automotive - flanders investment and trade€¦ · 5.8%, another sales record was set in the...
TRANSCRIPT
www.eibn.org
EIBN Sector Reports
Automotive
2014
www.eibn.org 2
Contents
Methodology ........................................................................................................................................................ 3
Executive Summary............................................................................................................................................. 4
I. The Indonesian Automotive Market in the ASEAN context ......................................................................... 6
Indonesia: A Gateway to the ASEAN Automotive Market ........................................................................... 6
1.1. ASEAN Sales Market.............................................................................................................................. 6
1.2. ASEAN Production market ..................................................................................................................... 8
1.3. Trade flows of ASEAN states in the automotive sector ........................................................................ 10
II. The Indonesian Automotive Market ............................................................................................................. 12
2.1. Indonesia’s National Automotive Policy .............................................................................................. 12
2.2. Market Structure Overview .................................................................................................................... 15
2.2.1. Development of the Vehicle Industry in Indonesia ............................................................................ 16
2.2.2. Location of the Automotive Industry .................................................................................................. 20
2.3. Characteristics of the Automotive Components Industry in Indonesia ........................................... 21
2.4. The Indonesia Car Market by Car Type: the Domination of the MPV sector .................................... 24
2.5. Key players: the Predominance of the Japanese industry ................................................................ 26
III. Trends and remaining challenges .............................................................................................................. 31
3.1. Current trends: Growing Interest and Investment in Indonesia ........................................................ 31
3.1.1. Key Factors for market growth .......................................................................................................... 34
3.1.2. Growth potential and key drivers of the sales market ....................................................................... 34
3.1.3. Expected changes in the domestic market’s demand ....................................................................... 36
3.1.4. ASEAN prospects .............................................................................................................................. 38
3.2. Remaining challenges ............................................................................................................................ 38
Relevant contacts .............................................................................................................................................. 43
Abbreviations ..................................................................................................................................................... 48
Trade Fairs in Indonesia ................................................................................................................................... 49
References ......................................................................................................................................................... 50
Disclaimer ........................................................................................................................................................... 52
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Methodology
This market study aims to highlight the potential of the automotive sector in the Indonesian market. It is
an overview of the business opportunities for European companies and covers the characteristics of the
sector, the structure of the market, the key players, future trends and existing challenges.
In the preparation of this report, EIBN made use of a variety of sources and methods, which are briefly
explained here. Information regarding the automotive industry was sourced from interviews with industry
experts and publicly available sources published by several entities.
Where the latest official data was not yet publicly available, we reverted to the latest data on hand. For
example, for data and figures still unavailable for 2013 and 2014, the data and figures for 2012 and 2011
were used. Any data included has been mentioned in the report.
Executive Summary
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Executive Summary
For the first time in Indonesian history, more than 1 million cars were sold in 2012, exceeding all
estimates (a rise of 25% compared to 2011). In 2013, despite a slight slowdown in real GDP growth to
5.8%, another sales record was set in the Indonesian car market with a total of 1,229,901 units sold in
Indonesia (115,921 in September alone). Analysts expect sales to grow even further in 2014 and
onwards.
The rapid expansion of the automotive market is sustained by the positive economic environment the
country is presently experiencing. Indonesia is the fourth most populated country on earth and is
currently living through a period of optimism and steep consumption growth. Its population of around 250
million people (43% of whom are under 25 years) still displays a very low level of car ownership (only
around 80 in every 1000 people in Indonesia own a car, compared to 123 in Thailand and 300 in
Malaysia). Its remarkable economic growth (6% on average between 2007 and 2013) is sustained by an
abundant and cost-efficient labor force. Thus, the recent expansion of the automotive industry is often
seen as the beginning of a promising period for the sector in Indonesia. Indeed, much of its potential is in
fact still to be unleashed, rendering Indonesia one of the most promising auto markets to look into in the
upcoming years. This is so in spite of some factors that might hamper future growth. Among them are
increased fuel prices due to the phasing out of subsidies and increased interest rates (around 70% of all
cars are bought on credit). Nevertheless, growth predictions of the market still vary between a formidable
7% and 15% in the coming years, with an expected 1,300,000 units sold in 2014.
The attractiveness of the Indonesian market has not escaped global players in the automotive industry,
who continue to heavily invest in the country. Investments are flowing in from both already established
companies and newcomers. Besides Japanese car makers aiming to secure their market share,
European, American and other Asian (notably South Korean and Indian) car and automobile
components manufacturers (e.g. tire companies) have contributed to an estimated $US3.3bn investment
volume in Indonesia over the last two years. The bulk of the industry is concentrated on the island of
Java, mostly in the Jakarta area.
With a market share of over 90%, Japanese car makers (especially Toyota, with a 35% market share)
are the key players in the sector. The best-selling car in the past eight years has been the Toyota
Avanza, an example of the dominance of seven-seating Multi Purpose Vehicles (MPV) in attracting the
most buyers in Indonesia. However, boosted by massive investments, the automotive landscape in
Indonesia is bound to change with the increased demand for SUVs and luxury cars, as well as higher
market penetration by European and other foreign car makers. Another decisive factor expected to
change the market is the spread of integrated transportation solutions in car manufacturing. The trend is
expected to enrich cars as an end-product, integrating technology such as smart phones, dedicated
application stores and innovative HMI (human-machine interface) concepts (bringing connectivity to
cars).
However, it is expected that the so-called “low cost green car” (LCGC) regulation will be the factor that
will inspire the most significant changes in the Indonesian automotive landscape. Issued by the
Indonesian government in 2013, it exempts cars that fulfill certain requirements in the area of production
location, fuel efficiency and price from the luxury tax. The price advantage the new law generates for the
LCGC industries is widely expected to change the market. This segment is estimated to have a deep
Executive Summary
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future impact on consumption, especially in the lower sector and among first-time car buyers and those
switching from motorcycles to cars. This development can be further enhanced through the planned
phase-outs of fuel subsidies and the expected general awareness increase regarding fuel efficiency. In
the future, the LCGC segment is expected to grow to 300,000 units by 2015.
Automotive companies have not been overlooking the potential of the future LCGC market in Indonesia
and have been active in investing in the segment. This correlation has been pointed out to be potentially
decisive for the government’s plan to transform the country into a production base for cars. The strategy
of the Indonesian government is divided into three components: 1) multiplying the automotive
manufacturing facilities; 2) encouraging the expansion of its local components industry; 3) developing a
domestic production base for environmentally friendly and low cost cars. Traditionally, the car industry in
Indonesia has been confined to the assembly of imported car products. This might change with
increased investment in the country by car makers and component manufacturers. Ultimately, Indonesia
is becoming increasingly qualified to host a more complete supply chain. Beyond the present positive
conjuncture, a still relatively cheap and young labor force remains available, alongside an abundance of
natural resources and the proximity to the giant Indian and Chinese markets, in both geographic terms
and in their relatively close economic relationship.
Furthermore, Indonesia is embedded within the Association of Southeast Asian Nations (ASEAN) market
with its population of 600 million. With the planned establishment of an ASEAN Economic Community
(AEC) in 2015, the region is expected to witness increased trade flows and experience greater
competition for firms to invest in their countries. In the past, Indonesia has often lagged behind other
ASEAN partners (Thailand and Malaysia) who offered better infrastructure, lower logistics costs and
greater fiscal incentives. But while the relationship between Indonesia and other ASEAN states is often
described as a competitive one, it should instead be viewed as a partnership. Whereas automotive
production in Thailand concentrates on commercial vehicles (such as the 1-ton pickup truck), the
automotive production in Indonesia very much focuses on passenger cars (around 70% of the total
production). To date, Indonesia is one of Thailand's closest trading partners in the automotive industry.
In the longer term, the creation of the AEC and the harmonization of the technical standards (with the
upcoming ASEAN Automotive Mutual Recognition Agreement) will facilitate the transfer of goods
between ASEAN Member States. This can transform the region into one of the highest growth markets
for the automotive industry in Asia (together with China and India). Whether or not Indonesia will
succeed in developing into a hub for some segments (notably the LCGC sector) will be determined by
factors such as its infrastructure and wage level development. However, political turmoil in Thailand in
2013 and 2014 may divert investments to Indonesia, thus enhancing the current expansion of the car
manufacturing industry in the country.
Overall, it is expected that market size, low car penetration, new consumption patterns and its
strategic position in ASEAN will continue to attract global car makers to Indonesia. However, it
remains the case that doing business in the automotive sector in Indonesia can be challenging due
to various factors that still need to be addressed. Among these are burdensome administrative
procedures, technical regulations, high import duties, poor infrastructure, a lack of testing facilities
and poor fiscal incentives—all have slowed down the development of the industry.
I. The Indonesian automotive market in the ASEAN context
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I. The Indonesian Automotive Market in the ASEAN context
Indonesia: A Gateway to the ASEAN Automotive Market
In recent decades, the ASEAN region has witnessed strong and relatively constant economic growth, even
during the recent worldwide economic slowdown. Home to more than 600 million people and with a
combined GDP of US$2 trillion, the ASEAN market has become increasingly attractive to European
companies willing to diversify their exports or searching for new production bases. This appears to be
unsurprising, considering the forecasts that place ASEAN as the 5th largest automotive market by 2019
(behind China, the US, India and Brazil). The European Union (EU) and ASEAN are inevitably strong trade
partners, representing together a market of one billion people. With exports from ASEAN into the EU28
worth more than US$122 billion in 2013, the EU28 represented ASEAN’s third largest export partner behind
China and Japan. Furthermore, with a total FDI flow of more than US$2.3 billion from the EU28 into ASEAN
in 2012, EU companies represent the biggest investor in the region.
ASEAN’s automotive market recovered rapidly from the global financial crisis. Countries such as Thailand,
the Philippines, Indonesia and Malaysia are expected to be some of the highest-growing markets for the
automotive sector due to various provisions of Free Trade Agreements. From a long-term perspective,
cheap financing, rising income levels and infrastructure development will drive growth in the majority of the
ASEAN countries.
Moreover, the creation of the ASEAN Economic Community (AEC) by 2015 would further transform ASEAN
as a single market, one of the biggest growth markets for the automotive industry in Asia (together with
China and India). The economic integration of ASEAN will benefit global players by making the region more
competitive, encouraging economies of scale, lower costs and increased efficiency. Already under the
AFTA (ASEAN Free Trade Area) with its Common Effective Preferential Tariff (CEPT), all internal tariffs on
manufactured products have been lowered to 0-5 %.
1.1. ASEAN Sales Market
The figure below highlights the dynamics of the ASEAN domestic automotive market.
