, Suzuki, Isuzu, Daihatsu, Honda,
Nissan, Hino and Mazda), either locally assembled
or imported, accounted for 81.5% of passenger-car
sales.
The homegrown automotive giant,
publicly listed PT Astra International, is 42%
owned by Singapore's Jardine Cycle and Carriage.
Astra leads the pack and last year increased its
market share to 45% from 41.5% in 2003. The
company sold over 483,000 vehicles, including
exports, and saw its net income surge to a record
high of Rp5.4 trillion ($577.54 million).
Car makers are also expanding their
existing production capacity to meet demand and
exploit the market potential from the relatively
low ratio of car ownership in the world's fourth
most populated country. Less than 1 in 35
Indonesians owns a car, compared with 1 in 14
Thais and 1 in 7 Malaysians, suggesting potential
for even more growth.
Massive regional
market
Another attraction is the opportunity presented by
the ASEAN Free Trade Area (AFTA). This was
established in January 1992 to eliminate tariff barriers
among the Southeast Asian countries and
to integrate their economies into a single
production base, creating a regional market of over
500 million people with a combined gross domestic product
(GDP) of $682.4 billion.
Under AFTA, tariffs were cut,
including those on cars, to
between 0 and 5% by 2003. Provided a car
has a minimum local content of 40% from any Association of
Southeast Asian Nations (ASEAN) country, a car maker has
to pay just 5% duty when exporting to member countries
of the grouping. Kuala Lumpur, however, won
a delay and was allowed to maintain protective tariffs
on automobile imports until this year to protect
its national auto maker, Perusahaan
Otomobil Nasional (Proton).
Proton, despite
having left an unimpressive footprint in Indonesia's
market in the mid-1990s, is moving south again
to target not only the domestic market but also
to export. A few years ago, the Proton Saga model,
well past its sell-by date, attracted only taxi
fleet operators. Proton is Southeast Asia's biggest
car maker and faces intensifying
competition and limited opportunities for volume
growth at home. The company is due to start
cranking up its Indonesian assembly lines by the
end of this month. Proton's plant, at the Cikarang
industrial park some 50 kilometers east of
Jakarta, has a production capacity of 50,000 units
per year, but annual production is projected at
8,000 units initially.
It will assemble
CKD (completely knocked down) units of the Proton
Wira compact sedan and the Gen2, but may add the
Arena model at a later date. The
Indonesian-assembled Protons will be more
competitively priced than the Malaysian-made units
and will qualify for tax breaks under AFTA. Proton
is likely to export assembled vehicles to Thailand
and the Philippines.
Japanese
dominance
Its continuous presence and long experience
in sales and distribution help explain why
Japanese auto giant Toyota has done so well in Indonesia.
In February 2005, Toyota had a 31.7% market
share with 13,899 vehicles sold, compared with
10,717 units sold the same period last year. It
plans to increase annual production capacity of its
Innovative International Multipurpose Vehicle (IMV),
the Toyota Innova MPV, from 70,000 vehicles to
around 100,000 vehicles by the end of this year.
The expansion will set it back around $40 million.
In 2006, Daihatsu will invest around $10 million
to increase its annual production capacity for
the hot seller Xenia/Avanza, jointly developed with
Toyota, from 78,000 vehicles to 114,000 vehicles.
The model sells as the Xenia under the Daihatsu
brand and as the Avanza under the Toyota brand.
Nissan plans to more than triple its annual capacity
in Indonesia by 2007, from 12,000 units to
40,000, and plans to mass-produce a global car in
Indonesia and other plants in Asia for markets in
Asia, the Middle East and Central and South
America. Figures released by PT Indomobil, one of
the country's largest automobile distributors,
show that sales of Nissan cars, only one of the 12
car brands marketed by Indomobil, accounted for
12.5% of the company's 96,000 vehicles sold last
year.
Indomobil also distributes for
Suzuki, whose cars accounted for 83% of total
sales. PT Indomobil Suzuki International (ISI),
Suzuki's Indonesian car manufacturing joint
venture, last month launched the export campaign
for its new APV multipurpose, compact minivan. The
vehicle jointly developed by ISI and Suzuki went
on sale in Indonesia in September 2004. Monthly
domestic sales volumes have since averaged at
around 2,400 units. There are plans to make
Indonesia the production base for worldwide sales
of the vehicle, according to Industry Minister
Andung Nitimihardja.
South Korean's
Hyundai and KIA are also considering setting up a
production base in Southeast Asia to take
advantage of AFTA, though there has been no
confirmation yet that Indonesia has been
shortlisted. Honda assembles the CR-V sports
utility vehicle (SUV), Stream MPV and Jazz compact
cars in Indonesia. The Stream is exported to
Thailand. Similarly, BMW assembles most of its 3
Series and 5 Series sedans in Indonesia and
exports the BMW 530i to Thailand.
Odd
man out
It's easy to see why the car
makers in Asia are optimistic. Emerging markets
present the main opportunity for long-term car
sales growth and will boost the global car market
to over 60 million units by 2009. Prospects for
car market growth in Asia are particularly
positive and the Pacific Rim countries are forecast to
make an additional 5 million units for the world
market by 2009. China alone accounts for around 80%
of that increase and annual car sales there
are expected to top 6 million units by the end of
the forecast period.
None
of the member states has a market big
enough to give the economies of scale needed to
justify major manufacturing investments. But the complete
liberalization of the region's automotive
sector by the full-scale implementation of
AFTA cranks up the stakes. ASEAN states have
agreed to remove import duties altogether by 2010
for the five founding members of the grouping
(Indonesia, Malaysia, the Philippines, Thailand and
Singapore) and by 2015, for new
members Brunei, Vietnam, Laos, Cambodia and Myanmar as well.
As
trade
barriers tumble and car makers shut down
redundant plants to move production to where it
can be done most profitably, the ASEAN market,
with 10 countries and around 511 million
consumers, becomes even more appealing. Ford has
production facilities in Malaysia, Thailand,
Vietnam and the Philippines but only has a
distribution network in Indonesia. It focuses on
sales and after-sales service. Ford (Thailand)
exported 20,000 vehicles to 130 countries from the
Kingdom, mainly as a result of the AFTA
agreements.
Stephen Biegun, vice president
of the Detroit-based auto giant's international
government affairs division said, "We are betting
on the ASEAN Free Trade Area model and also on
trade relations among ASEAN nations. We are the
biggest cheerleader for ASEAN economic integration
because we are the biggest beneficiary," admitted
Biegun. This will herald stiffer competition for
existing players, but Indonesians who can afford a
car will still have plenty of choice for a long
time to come.
Bill Guerin, a
Jakarta correspondent for Asia Times Online since
2000, has worked in Indonesia for 19 years as a
journalist. He has been published by the BBC on
East Timor and specializes in business/economic
and political analysis in Indonesia.
(Copyright 2005 Asia Times Online Ltd. All
rights reserved. Please contact us for information
on sales, syndication and republishing.) |
|
|
|
|
|
|
|
 |
|
|
|
|
|
All material on this
website is copyright and may not be republished in any form without written
permission.
© Copyright 1999 - 2005 Asia Times
Online Ltd.
|
|
Head
Office: Rm 202, Hau Fook Mansion, No. 8 Hau Fook St., Kowloon, Hong
Kong
Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
|
|
|
|