I. The Indonesian automotive market in the ASEAN context
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Figure 1: Development of ASEAN sales market
Notes:
2009: Global financial crisis
2011: Flood disaster in Thailand
Motor vehicles include commercial & passenger vehicles. No data available for Laos, Cambodia & Burma
Source: ASEAN Automotive Federation, 20131
As shown above, the ASEAN automotive market has been exhibiting high performance levels and grew
almost constantly over the last years. Even the global financial crisis of 2008 had only a minor impact on
the sales volume in 2009, after which the ASEAN market gained momentum again. Furthermore, it is
worthy to note the strong growth rates that occurred in 2012 and 2013, in spite of the slow removal of fuel
subsidies and the introduction of vehicle taxes designed to discourage people from buying more than one
car per household. The recent numbers are indeed a call for confidence in the future of the automotive
market in ASEAN. The sheer growth of the population, especially in Indonesia, may help explain recent
performance. However, it is clear that the main reason for sales developments in 2012 and 2013, which
exceeded all forecasts, is primarily a switch to cars from motorcycles, due to a rise in income level and the
emergence of a growing middle-class. However, it is clear that much of this trend stems from an adjustment
of the still rather low average level of car ownership to the present economic environment. In 2012, only 80
per 1,000 people owned a car in Indonesia, while in Thailand and Malaysia the number was 123 and 300,
respectively. The difference, for instance, to Italy, where there were some 670 cars per 1000 people in
2010, suggests that the positive economic environment in these markets may continue to narrow the car
ownership gap in the future.
1 ASEAN Automotive Federation, Statistics 2013. Available at: www.asean-autofed.com/statistics.html
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
2006 2007 2008 2009 2010 2011 2012 2013
ASEAN motor vehicles sales volume (units sold)
Vietnam
Brunei
Philippines
Singapore
Malaysia
Thailand
Indonesia
I. The Indonesian automotive market in the ASEAN context
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An important element to be mentioned is that European automotive producers still have a relatively small
market share in ASEAN (approximately 2-3%). In comparison, the share of Japanese car makers in the
local automotive production and new vehicle sales volumes in Indonesia and Thailand are both over 80%.
The same trend is found in the smaller ASEAN countries. The strong presence of Japanese companies
stems primarily from the strong economic links between Japan and each individual ASEAN member state.
These are further ensured by various Economic Partnership Agreements, which facilitate the entry of
Japanese firms into those markets. In turn, Malaysia is the only ASEAN country with an national
manufacturer of significant volume.
ASEAN’s largest sales markets are Indonesia, Thailand and Malaysia. In 2013, these countries were the
recipients of around 90% of all vehicles sold in the region. Among the “big three”, Malaysia is presently the
least dynamic, displaying highly stable sales rates at around 600,000 vehicles sold per year. In contrast,
both Thailand and Indonesia have been growing in sales volume, contributing strongly to the overall
expansion of the ASEAN market. In 2012, Indonesia exceeded the 1 million vehicle barrier for the first time.
In 2013, its sales increased even further to reach 1,229,901 units, almost overtaking Thailand, which then
registered a volume of 1,330,672.
1.2. ASEAN Production market
When looking at the production side of the ASEAN market, Indonesia, Thailand and Malaysia are also the
most important players in ASEAN, as can be seen in the following figures.
Figure 2: Development of ASEAN motor vehicle production
Notes: 2009: Global financial crisis
2011: Flood disaster in Thailand
Motor vehicles include commercial & passenger vehicles. No data available for Brunei, Singapore, Laos,
Cambodia and Burma. Data for Philippines only available as of 2008.
Source: ASEAN Automotive federation, 20132
2 ASEAN Automotive Federation, Statistics 2013. Available at: www.asean-autofed.com/statistics.html
0
500000
1000000
1500000
2000000
2500000
3000000
3500000
4000000
4500000
2006 2007 2008 2009 2010 2011 2012 2013
ASEAN motor vehicle production
Phillipines
Vietnam
Malaysia
Thailand
Indonesia
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In 2013, Thailand produced 2,457,057 motor vehicles compared, to 999,378 in 2009, thus increasing its
output over time by 246%. However, the development of the Indonesian automotive sector is no less
impressive, having grown by 260% in the same period (from 464,816 units in 2009, to 1,208,211 in 2013).
Malaysia saw a far smaller increase, with output rising 23% between 2009 and 2013 (from 489,269 vehicles
to 601,407 vehicles produced).
All three countries have taken advantage of various governments schemes to promote a thriving
automotive industry and accounted for 90% of the motor vehicle output (passenger vehicles and trucks) in
ASEAN in 2013.
The remaining ASEAN countries, which are home to 43% of ASEAN’s population, lag far behind (both sales
and production-wise). ASEAN is a very diverse region in terms of demographics, infrastructure and
economic progress. The size of the individual markets and the importance of cars in the domestic context
have a strong role to play in the evolution of domestic automotive sectors. In addition, Southeast Asian
countries’ automotive markets still allocate a significant share to trucks, which represent approximately 46%
of the overall vehicle production and around 36% of the total volume sales.
When looking at Indonesia, Thailand and Malaysia, competition has been noted to be somewhat healthy.
Contrary to forecasts that predicted intense direct competition, the tendency has been one of
complementarity and specialization, which has inspired industries to develop different production niches.
Thailand, with the impressive development of its automotive industry, has joined China and India as primary
production base for vehicles (excluding motorcycles). Established very early as one of the key sectors of
the Thai economy, the country’s automotive industry managed to differentiate itself from the Malaysian and
Chinese industries by shifting its specialization from cars (as done in Malaysia) to truck production. Inspired
by government promotion programs, Thailand’s automotive industry has specialized in the production of
one-ton pick-up trucks and international energy-efficient and safety standard vehicles. This focus is also
explained as an effort to position the country’s automotive-related products higher along the value chain
(compared to Chinese products).
Already representing some 10% of the overall GDP of the Thai economy, the Thai automotive sector
remains a key growth priority for the government, as stipulated in its ambitious master plan for the
automotive industry for the years 2012-2016. The plan includes a set of guidelines to serve as standards for
the country’s automotive industry development; taking into account the sector’s global technological trends
and consumer and private sector inputs. Mainly, it highlights the need for a development of R&D centers,
increased capabilities of the labor force and a special focus on environmental and safety standards.
Conversely, Malaysia’s industry produces mainly medium and large passenger cars and is the only country
within ASEAN that produces its own brands, Proton and Perdoa. The latter are heavily supported by the
government, which has been rather protectionist regarding its automotive industry. In addition, Malaysia is
developing to become a regional hub for hybrid and electrical vehicles, as shown by the recent steep
increase of sales regarding the segment (up 84% between 2010 and 2012). Beyond this recent trend,
Malaysia remains an important centre for major automotive components manufacturers.
Indonesia has specialized in the production of multi-purpose vehicles and small passenger cars. In general,
passenger cars represent around 70% of the country’s overall production. It should also be noted that,
while Malaysia has focused on the production of components and cars, vehicles in Indonesia are mostly
merely assembled from imported car components.
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1.3. Trade flows of ASEAN states in the automotive sector
The different specializations of the countries are also reflected in trade flows:
Table 1: Comparison of most exported products within the automotive sector 2013 (in € billion)
Most exported product within automotive
sector
2nd
most exported product within
automotive sector
3rd
most exported product within
automotive sector
Total volume
Thailand
trucks, motor vehicles for the transport of goods
8.0
cars including station wagon
5.0
Parts & access of motor vehicles
4.8
19.7
Indonesia
cars including station wagon
1,6
parts & access of motor vehicles’
1.0
Parts and accessories of
motorcycles & cycles
330
3.4
Malaysia
Parts & access of motor vehicles’
0.7
parts and accessories of motorcycles &
cycles’
0.4
Cars incl. station wagon
0.2
1.4
Note: Products correspond to HS code 8703XX in the category “Cars (incl. station wagon)”
Values given in billion EUR
Source: Trademaps3
These figures clearly show that the countries focus their production differently, as discussed above. Hence,
Thailand’s production is mostly focused on trucks, Malaysia mainly produces and exports vehicle parts,
while Indonesia is majorly dedicated to assembling cars. Rather than being in competition, the three
countries’ automotive sectors have developed within specific production niches and can be considered
complementary. Moreover, the figures also show that both Indonesia and Malaysia are still considerably
smaller in terms of automotive industry exports.
When delving into the trade flows in the automotive sector, it is clear that, generally, the main trading
partners for the three countries are in fact Indonesia, Malaysia and Thailand, along with other ASEN
neighbors.
3 Trademaps. Data retrieved on 16.06.2013. Available at: www.trademaps.org
I. The Indonesian automotive market in the ASEAN context
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Table 2: Trading partners in the automotive sector (in billion EUR), 2013
Five biggest export countries Total export volume in
automotive sector
Th
ai
lan
d Australia
3.4
Indonesia
2.0
Malaysia
1.2
Saudi Arabia
1.1
Japan
1.0
19.7
Ind
o
nesi
a
Thailand
0.6
Saudi Arabia
0.5
Philippines
0.4
Japan
0.4
Malaysia
0.3
3.4
Mal
aysi
a
Thailand
0.3
Indonesia
0.2
Singapore
0.1
China
<0.1
Germany
<0.1
1.4
Note: Exports include only products under HS code 8703 “Cars (incl. station wagon)”, values are given for year 2013
in € billion.
Source: Trademaps4
For both Malaysia and Indonesia, Thailand is the most important export market. As for Indonesia, the main
export destinations for its automotive products are Saudi Arabia, the Philippines, Japan and Malaysia. For
both Malaysia and Indonesia, ASEAN partners are still highly importan. Thailand has managed to diversify
its exports beyond ASEAN’s borders. One main factor is its focus on production in accordance with
international automotive standards, allowing it to develop Australia as its biggest export market is Australia,
followed by Indonesia and Malaysia.
4 Trademaps. Data retrieved on 16.06.2013. Available at: www.trademaps.org
II. The Indonesian automotive market
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II. The Indonesian Automotive Market
2.1. Indonesia’s National Automotive Policy
Over the last 40 years, the Indonesian government has shown continued commitment towards the
advancement of its local automotive manufacturing industry and often introduced protective measures to
motivate technology transfer. Towards this end, the import of CBUs (complete build-up, cars entirely
assembled abroad) was banned in 1973. In 1996, the National Car Program, as an extension of its 1993
predecessor, presented new incentives for locally made cars. In general, the measures stipulated that in
order to qualify for import duty exemption, cars had to be produced with 20%, 40% and 60% of local
content in their first, second and third years of production respectively. However, in 1999, in recognition that
the measure had not produced the desired motivation on the national car-producing industry, the import of
CBUs was allowed again.
Since 2000, the government of Indonesia has heavily incentivized the local component industry, which in
turn established numerous partnerships with Japanese manufacturers. In 2006, the Ministry of Industry
announced the abolition of import tariffs on car components and spare parts for units destined for export.
This was followed by further regulation passed by the Ministry of Finance in 2007, which also exempted raw
materials for component production. However, despite those incentives, export of components has been
heavily affected since 2008. The Ministry of Industry recorded component exports at US$2.01 billion in
2008, dropping to US$1.12 billion in 2009 and then declining further to US$45.2 million in 2010. This
suggests that, in spite of the regulatory effort, Indonesia has yet to reach the productivity levels to meet its
potential as a manufacturing hub.
In terms of vehicles’ production, Indonesia was sometimes challenging for investors and foreign companies.
Among the obstacles, heavy administrative procedures, lack of qualified human resources, high logistical
costs stemming from poor infrastructure and unreliable electricity supply are often mentioned by industry
experts. However, this trend is clearly reversing, as shown by continuous announcements from large scale
companies regarding the expansion of their production capacities. The large domestic market, the strategic
position in ASEAN and some incentives from the Indonesian government have been the main attraction
factors for car producers.
The Indonesian government has shown to be ambitious towards the automotive sector, having identified it
as strategic for the growth and development of the country’s economy. In fact, it aims to transform the
country into a world class production base of automotive and component products. The stance has been
consistent with this mission, as the former Minister of Trade, Gita Wirjawan, recently stated: “we want to
multiply our auto-manufacturing production to become an export hub for at least some of the signature
models".
The chart below highlights the expected stages of development regarding the Indonesian automotive
industry:
II. The Indonesian automotive market
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Table 3: Development of the Indonesian Automotive Industry - Roadmap
Motor Vehicle
Produced
MPV, Light
Commercial
Trucks
MPV, Commercial
Trucks up to 24
tonnes and small
economy Sedan
MPV, SUV, Small
economy sedan,
Commercial Trucks
s> 24 tonnes,
Medium sedan,
Hybrid car
MPV, SUV, Small
economy Sedan,
Commercial trucks >
24 ton, Medium class
sedan, Hybrid car,
Luxury car
Production Base
MPV Production
Base, Light
Commercial
Trucks
MPV production
base, Commercial
Truck up to 24
tonnes, SUV and
small economy
Sedan
Production base for
MPV, SUV, Small
economy Sedan,
Commercial trucks
> 24 tonnes,
Medium Sedan,
Hybrid car
Production base for
MPV, SUV, Small
economy Sedan,
Commercial trucks >
24 tonnes, Medium
sedan, Hybrid car,
Luxury car
Mastery of
Technology
- 80% Motorcycle
design capability
- Engine
manufacturing,
Motor vehicle
production base
for MPVs and
Light Commercial
Trucks
- 80% design
capability for 4-W
motor MPV vehicle
and Light
Commercial Trucks
- Engine
manufacturing, Motor
vehicle production
base for Commercial
Truck up to 24
tonnes, SUV and
small Sedan
- 80% design
capability for 4-W
motor vehicle,
small Sedan and
SUV.
- Engine
manufacturing
(hybrid engine),
Engine Control Unit
(ECU), integrated
systems
- 80% design
capability for 4-W
motor vehicle for
Medium sedan.
- 4-W motor vehicle
manufacturing
capability for quality
luxury cars
Component
Industry
Capability
Capable of
supplying
component for
MPVs and Light
Commercial
Trucks
Capable of supplying
components for
Commercial Trucks
up to 24 tonnes, SUV
and small Sedan
Capable of
supplying
components for
Commercial Trucks
> 24 ton, medium
Sedan, Hybrid car
Capable of supplying
components for quality
Luxury car
Source: Ministry of Industry of the Republic of Indonesia, PERPRES No. 28/2008
One important policy regulation (government regulation 41/2013) introduced in 2013 by the Indonesian
government could have a profound impact on the landscape of the Indonesian car market. The so-called
“Low Cost Green Car Regulation” (LCGC) could confirm the aspirations of the government to develop a
domestic production base towards regional leadership regarding the production for low cost and
environmentally friendly cars. This regulation offers tax breaks and incentives to manufacturers of small-
2025 2020 2015 2010
II. The Indonesian automotive market
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sized and fuel-efficient cars. Concretely, cars which fulfill the following criteria can be eligible for a partial
exemption from the luxury tax on cars (ranging from 10-125%):
engine of less than 1.200 cc;
cost limited to Rp120 million (€7420);
assembled in Indonesia and contain mostly domestically produced components;
minimum fuel range of:
o 20-28 km/liter for a 25% luxury tax reduction;
o 28 and more km/liter for a 50% luxury tax reduction.
This policy is especially relevant for first time car buyers who are more conscious of fuel prices, bound to
increase in line with the government’s plans to phase out fuel subsidies. In fact, a potential shift from
motorcycles to low cost cars could boost the total sales volume of the latter up to 35% of the 1.8 million
passenger vehicles expected to be sold by 2020.5 Conversely, in terms of purchasing power, half of the
market for LCGCs would be concentrated in the capital Jakarta, which governors are presently
implementing plans to combat heavy traffic and mobility problems.
The Japanese car makers Toyota and Daihatsu were the first to introduce models under the tax reduction
of the LCGC. Their models Toyota Agya and Daihatsu Ayla managed to attract orders from thousands of
customers in the context since September 20136. As soon as the technical regulations will be released by
the Government, production of these cars should start in the newly built plant in Karawang (70km east of
Jakarta) which has been operating since 20127. By February 2014, around 17000 Toyota Agya and some
14000 Daihatsu Ayla had been sold8. Presently, they are joined in the market by Honda with its Brio model,
as well as Suzuki with its Karimun Wagon R. The sales numbers for these brands were 11,592 and 8,500
respectively as of early 2014. Nissan has also recently entered the Indonesia LCGC market with its Datsun
Go model.
The impressive sales numbers recorded up to date confirm the various estimates that the automotive
market is experiencing a shift from MPVs to LCGCs. According to Gaikindo (the Indonesian Vehicle
Industry Association) around 51000 LCGC were sold in the fourth quarter of 20139. The sales forecast for
2014 is around 125000. In the first quarter of 2014, 4396910 units (35% of that estimate) were already sold,
opening promising prospects that forecasts will be achieved, if not exceeded.
With larger output volumes generated through the low-cost and green car program, Indonesia could catch
up with Thailand’s production levels through an increase in its exports volumes to new markets. While
Thailand’s standard-focused production is mostly suitable for the Japanese, Australian and European
5 Bloomberg, Siddharth Philip et al., Indonesian Government Approves Tax Breaks on Low Emmission Cars, 06.07.2013.
Available at: http://www.bloomberg.com/news/2013-06-07/indonesian-president-approves-tax-breaks-on-low-emission-cars.html 6 The Jakarta Globe, Daihatsu Ayla hits the road, Carla Isati Octama et al., 10.09.2013. Available at:
http://www.thejakartaglobe.com/business/daihatsu-ayla-hits-the-road/ 7 Environmental News Wire, Indonesia Backs Low Cost Green Car Production, 25.09.2013. Available at: http://ens-
newswire.com/2013/09/25/indonesia-backs-low-cost-green-car-production/ 8 Tempo, LCGC replaces MPV market, 06.02.2014. Available at: http://en.tempo.co/read/news/2014/02/06/056551523/LCGC-
Replaces-MPV-Market-Businesses-Say 9 Ibid.
10 Kontan, Pasar LCGC mulai lesu, Oleh F.B. Vistika, 05.05.2014. Available at: http://industri.kontan.co.id/news/pasar-lcgc-
mulai-lesu/2014/05/05
II. The Indonesian automotive market
www.eibn.org 15
markets, Indonesia could target other developing economies like Vietnam and India with competitively
priced vehicles.
In spite of the incentives set afoot by government of Indonesia, its ambitions may only be fulfilled if it goes
further in changing remaining regulatory obstacles and committing to reform the country’s insufficient
infrastructure (.e.g. the Tanjung Priok port in Jakarta, currently running at full capacity).
2.2. Market Structure Overview
Since the days when the Asian crisis struck Indonesia in 1998, the country has undergone formidable
economic development. Today, Indonesia is the world’s 4th most populous country (around 250
inhabitants), its 10th biggest economy and the 3rd biggest democracy. Around 50% of the population is
below the age of 23 and the Indonesian economy is to a large part driven by its strong domestic consumer
market, sustained in part by a rising middle class. In fact, domestic consumption (i.e. household and
government consumption combined) constantly contributed to more than 60% of the total GDP in the past
four years. These positive macroeconomic fundamentals are also reflected in the automotive market.
In 2013, vehicle sales hit a new record with some more than 1,200,000 units sold, confirming the strong
growth that the Indonesian automotive market has undergone over the past years. The expansion of the
automotive market both in terms of production and sales can be tied to the overall performance of the
country in recent years, marked by an overall GDP growth, a stable macroeconomic environment fostered
by fiscally prudent policies, political stability and an expanding consuming class. Combined with the
relatively low car penetration – there were only 80 cars per 1000 people in 2012 – Indonesia constitutes a
promising market, likely to steadily continue its rise. As can be seen in the following figure, the sales market
has constantly been growing except in 2009, due to the global financial crisis. Between 2006 and 2013,
sales have almost quadrupled.
Figure 3: Development of the Indonesian automotive market
Source: Gaikindo, data retrieved 16.06.2014
11
11
GAIKINDO, website. Retrieved 16.06.2013. Available at: http://gaikindo.or.id/index.php?option=com_content&task=blogcategory&id=0&Itemid=145
0
500000
1000000
1500000
2006 2007 2008 2009 2010 2011 2012 2013
Indonesian domestic auto production and sales (units)
Production
Sales
II. The Indonesian automotive market
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2.2.1. Development of the Vehicle Industry in Indonesia
The automotive vehicle industry began to grow in the early 1980’s with the operation of a number of
Trademark Holding Sole Agents (Agen Tunggal Pemegang Merk or ATPM). Within the framework of the
Ministry of Industry Regulation No. 295/1982 and No. 428/1987, the ATPM were operating as national
companies appointed by the principal manufacturer to exclusively import, promote, distribute and maintain
after sales services for one or several designated trademarks within a specific jurisdiction. The ATPMs are
listed through their holding company, as opposed to appear under the brand itself, on stock exchanges in
Indonesia and abroad.
Originally, the government of Indonesia hoped that the ATPMs would accelerate the process of technology
transfer and therefore further develop the country’s manufacturing industry. However, after 40 years, it is
fair to say that the industry is still not very far from its original position as an assembling industry that still
relies heavily on car components imports.
In 1999, new regulations allowed companies to import automotive vehicles in the CBU form, blurring the
role of the ATPMs in the face of the rise of non-ATPMs which began to be active in importing foreign-made
cars. Shortly after, official regulations were issued under which the relations between ATPMs and their
principals were now considered solely business-based. As a result, some of the foreign principals decided
to take control of the production of vehicles, leaving their ATPM only with the responsibility for distribution in
the domestic market.
The table below presents a list of the companies active in Indonesia, as well as their business lines12:
Table 4: List of ATPMs and trademarks
No Companies Trademarks
ATPM
1 PT Astra Daihatsu Motor Daihatsu
2 PT Astra Nissan Diesel Indonesia UD Trucks
3 PT Auto Euro Indonesia Renault
4 PT Central Sole Agency Volvo
5 PT Ford Motor Indonesia Ford
6 PT Foton Mobilindo Foton
7 PT Garuda Mataram Motor Audi/ VW
8 PT GM Auto World Indonesia Chevrolet
9 PT Grand Auto Dinamika Jaguar
10 PT Honda Prospect Motor Honda
12
GAIKINDO, Indonesian Commercial Newsletter, Market Intelligence Report on Automotive Industry in Indonesia, April 2011
II. The Indonesian automotive market
www.eibn.org 17
11 PT Hyundai Indonesia Motor Hyundai
12 PT Indobuana Autoraya Foton Truck
13 PT Isuzu Astra Motor Indonesia Isuzu
14 PT Java Motors Land Rover
15 PT Kia Mobil Indonesia Kia
16 PT Krama Yudha Tiga Berlian Motors Mitshubisi
17 PT Mazda Motor Indonesia Mazda
18 PT Proton Edar Indonesia Proton
19 PT Suzuki Indomobil Motor Suzuki
20 PT TC Subaru Subaru
21 PT Tjahja Sakti Motor BMW
22 PT Korindo Heavy Industry Hyundai Truck
23 PT Garasindo Inter Global Dodge, Chrysler, Jeep
24 PT Geely Mobil Indonesia Geely
25 PT Duta Putera Sumatera (Sun Motor) Man Truck
26 PT Hino Motor Sales Indonesia Hino
DISTRIBUTORS
1 PT Astra International Tbk – Peugeot sales
operation
Peugeot
2 PT BMW Indonesia BMW
3 PT Mercedes Benz Distribution Indonesia Mercedes Benz, Smart
4 PT Nissan Motor Distributor Indonesia Nissan
5 PT Toyota Astra Motor Toyota
6 PT Toyota Motor Manufacturing Indonesia Toyota
7 PT Unicor Prima Motor Hino
MANUFACTURERS
II. The Indonesian automotive market
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1 PT Astra Daihatsu Motor Daihatsu
2 PT Astra Nissan Diesel Indonesia UD Trucks
3 PT BMW Indonesia BMW
4 PT Foton Indonesia Foton
5 PT Gaya Motor (Assembler) Daihatsu, Peugeot, BMW, Isuzu, Nissan Diesel,
Foton
6 PT Hino Motor Manufacturing Indonesia Hino
7 PT Honda prospects Motor Honda
8 PT Hyundai Indonesia Motor Hyundai
9 PT Isuzu Motor Astra Indonesia Isuzu
10 PT Kia Mobil Indonesia Kia
11 Pt Krama Yudha Ratu Motors Mitsubishi
12 PT Krama Yudha Tiga Berlian Motors Mitsubishi
13 PT Mercedes Benz Indonesia Mercedes Benz
14 PT Mesin Isuzu Indonesia Isuzu
15 PT Mitsubishi Krama Yudha Motor &
Manufacturing
Mitsubishi
16 PT Nissan Motor Indonesia Toyota
17 PT Suzuki Indomobil Motor Suzuki
18 PT Toyota Motor Manufacturing Indonesia Toyota
19 PT Trijaya Union Mitsibishi
20 PT Korindo Heavy Industry Hyundai Truck
PT. Astra International Tbk and PT Indomobil Sukses Internasional Tbk are largely dominating the
automotive market in Indonesia as both groups became ATPMs for numerous foreign trademarks, both
Asian and European.
Some ATPMs appear to still have a double function, i.e. as producer and distributor, while some decided to
split their activities into manufacturing and marketing companies. For instance, since 2003, PT. Toyota
Astra Motor is officially in charge for sales, while PT. Toyota Motor Manufacturing Indonesia (95% owned
by Toyota Motor Corporation, and 5% PT. Astra Internasional) is handling the production.
II. The Indonesian automotive market
www.eibn.org 19
Simultaneously, some ATPMs have no assembling facilities: the vehicles sold by PT Tjahja Sakti Motor,
PT. Astra France Motor, PT. Foton Mobilindo, among others are actually assembled by other companies
(ATPM or not).
In general, the main activity of the Indonesian automotive companies is assembling, regarding both
intermediate goods – auto-parts – and final goods – cars and motorcycles. The technology is mostly
foreign, obtained through joint ventures with foreign and technologically more advanced companies, with
Indonesian counterparts acting as suppliers of larger firms.
Imported CKD (Complete Knock-down, cars assembled in a country using imported components) parts,
dominates the Indonesian car building industry, as the local automotive industry merely assembles the CKD
parts into final goods ready to be marketed to consumers. Similarly, nearly all components makers are
dedicated to assembling, using inputs with technologies provided by larger foreign trademarks.
This is reflected on Indonesia’s trade balance in the automotive sector, where imports more than double the
exported amount of parts and motor vehicles that it exports. This shows that, in the country, vehicles are
mostly assembled with imported vehicle parts. A similar situation is noted regarding the production of
motorcycles.
In contrast, when looking into the trade flow of completely assembled cars, Indonesia’s trade balance is
almost even, which means that, in terms of car production, Indonesia can be considered “autarkic”. Both
sales and production of cars have been growing rapidly over the past decade, having experienced a
negative growth rate only in 2009, as a consequence of the global financial crisis. In the past four years, the
production of cars has always been slightly above sales, although the gap is decreasing. In 2013, the
production level stood at 1,229,901 and thereby exceeded the sales volume, which stood at 1.208,211
(21,690 units less).
Figure 4: Comparison of exports and imports within automotive sector (2013)
Source: Trademaps
13
13
Trademaps. Data retrieved on 16.06.2013. Available at: www.trademaps.org
-3000000
-2500000
-2000000
-1500000
-1000000
-500000
0
500000
1000000
1500000
2000000
Cars (incl. station wagon)
Parts & access of motor vehicles
Parts and accessories of motorcycles &
cycles
Trade balance Indonesia of automotive products
Imports of vehicle products to Indonesia
Exports of vehicle products from Indonesia
II. The Indonesian automotive market
www.eibn.org 20
2.2.2. Location of the Automotive Industry
The vast majority of the automotive component industry is located on the island of Java. In turn, within
Java, most of the industry is centered in the West Java region, particularly in the greater metropolitan area
of Jakarta. A small number of companies are located in both Central and East Java.
Figure 5: Location of the automotive component industry
Note: Numbers indicate number of automotive component firms situated in the region
Source: Ipsos Business Consulting14
A closer look at the greater metropolitan area of Jakarta and its surroundings reveals that almost all major
players in the Indonesian automotive market have plants in the “Jabodetabek” area (an acronym for the
greater metropolitan area of Jakarta consisting of Jakarta, Bogor, Depok, Tangerang and Bekasi). More
particularly, the Karawang regency has become a popular investment destination and today hosts
numerous assembly plants of global automotive manufacturers. Table 5 lists some of the car makers that
have installed their plants in the region.
Figure 6/Table 5: Jakarta metropolitan area: “Jabodetabek”
14
Ipsos Business Consulting, Automotive Parts Industry in Indonesia, 2013. Available at: http://www.ipsosconsulting.com/pdf/Research-Note-Automotive-Parts-Industry-in-Indonesia.pdf
II. The Indonesian automotive market
www.eibn.org 21
Province City/ District
Car Company
Jakarta
Bukit Gading Honda
Jalan Gaya Motor
Astra Daihatsu, Gaya Motor (Astra), Toyota
Sunter Kia
Jl MT Haryono GMM (Indomobil/ VW)
Pulo Gadung Krama Yudha Ratu, Mitsubishi Krama Yudha
Cakung Suzuki
West Java
Bekasi GM, Hyundai, Isuzu Astra, Isuzu, Proton, Sugity creatives (Toyota), National Assemblers (Indomobil), Suzuki
Bogor Mercedes-Benz
Karawang Astra Daihatsu, Isuzu, Toyota, Honda Prospect
Purwakarta Hino, Nissan
Banten Tangerang Korindo, Trijan
Source: Marklines (adapted)15
2.3. Characteristics of the Automotive Components Industry in Indonesia
The Indonesian automotive industry structure can be described as follows:
Figure 7: Automotive Industry Structure (4 Wheelers)16
15
Marklines, Automotive Industry Portal. Available at: http://www.marklines.com/en/report/ 16
GAIKINDO, Co-Chairman Jongkie D. Sugiarto, Indonesia Automotive Industry Development, Presentation, Investor Daily Seminar, November 2012
Car Assemblers
Tier 1 Component
Industry
Tier 2 & 3
Component Industry
Outlet, Workshop, Authorised Sales Service and Spare Parts
Outlet, Workshop, Non-Authorised Sales Service and Spare Parts
± 600 companies – MP: 40.000 people
± 12.000 Authorized Outlets –
MP: ± 240.000 people
± 36.000 Non-Authorized Outlets –
MP: ± 360.000 people
± 250 companies – MP: 48.000 people
20 companies – MP: 27.000 people
II. The Indonesian automotive market
www.eibn.org 22
The first-tier or OEM (Original equipment manufacturers) dominate the market for branded or ”genuine”
parts, concentrating on the production of highest-value products such as electrical systems, engine
systems, brake systems, cooling systems, body and frame components, suspension systems, and a wide
variety of plastic, rubber and forged steel products.
The first-tier component suppliers are typically joint ventures between local and foreign companies (often
Japanese), which are mostly under Astra International or Indomobil Group. These ventures are primarily
involved in the production of parts for the first-tier assembly market, which are sold under well-known OEM
brands. They also sell those genuine parts directly to consumers through certified first-tier wholesalers and
in the aftermarket through subsidiaries.
Those second-tier suppliers that are able to comply with strict requirements play an important role in
assisting the first-tier companies. As most of the second-tier suppliers are unable to produce all the parts
required for a single vehicle, first-tier suppliers usually contract simultaneously several second-tier
manufacturers. However, those second-tier companies do play an independent role as well, as most of
them also produce a number of parts for the aftermarket which are being sold through OEM and non-OEM
second-tier wholesalers (marketed as branded and non-branded).
GIAMM (Gabungan Industri Alat-Alat Mobil dan Motor, the Indonesian car component industry association)
counts 161 members to date, consisting of 95 joint ventures (70 with Japanese companies); mostly
manufacturing engine components and body components. The following figure lists their members and
respective produced components:
II. The Indonesian automotive market
www.eibn.org 23
Figure 8: Players in the automobile component industry in Indonesia
Source: Ipsos Business Consulting
17
The key players in the Indonesian car component industry18 are PT. Astra Otoparts, Indospring Group,
Pako Group, PT. Bakrie Tosanjaya and Dharma Polimetal Group.
Genuine parts are distributed through authorized dealers and ATPM workshop networks. However, studies
have shown that the owners of motorized vehicles tend to use genuine OEM parts only for the first 3 years
– which fits to the initial warranty period usually offered by the OEM. At the end of the warranty period,
17
Ipsos Business Consulting, Automotive Parts Industry in Indonesia 2013. Available at:
http://www.ipsosconsulting.com/pdf/Research-Note-Automotive-Parts-Industry-in-Indonesia.pdf 18
Please find the list of manufacturers of car components in Annex 1
II. The Indonesian automotive market
www.eibn.org 24
customers tend to switch to less expensive white brand or imitation parts coming from China, Thailand,
Taiwan or Vietnam.
Overall, the local component industry in Indonesia is developing (higher number of car parts manufacturing
companies) but continues nonetheless to produce less sophisticated items that lack value-added processes
and are therefore facing increased competition. Indeed, under the ASEAN free trade area and the ASEAN-
China free trade agreement, import duties on auto components are set at zero. Japanese producers have
maintained their own production of high technology components due to the weak enforcement of intellectual
property rights regulations in production bases, to protect their core business. The high rate of investment
needed to establish facilities capable of producing sophisticated components has also held back
manufacturers from making the decisive shift to centralize all their production processes. Local component
producers are therefore keen to establish financial and technology partnerships in order to add value to the
production process and boost future exports.
2.4. The Indonesia Car Market by Car Type: the Domination of the MPV
sector
Two main categories of vehicles can be distinguished: the passenger vehicles which include Sedan, MPV,
SUV, Hatchback 4x2 and SUV 4x4; and the commercial vehicles consisting of Bus, Pick Up/Truck and
Double Cabin 4x2/4x4.
When we look at the Indonesian car market in terms of car types sold, it immediately becomes evident that
7-seater MPVs are best-sellers in Indonesia. Their characteristics seem to adapt adequately to the
Indonesian middle class demand: they are lower in price due to the tax regime, well suited for the local
infrastructure and to accommodate a number of passengers commensurate with the average size of
Indonesian households.
Most of the ATPMs in Indonesia have a share in the MPV automotive market, but Toyota Astra Motor is still
in the lead with the successful Toyota Avanza. As can be seen in the following figure, the Toyota Avanza
was by far the most sold car in 2013, confirming its pole-position for eight consecutive years. With 213,458
units sold in 2013, the Avanza represented an impressive share of over 17%.
II. The Indonesian automotive market
www.eibn.org 25
Figure 9: The Indonesian car market by car model
Source: Marklines
19
Just as in the previous two years, the Daihatsu Xenia (an identical car to the Toyota Avanza of the Toyota
subsidiary Daihatsu) ranked second in 2013, with a total market share of 5.3% (64,611 units sold). It was
closely followed by the Toyota Kijang Innova, which had a market share of 5.3% (64,539 units); and by the
Suzuki Ertiga, holding a 5.2% share (63,317 units). Therefore, the four best selling cars in Indonesia in
2013 were all 7-seater MPVs, showing the significance of this car type in the Indonesian market. The
Daihatsu Gran Max Pick-up truck, which ranked as fifth most sold car model in 2013, represents the only
car type other than MPV in the top five of sold cars (market share of 4% with 48,048 units sold).
Unsurprisingly, brands that have entered the Indonesian market offering luxurious MPV models (e.g. VW)
have not yet achieved more than small market shares.
In addition, SUVs tend to attract more and more buyers as reflected in the increasing number of players in
this segment. The characteristics of SUVs appear to adapt well to Indonesian demand, mainly due to their
high-ground clearance (of significant relevance during the tropical rainy season and frequent floods) and
the flexibility of the chassis. The market is dominated by the Japanese Toyota (Fortuner), Honda (CR-V)
and Mitsubishi (Pajero Sport and Outlander), followed by the newcomer Chevrolet. The latter entered the
Indonesian market successfully with its Chevrolet Captiva, selling 2,495 units in 2012.
Together, MPVs and SUVs largely dominate the Indonesian market with a market share of almost 67%.
19
Marklines, Automotive Industry Portal. 2014. Available at: http://www.marklines.com/en/report/
17.5%
5.3%
5.3%
5.2%
4.0% 62.7%
Market shares by car model, 2013 Total sales volume: 1,219,760 units
Toyota Avanza
Daihatsu Xenia
Toyota Kijang Innova
Suzuki Ertiga
Daihatsu Gran Max Pick Up
Others
II. The Indonesian automotive market
www.eibn.org 26
Figure 10: Vehicle sales per car type 2006-2013
Notes: Left axis indicates sales volume of single car types. Right axis indicates total volume of domestic market.
Affordable Energy saving cars are LCGC-certified cars and are therefore only recorded as of 2013
Source: GAIKINDO20
2.5. Key players: the Predominance of the Japanese industry
When walking or driving in the streets of capital Jakarta, it is impossible not to notice the over-
representation of Japanese branded vehicles. The dominance of Japanese carmakers in the Indonesian
market can be explained by the fact that Japanese manufacturers moved into Indonesia before most car
makers (for geographical, political and economic reasons). Moreover, they remained in the country during
the Asian financial crisis and other economic and political instability, while many others left. The signature
of the Economic Partnership Agreement in 2008 between Japan and Indonesia intensified the circulation of
goods and investments with the suppression of all tariff barriers. As a result, Japanese car-making
companies currently control about 90% of the Indonesian market. Toyota is the dominant market leader,
followed at a reasonable distance by Mitsubishi, Suzuki, Honda and Nissan.
The table below indicates the volume of vehicles sold21 since 2006 by country of origin:
20
GAIKINDO, Website, Statistic Data, 2014.Available at:
http://gaikindo.or.id/index.php?option=com_content&task=blogcategory&id=0&Itemid=110 21
Ibid.
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
0
200,000
400,000
600,000
800,000
1,000,000
2006 2007 2008 2009 2010 2011 2012 2013
SEDAN
4 X 2 TYPE
PICK UP/TRUCK
BUS, 4X4 TYPE, DOUBLE CABIN
AFFORDABLE ENERGY SAVING CARS 4 X 2
Domestic Market
II. The Indonesian automotive market
www.eibn.org 27
Table 6: Car sales volume in Indonesia of various brands grouped by country
Country
of Origin Brand
Number
of
Brands
in 2012
Domestic Market (units)
2006 2007 2008 2009 2010 2011 2012 2013
JAPAN
Toyota,
Daihatsu,
Mitsubishi,
Suzuki,
Nissan,
Honda,
Isuzu, Hino,
Mazda, UD
Trucks,
Lexus,
Subaru
12 304,918 411,289 579,371 461,369 730,207 846.846 1.064,000
1,174,905
USA
Ford,
Chevrolet,
Jeep, Dodge,
Chrysler
5 4,340 7,801 10,656 8,960 13,499 21,210 18,086
26,375
KOREA Kia, Hyundai 2 6,861 8,064 7,681 5,862 11,591 14,632 20,035
15,990
EUROPE
Mercedes-
Benz, BMW,
Volkswagen,
MAN Truck,
Audi, Smart,
Mini,
Peugeot,
Renault,
Volvo, Infiniti,
Jaguar
14 2,041 3,602 4,120 4,773 6,601 8,167 9,543
10,357
MALAYSIA Proton 1 305 1,584 1,089 2,150 2,126 1,926 2,263
1,088
CHINA Geely, Faw,
Foton, Chery 4 269 759 853 434 686 1,383 2,303 997
INDONESIA Timor,
Perkasa 0 170 242 4 - - - - -
INDIA Tata 1 - - - - - - 60
1,192
TOTAL 39 318,904 433,341 603,774 483,548 764,710 894,164 1,116,230 1,229,811
Source: Gaikindo22
and Marklines23
(adapted)
In 2013, Japanese car makers had a total market share of 93% of the sales volume measured in units sold
in Indonesia (see following figure). Only American car makers, clearly led by Chevrolet which reinvested
confidently in the Indonesian market, had a noteworthy share, hovering around 4%.
22
GAIKINDO, Website, op. cit. p.27 23
Marklines, Automotive Industry Portal, Vehicle Sales, 2014. Available at: http://www.marklines.com/en/vehicle_sales/
II. The Indonesian automotive market
www.eibn.org 28
Figure 10: Car sales market share according to country of origin of brands
Source: Gaikindo
24 and Marklines
25 (adapted)
Looking at the breakdown by car manufacturer, it is clear that among the Japanese carmakers it is Toyota
that holds the lead: with a formidable market share of 36% in 2013, Toyota is by far the largest car producer
in Indonesia. Combined with its subsidiary Daihatsu, that held a 16% market share of the sales volume in
Indonesia, the Toyota group controls more than half of the Indonesian market. Without exception all other
notable players are also Japanese: the Suzuki group, tanking third, with a market share of 15%; then
Honda with 9%; followed by Mitsubishi holding 8%; and finally Nissan in the sixth position with 6%. Other
carmakers only hold a combined market share of 10%.
24
GAIKINDO, Website, op. cit. p.27 25
Marklines, Automotive Industry Portal, op. cit. p.27
93%
4%
1% 1%
1%
Car sales market share by nation, 2013 Total sales volume: 1,219,760 units
Japan
USA
South Korea
Europe
Others
II. The Indonesian automotive market
www.eibn.org 29
Figure 11: Breakdown of Indonesian car sales market by brand
Calculated based on information of Gaikindo
26 and Marklines
27
The domination of the Japanese car makers in Indonesia can also be explained by their flexibility and
adaptability to the local market. For instance, the Toyota Kijang has a higher road clearance able to cope
with the seasonally occurring floorings in Indonesia. Apart from that, Japanese cars are renowned for their
long lifespan and high value-retention28. As such, Japanese carmakers managed to penetrate all segments
of the domestic market, targeting both middle and upper classes. Besides their monopoly on the MPV
segment, it has to be mentioned that PT. Toyota Astra Motor is importing from its principal in Japan a
growing number of luxurious Toyota cars with cylindrical capacity of more than 3,000 cc (to date, no local
factory produces cars with an engine capacity of more than 3,000 cc).
Naturally, Japanese car makers also have the largest production capacity among the automotive
manufacturers in the country. Their production lines in Indonesia are being used for the supply of both the
domestic and overseas market via exports.
Looking at the European side, despite a very small market share, a slow but constant growth of the
European cars sales has to be highlighted, for which there are several reasons:
Since 2006, a higher number of European trademarks appeared on the Indonesian market and
through successful marketing campaigns became increasingly visible among the local population.
For instance, numerous showrooms in Indonesia’s trendiest malls are displaying luxurious
European car models.
Those same models increasingly attract the wealthy Indonesian middle and upper classes, looking
for premium products. For instance, despite the high luxury taxes in the country (resulting in very
high selling prices), in Jakarta there is a six-month waiting list for Lamborghini sports cars carrying
26
GAIKINDO, Website, op. cit. 27
Marklines, Automotive Industry Portal, op. cit. 28
KPMG, Indonesia’s Automotive Industry: Navigating 2014, 2014. Available at: http://www.kpmg.com/ID/en/IssuesAndInsights/Documents/Indonesias-Automotive-Industry-Navigating-2014.pdf.
36%
16% 15%
9%
8%
6%
10%
Market share by carmaker, 2013 Total sales volume: 1,219,760 units
Toyota
Daihatsu
Suzuki Group
Honda Group
Mitsubishi
Nissan
Other
II. The Indonesian automotive market
www.eibn.org 30
price tags of up to $1.2 million. On the other hand, in 2013, BMW recorded an increase in sales of
12% (total sales volume of 2460 cars) from 2012. A main driver behind this growth was BMW’s SUV
sector, which experienced a 42% growth.29
European brands started penetrating more segments of the market with the diversification of the
models on offer. For instance, VW is now selling cars in the compact segment (Polo and Golf
models), as well as in the MPV and SUV sector.
On the other hand, a tax increase on luxury cars in 2014 from the maximum rate of 75% to 125% has put
producers of high-end cars under pressure.30 While this only affects a small proportion of cars sold in
Indonesia, European car producers whose market share in this high-end car sector is dominant were
especially affected. This might even reduce the sales volume of many European car makers, whose
expensive products were already directed only at a small part of the Indonesia population.31
29
The Jakarta Globe, BMW Indonesia posts 28 per cent sales volume growth in 2013, Carla I. Octama, January 24 2014. Available at: http://www.thejakartaglobe.com/business/bmw-indonesia-posts-28-percent-sales-volume-growth-in-2013/. 30
Nikkei Asia Review, Indonesia to hike tax on Luxury Cars, Sadachika Watanabe, March 28 2014. Available at: http://asia.nikkei.com/Politics-Economy/Policy-Politics/Indonesia-to-hike-tax-on-luxury-cars-to-125. 31
The Jakarta Globe, Luxury Auto tax hike has few fans, Muhammad Al Azhari, September 19 2013. Available at: http://www.thejakartaglobe.com/business/luxury-auto-tax-hike-plan-has-few-fans/.
www.eibn.org
III. Future trends and remaining challenges
31
III. Trends and remaining challenges
3.1. Current trends: Growing Interest and Investment in Indonesia
The size of Indonesia’s domestic market, its impressive economic growth and the development of the
industrial sector – stimulating the demand for commercial vehicles – provide a considerable margin for
continued increases in sales. Assembling in Indonesia leads to a reduction of production costs – given
lower tax rates and local components – with a direct consequence on price competitiveness (required to
boost sales). Furthermore, the number of local suppliers has significantly increased in recent years, leading
complete-unit manufacturers to expand their production (consequently stimulating the further growth of the
components’ industry).
These factors are at the basis of why global automakers have been and still are heavily investing in what
appears to be Southeast Asia’s largest vehicle market. Announcements of either fresh strategic investment
by new OEMs or of expansion activities of existing OEMs have been numerous over the past two years.
Especially given the political turmoil in Thailand in 2013 and 2014, many investors and firms in the
automotive sector have looked to Indonesia as alternative investment destination and local production
facility.32
The following examples give a glimpse of the dynamics of the market (it should be noted, however, that the
total amounts of investment per company are often difficult to estimate due to conflicting data between
sources). In total, it is estimated that over the past two years, automotive manufacturers have invested
some $US3.3 billion.33 Needless to say, that these investments will also stimulate the growth of the
components industry, as a supporting industry of the former.
Japanese companies:
At the end of 2012, Toyota revealed its plan to invest US$2.7 billion (equivalent to the company’s
total investment volume in Indonesia over the past 40 years)34 over the next four years;35 intending to
expand its production capacity. In March 2013, Toyota started operating its second plant in Karawang,
having raised total output capacity to 250,000 units per year. Another engine plant with an annual
production capacity of 216,000 units is expected to start operating by 2016.36 Around 30% of Toyota’s
increased Indonesian production is meant for the export market. The Toyota subsidiary Daihatsu started
running its second plant in Karawang in 2012 to build the to LCGC-eligible models Daihatsu Ayla and
Toyota Agya. The production capacity of the Toyota group in Indonesia lies therefore at some 570,000.37
32
Investvine, Thailand loses auto investments to Indonesia. 2014. Available at: http://investvine.com/thailand-loses-auto-investments-to-indonesia/. 33
Financial Times, Carmakers rev up discounts to clear Indonesia showrooms, Ben Bland, June 25 2014. Available
athttp://www.ft.com/cms/s/0/ba3d7e14-fc11-11e3-ad9b-00144feab7de.html#axzz3657p9kHs. 34
Oxord Business Group, The Report: Indonesia 2013. 35
The Jakarta Globe, Toyota announces Rp. 26 Trillion Indonesian Investment Plan, Arientha Primanita, November 10 2012. Available at: http://www.thejakartaglobe.com/archive/toyota-announces-rp-26-trillion-indonesian-investment-plan/. 36
Marklines, Automotive Industry Portal, Market and Technology Report. Available at: http://www.marklines.com/en/report/. 37
Ibid.
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III. Future trends and remaining challenges
32
In 2012, rival Suzuki invested a total of US$917 million to purchase land and build a new assembly
plant, slated to start in 2015. This will raise the car manufacturers’ annual production capacity to 250,000
units.
Nissan Motor indicated that they will invest $US400 million through their Indonesian subsidiary to
boost their production to 250,000 units from the current 150,000.
By the beginning of 2014, Honda has started the operations of its second and new plant in
Karawang, which adds another 120,000 units to its production capacity and almost triples Honda’s total
annual output therewith from its previous 80,000 units per year.
Obviously, the expansion of the production lines has also been accompanied by an expansion of the sales
distribution network and by increased sales in total. Over the past two years, companies have been
establishing numerous new outlets in order to support their marketing activities.
European companies:
Although Japanese carmakers are dominating the Indonesian automotive market, other companies have
also been taking a proactive stance to expand their businesses in Indonesia. The following examples show
that Indonesia has also been motivating the interest of European car and car part makers:
Renault has reentered the Indonesian market after having signed a partnership agreement with
Indomobil Sukses International. The French car maker will sell three models: Koleos, Megane and Duster,
whereas the latter is assembled locally in the plant of Indomobil. Renault had completely withdrawn its
operations following the Asian crisis in 1998.38
German car part supplier Bosch announced in 2013 that it will invest more than US$13.5 million in
its first automotive manufacturing facility in Indonesia. The plant is scheduled to commence operations in
2014.39
BMW announced in 2011 that they are set to double their production capacity, diversify and
increase the number of vehicle produced locally and strengthen their sales and distribution network by
investing some US$11.7 million40 in the following two years. BMW currently assembles the BMW 3 and 5
Series, as well as the X1 in its PT Gaya Motor plant (under PT Astra International, Sunter, North Jakarta).
Investments in production will involve the modernization of the assembly lines, including the installation of
new tools and equipment, recruitment of new employees, as well as training. Furthermore, the company is
already investing in the introduction of the British brand MINI into the Indonesian market41.
PT Mercedes-Benz Indonesia, one of the most established European brands on the Indonesian
market, has spent between US$26 to US$38 million between 2010 and 2012 to modernize its assembly
38
Marklines, op. cit. 39
Bosch, Press Release: Expanding footprint in Southeast Asia, 27 June 2013. Available at: http://www.bosch.co.jp/en/press/pdf/rbjp-1306-03-release.pdf. 40
The Jakarta Post, BMW to boost production with USD 11.7m investment, June 01, 2011. 41
BMW, Press release: BMW Group to expand business in Indonesia, May 31, 2011.
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III. Future trends and remaining challenges
33
plants42. In their plant in Wanaherang (Bogor, West Java), they are progressively expanding the lines of
models produced locally to passenger cars (e.g. the M-Class series).
In 2013, the French tire producers Michelin agreed to form a joint venture with the Indonesian
petrochemical producer PT Chandra Asri Petrochemical, aiming to produce synthetic rubber to feed the
growing demand in the region (including China). The total investment volume lies at $435 million.43
The Italian tire company Pirelli & C. SpA recently engaged in a joint-venture with the component
maker PT Astra Otoparts. Pirelli will control 60 percent of the shares of the joint-venture, while the
remaining will be held by Astra Otoparts. With a total investment of $US130 million over three years, the
two companies will operate a plant to produce motorcycle tires for the local and the ASEAN markets (full
operation is expected in 2016, with an annual production of 7 million tires).44
Recently, Volkswagen confirmed its plan to further enter the Indonesian market and to invest
US$140 million in a manufacturing plant with a production capacity of 50,000 units per year45 (to start in
2014). Volkswagen will partner with Indomobil Sukses International, the country’s second largest
automotive distributor.
They could be followed by many others like Ford or Peugeot, from which plans to build assembly plants in
Indonesia have been announced, but still appear to be under consideration.
Others
Notable investment activities by companies other than European and Japanese:
General Motors has been reactivating its plant in Bekasi, West Java, shut down in 2005. The
factory started operating in 2013, following an investment of US$150 million.46
The Indian carmaker Tata entered the Indonesian market in 2012 by founding its subsidiary PT Tata
Motors Distribusi Indonesia. The officials of Tata have made clear that their entrance in Indonesia is of a
long-term nature, with the goal of making Indonesia their biggest market outside of India. In 2013, it started
selling three passenger vehicles in Indonesia4748 and two pick-up models.49
42
The Jakarta Globe, Mercedes-Benz Indonesia Unveils M-Class, November 22, 2012. 43
Bloomberg, Michelin signs accord to form 435 million venture in Indonesia, Mathieu Rosemain, June 17 2013. Available at: http://www.bloomberg.com/news/2013-06-17/michelin-signs-accord-to-form-435-million-venture-in-indonesia.html. 44
Tirebusiness, Pirelli breaks ground on Indonesia M/C ire plant, August 19 2013. Available at: http://www.tirebusiness.com/article/20130819/NEWS/130819927/pirelli-breaks-ground-on-indonesian-m-c-tire-plant. 45
The Jakarta Globe, Volkswagen to Start Investing in Indonesia Early Next Year, March 11, 2013. Available at: http://jakartaglobe.beritasatu.com/news/volkswagen-to-start-investing-in-indonesia-early-next-year. 46
Wards Auto, Gm returns to Indonesia with 150 million Manufacturing bet, May 16 2013. Available at: http://wardsauto.com/plants-amp-production/gm-returns-indonesia-150-million-manufacturing-bet. 47
India Times, Tata Motors enters growing Indonesian market, Thekan Takkar, September 10 2013. Available at: http://articles.economictimes.indiatimes.com/2013-09-10/news/41938067_1_tata-motors-ltd-indonesian-biswadev-sengupta 48
Business Standard, Tata Motors enters Indonesian Market, launches 3 Vehicles, September 10 2013. Available at: http://www.business-standard.com/article/companies/tata-motors-enters-indonesian-market-launches-3-vehicles-113091000335_1.html. 49
Tata Motors, Website, The First Mini Diesel Pickup, http://tatamotors.co.id/product_super_ace.
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III. Future trends and remaining challenges
34
3.1.1. Key Factors for market growth
In general, positive trends in the automotive sector are supported by stable growth of the domestic
economy, the continuous investment flow and an increasing automotive production capacity. If these
factors continue to strengthen, they are likely to fuel the expansion of the Indonesian automotive industry.
Forecasts, however, vary. For instance, in the passenger vehicle segment, the consulting company Frost &
Sullivan50 anticipates growth of 7.6%, mainly driven by MPVs, SUVs, compact medium-small car models
and LCGC-eligible cars. Similar growth trend of approximately 7.3% is predicted in the commercial vehicles
segment. Driven by strong demand from domestic economic activities – especially in the retail and
manufacturing sectors – the market for small-medium pick-ups and trucks is likely to expand. Similarly,
growth in the construction sector and expected infrastructure development should boost the sales of heavy
trucks.
The Ministry of Industry is even more ambitious and projects that the domestic auto market in Indonesia will
grow at an average growth rate of about 15% over the next six years51. GAIKINDO forecasts a figure
between the two aforementioned estimates, with growth at 10% for 2014 with around 1.3 million units sold.
Regardless of the exact size of the future growth rate of the Indonesian automotive market, there seems to
be concurrence among the players in the sector: that it definitely will grow. These are some factors that are
likely to contribute to this growth.
3.1.2. Growth potential and key drivers of the sales market
Looking further ahead at the development of the Indonesian car and car component market, several
promising factors emerge as likely to drive the growth of the sector.
First, the general macroeconomic fundamentals are favorable. There is strong overall economic growth and
most future real GDP forecasts see a growth rate of 5-6% per year, confirming the positive trend that
Indonesia has followed in the past.
50
Frost & Sullivan, Presentation: Indonesia Automotive Outlook: 2013, Vivek Vaidya, January 17 2013. 51
Bisnis, Indonesia’s Automotive Industry gets stronger, 24 June 2014. Available at: http://m.bisnis.com/en/read/20140624/163/29841/indonesias-automotive-industry-gets-stronger.
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III. Future trends and remaining challenges
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Figure 12: Economic development Indonesia 2000-2013
Source: IMF, World Economic Outlook Database
52
A second important factor relates to Indonesia’s current level of economic development. As a “catch-up”
economy with a GDP of roughly US$3,500 per capita, the Indonesian population is bound to spend its
increased GDP on consumer goods. In fact, domestic consumption (combined government and household
consumption) comprises around 65% of total GDP. Traditionally the key driver behind Indonesia’s strong
economic development and growth, domestic consumption is likely to continue fuelling market expansion
given that high consumer confidence and consumer optimism.53
On top of an expanding per capita GDP and a consumption-oriented population, another supporting
factor for the growth of the Indonesian car market is demographic development. Steady population
growth is expected to continue, rising to 278 million people by 203054. Not only is the population size
predicted to grow, but also the share of the middle and consuming class in society. Therefore, the shift
motorcycles to cars is likely to continue, particularly among the lower end of the market. This is even
truer given that in Indonesia, public transport is rather poor, creating greater incentives for private
vehicle ownership as a necessary means of transportation.
52
IMF, World Economic Outlook Database, April 2014, June 2014. Available at: www.imf.org 53
KPMG, Indonesia’s Automotive Industry: Navigating 2014, 2014. Available at: http://www.kpmg.com/ID/en/IssuesAndInsights/Documents/Indonesias-Automotive-Industry-Navigating-2014.pdf 54
World Bank, World Statistics, Available at: http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTHEALTHNUTRITIONANDPOPULATION/EXTDATASTATISTICSHNP/EXTHNPSTATS/0,,contentMDK:21737699~menuPK:3385623~pagePK:64168445~piPK:64168309~theSitePK:3237118,00.html
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III. Future trends and remaining challenges
36
Figure 13: Forecasted population development Indonesia until 2030
Note: “Consuming class” is defined as a population group with an annual
net income of above $3,600 at 2005 purchasing power parity. Predictions
for 2020 and 2030 are based on an annual GDP growth of 5-6%
Source: McKinsey Global Institute55
Third, although Indonesia has experienced impressive economic growth rates, car ownership rates remain
low. It is estimated that car penetration is still as low as 80 cars per 1000 people, compared to more than
800 per 1000 people in the US.56 This means that there is ample room for an expansion in car sales, likely
to be buoyed high consumer and easy access to credit. The latter point is particularly important as 70% of
all car purchases in Indonesia are made on credit. These positive trends have countered the impact of
stricter car-purchasing credit rules implemented by the Central Bank and the Ministry of Finance in 2012
(e.g. the minimum level of initial down payments was raised to 30%57).
These positive trends have obviously not escaped global car makers, who have taken several investment
and marketing measures in the past which can sustain renewed demand.58 Needless to say, the positive
development of the automotive sector in Indonesia caused by these overall driving factors will also translate
as immediate positive impacts in supporting industries, especially the automotive components industry.
3.1.3. Expected changes in the domestic market’s demand
Arguably the most profound factor in changing the landscape of the Indonesian market is the LCGC
regulation passed by the Indonesian government in 2013. Demand for cars eligible under the LCGC
regulation is expected to continue to grow, expanding the sector even further. LCGC cars already
55
McKinsey Global Institute, The archipelago economy: Unleashing Indonesia’s potential, 2012 56
Global Business Guide Indonesia, Indonesia’s Automotive Industry, 2013. Available at : http://www.gbgindonesia.com/en/manufacturing/article/2014/indonesia_s_automotive_industry.php. 57
Ibid. 58
Frost & Sullivan, Indonesia Automotive Outlook 2013. Available at: http://www.slideshare.net/FrostandSullivan/frost-sullivan-2013-indonesia-automotive-outlook-briefing?qid=4b746c1b-c074-415b-a3dd-e546e53e3009&v=default&b=&from_search=1.
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III. Future trends and remaining challenges
37
accounted for some 15% of the 111,767 cars sold in Indonesia in February 2014.59 The Ministry of Industry
predicts that the production will grow up to 300,000 monthly by 2015, with 15% of that amount for export.60
Given that the fuel subsidies who put the Indonesian government budget under heavy pressure
(expenditure is around $US20 billion per year) are bound to be phased out over the next years;
Indonesians are likely to become more sensitive to fuel consumption – yet another factor that suggests a
promising future of the low cost green cars.
Obviously the growth of the LCGC market will have immediate consequences on other market segments.
With a growing demand for low cost green cars, the relative demand for other products is bound to
decrease. Given the LCGC’s small price and size, repercussions will likely be felt on the 2-wheeler market,
as many Indonesians will be encouraged to switch from scooters to small cars. Likewise, the share of MPV
sales is estimated to drop from the current 60% share of new vehicle sales to around 40% over the next 5
years.61 Therefore, the lower end of the car market is expected to be highly dynamic, attracting many first-
time car buyers.62
At the other end of the spectrum, an emerging upper class is driving increased demand for luxury63 -
despite a recent hike of luxury taxes. In Indonesia, especially among the upper class, luxurious cars are not
only considered as important status symbol, but also a part of a new lifestyle. This ‘growing wealth’ of
Indonesia’s middle-class can become the cornerstone of a promising future for the premium cars segment.
This is, for instance, reflected by the performance of Lamborghini, which doubled its sales volume in the
past two years.64
Furthermore, car makers will have to be swift in adapting to future trends induced by consumer demand in
Indonesia. In the future, integrated transportation solutions and association of smart phones with dedicated
application stores and innovative HMI concepts (bringing connectivity inside cars) will be a driver for the
growth of the automotive market, not only in Indonesia but also globally. The topic of connectivity and
inclusion of smart phones should not be underestimated in Indonesia, given that it is the nation with the
most time spent on smart phones and other electrical media per day (181 minutes spent on smart phones
on average per day).65 Especially in the after-market sector, another factor that car makers and automotive
component producers will have to adapt to is the pressure induced by counterfeit products present in the
Indonesian market.66
59
Indonesia Investments, Car Sales in Indonesia grow 8.2 in February backed by LCGC demand, 18 March 2014. Available at: http://www.indonesia-investments.com/news/todays-headlines/car-sales-in-indonesia-grow-8.2-in-february-2014-backed-by-lcgc-demand/item1775. 60
Marklines, op. cit. 61
Ibid. 62
Global Business Guide Indonesia, op. cit. 63
Reuters, Drive for Status Speeds Indonesia Car Sales, July 1, 2012. 64
The Jakarta Post, The new rich drive demand of luxury cars, Linda Yulisman, November 18 2013. Available at: http://www.thejakartapost.com/news/2013/11/18/the-new-rich-drive-demand-luxury-cars.html. 65
The Jakarta Post, Indonesians spend most time on smartphones in the world, Khoirul Amin, June 5 2014. Available at: http://www.thejakartapost.com/news/2014/06/05/indonesians-spend-most-time-smartphones-world.html. 66
Ipsos Business Consulting, Automotive Parts Industry in Indonesia, 2013. Available at: http://www.ipsosconsulting.com/pdf/Research-Note-Automotive-Parts-Industry-in-Indonesia.pdf.
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III. Future trends and remaining challenges
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3.1.4. ASEAN prospects
Apart from the thriving domestic automotive sales market in Indonesia, the country is also trying to achieve
its objective of developing into a regional hub for the production of cars by making use of its comparative
advantages. Namely, its young and abundant labor force and relatively low wage levels, which make
production in Indonesia still relatively cheap; and its vast amount of natural resources. For instance, the
South Korean tire company Hankook opened a plant in 2013 with the goal of sourcing rubber (one of the
Indonesia’s most important export commodities) and is now exporting 70% of their products.
Furthermore, Indonesia has the regional interconnectivity to develop into a production hub. On the one
hand, it is close to the giant markets of India and China, both in terms of geographic positioning and
economic ties. China and Indonesia operate under the China-ASEAN free trade agreement. This
framework has had direct impact, as seen in 2013, when China was Indonesia’s biggest trading partner
with a volume of US$54.6 billion. On the other hand, the establishment of the ASEAN Economic
Community (AEC), introducing a single market and production area due in 2015, is expected to intensify
trade among ASEAN countries and have a profound impact on the automotive market in Indonesia and the
region.67 Therefore, benefitting from more integrated markets, Indonesia could not only become a car-
exporting hub for the ASEAN region, but also for the Middle East and Africa (according to Yoshifumi
Fukunaga, a senior policy coordinator at the ASEAN economic research institute.)
The recent massive investments made by car manufacturers in the country seem to be a step towards this
goal. These investments are mainly due to strong domestic sales growth, which has already led many car
makers to invest in local production. Consequently, this might motivate even more car component
producers to invest in Indonesia in the future. The current number of auto part suppliers in the country is
around 800 (compared to around 2300 in Thailand), but it should rise sharply in coming years.68
Ultimately,
this could lead to the development of a more complete and strong automotive supply chain in Indonesia,
historically slanted towards final assembly of units from components or kits imported from abroad. If
Indonesia succeeds in this endeavor, it could indeed turn into a regional car production hub in some
segments, but most prominently the LCGC sector, which is already expanding rapidly.
However, the prosperity of the automotive market is not without its remaining challenges.
3.2. Remaining challenges
From a domestic sales point of view, there are several factors that are likely to have detrimental effects on
what is otherwise an overall positive outlook on the Indonesian automotive market. Firstly, government
plans to phase out fuel subsidies will incrementally increase the price of fuel. This may make buying a car
less attractive, although consumers may also merely reconsider and adjust their buying behavior towards
more fuel-efficient models, e.g. towards the LCGC segment.
67
Global Business Guide Indonesia, op. cit. 68
The Jakarta Post, Indonesia rides its way to being the next Auto hub, Linda Yulisman, April 14 2014. Available at: http://www.thejakartapost.com/news/2014/04/14/indonesia-rides-its-way-being-next-auto-hub.html.
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III. Future trends and remaining challenges
39
Secondly, the financial environment plays a crucial role in the automotive market. It is estimated that
around 70% of all vehicles in Indonesia are bought on credit. This means that further tightening of the
legislation regarding down payments could have negative impacts on future vehicles sales. Apart from this,
the interest rate in Indonesia, as well as the value of the Indonesian Rupiah will play a crucial role and
affect consumer decisions to buy and finance a car. In August 2013, for instance, the Bank of Indonesia
raised the interest rate from a record low of 5.75% to 7%, attempting to support the value of the local
currency and curb inflation.69 As of June 2014, the interest rate stood at 7.5%.70 Further raises might lead
buyers to reconsider their car purchase decision.
Overall, however, the aforementioned growth drivers of the Indonesian vehicle sales market should
outweigh these constraints, as the overall automotive sales market is expected to continue its strong
growth.
On the production side, Indonesia’s production expansion and development into an automotive hub for the
region and beyond, especially in the LCGC sector, will depend heavily on infrastructure development.
Infrastructure (roads, electricity supply, sea and airports) is one notable weak spot for Indonesian industry.
This has already been identified by the Indonesian government, who addressed the question extensively in
the so called “Masterplan for Acceleration and Expansion of Indonesia’s Economic Development” in 2011.
Within this comprehensive economic policy plan, the Indonesian government foresees increased
investments in infrastructure. Whether or not it will be able realize these goals remains to be seen. Certain
infrastructure upgrades will be crucial for the country’s overall capacity. One example is the notoriously
overburdened Tanjung Priok seaport in Jakarta, which is currently undergoing a long-term expansion
program in order to become bigger and more efficient.71
Another concern on the production side is the Indonesian labor market. While the Indonesian labor force is
abundant, young and yet relatively cheap, recent significant increases in the minimum wage have made
producing in Indonesia more costly (in 2013 alone, the minimum wage in the automotive industry
experienced a significant increase of 45% in Jakarta and 30% in Bekasi)72. Furthermore, relatively rigid
labor laws remain in place. It has to be kept in mind, however, that the automotive sector in Indonesia is
one of the sectors in which the minimum wages are regulated on the province level.73
Furthermore, companies are facing challenges arising from tariff but especially non-tariff trade barriers
(NTB). For instance, fuel quality in Indonesia is still not living up to international standards. Both high lead
contents in gasoline, as well as high sulphur contents in diesel (currently only fulfilling Euro2 standards),
influence market entry for car makers as they have to adapt to these local circumstances74. Moreover,
regulatory uncertainties (namely overly short transition periods which are hard for companies to comply
with) and a protectionist drive from the government complicate business activities for European companies.
Compliance with the Indonesian National Standards (SNI) has in recent years has also proven to be a
burdensome exercise for some foreign businesses.
69
Oxford Business Group, Economic Updates, Indonesian Market Attracts attention from car makers, 2013. Available at: http://www.oxfordbusinessgroup.com/economic_updates/indonesian-market-attracts-attention-car-makers. 70
Bank of Indonesia, Website. Available at: http://www.bi.go.id/en/perbankan/suku-bunga-dasar/Contents/Default.aspx . 71
Global Business Guide Indonesia, op. cit. 72
Ipsos Business Consulting, Automotive Parts Industry in Indonesia, op. cit. 73
Ibid. 74
CAI – Clean Air Initiative, Glynda Bathan, Current Fuel Quality and Vehicle Emmission Standards – Opportunities and Challenges in Asia, Presentation, Manila, 2013. Available at: http://www.unep.org/transport/pcfv/PDF/pathumbai_glyndabathan.pdf.
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III. Future trends and remaining challenges
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Unlike some of its ASEAN neighbours, Indonesia has not yet signed the UN/ECE 1958 Agreement setting
international standards for automotive products. The National Standardization Agency (BSN) therefore
developed national technical requirements for the industry, their implementation being either voluntary or
mandatory depending on the product. The obtainment of the SNI mark and number for a given product
often involves complicated testing procedures for which there are few certified facilities. Incidentally,
certification procedures significantly increase costs and delay when companies are looking to release their
products on the market. Moreover, the application of domestic automotive standards different from
international standards can potentially contribute to setting Technical Barriers to Trade (TBT) and non-tariff
barriers (NTB). These apply to European and Indonesian exports, affecting bilateral trade and creating
unnecessary burdens for producers and manufacturers.
However, the ASEAN initiative to harmonize the regional automotive standards, based on the UN/ECE
regulations (implementation of the ASEAN Mutual Recognition Agreement on type approval for automotive
products and systems), will facilitate the trade of automotive goods between Indonesia and the international
market. This harmonization is also expected to have extremely positive impacts on the quality of the local
products (especially in terms of environmental and safety standards). 19 priority UN/ECE technical
regulations, out of the existing 140 related to specific car parts have been identified:
Table 7: 19 Priority UN/ECE Regulations for Harmonization75
COMPONENT REGULATION NBR.
BRAKING SYSTEM R13
BRAKING SYSTEM (Passenger Car) R13H
SEAT BELT ANCHORAGE R14
SEAT BELT R16
SEAT R17
HEAD RESTRAINT R25
PNEUMATIC TYRE - Passenger R30
SPEEDOMETER (L Category) R39
EXHAUST EMISSION (L Category) R40
NOISE (L Category) R41
SAFETY GLASS R43
REAR VIEW MIRROR R46
DIESEL EMISSION R49
NOISE EMISSION R51
PNEUMATIC TYRE - Commercial R54
DRIVER OPERATED CONTROL R60
TYRE (L CATEGORY) R75
STEERING EQUIPMENT R79
EXHAUST EMISSION R83
75
AEM-METI Economic and Industrial Cooperation Committee, Harmonization of Technical Regulations for Automotive, 12th
AMEICC WG on Automotive Industry meeting, Presentation, January 2011
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III. Future trends and remaining challenges
41
Beyond regulatory and standards-related issues, European products are subject to extremely high import duties to which excise taxes are added, significantly affecting production costs and selling price. To become more competitive regionally, Indonesia should reduce its import duties gradually through the creation of import schemes tailored to the Indonesian market’s characteristics.
Indonesia’s two main competitors have already implemented such measures. First, in Malaysia it is possible to limit the import duty to 10% and the excise tax to 0% if the local content ranges between 30-40%, depending on the engine capacity. And second, in Thailand, where the use of the free trade zones would limit the import duty to 0% and the excise tax between 34 and 71% of the ex-factory price76. The table below highlights the import duties and luxury tax for automotive products in Indonesia.
Table 8: Import Duty and Luxury Tax for various car types77
Category Engine type Displacement Import Duty (%)
Luxury Tax (%) CBU CKD New IKD
Passenger car
4x4
Gasoline 1500< CC < 3000 40 10 0 40
CC > 3000 40 10 0 125
Diesel 2000 < CC < 2500 40 10 0 40
CC > 2500 40 10 0 125
Sedan
Gasoline 1800 < CC < 3000 40 10 0 40
CC > 3000 40 10 0 125
Diesel 2000 < CC 2500 40 10 0 40
CC > 2500 40 10 0 125
Passenger
Car 4x2 Gasoline
1500 < CC < 2500 40 10 0 20
CC > 3000 40 10 0 125
The Government of Indonesia has now an important role to play in transforming the country to become a
production hub for export and an important actor in the automotive global supply chain. In order for this to
be attained, some in-depth structural and political changes need to be implemented. Indonesia must
urgently develop its infrastructure in order to allow its economy to continue growing. Further investments
also have to be made in the education system. Last but not least, a more conducive and less protectionist
environment is needed if Indonesia wants to keep attracting foreign investment and fully embrace the
opportunities fostered by regional integration.
Nonetheless, the Indonesian market is the market to look at for global automotive players. While some
challenges, such as poor infrastructure or financial risks, might be hampering growth, the market is likely to
grow. Driven by broader economic growth, its large, consumption-oriented and optimistic population; and
an expanding consuming class, combined with a low level of car penetration, the greatest expansion is
76
EuroCham Indonesia, Import Duty Compared to other ASEAN Countries, Position Papers 2012, Chapter 8 – Automotive,
2012. 77
Eurocham Indonesia, Automotive Working Group, Presentation, February 2014
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III. Future trends and remaining challenges
42
likely in sales. This might lead car manufacturers to further invest in local production, as has already
happened in the past. Ultimately, it could lead to more integrated supply chains in the archipelago, which
would contribute to the country’s goal to become an important production hub by 2015, notably in the LCGC
sector. Such an achievement could be further sustained by the closer economic integration of the ASEAN
market, one of the fastest-growing markets for the automotive industry in Asia.
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Relevant contacts
43
Relevant contacts
GAIKINDO (Association of Indonesia Automotive Industries)
The organization is composed of 41 members representing, to one exception, all the brands and their
related ATPMs present on the Indonesian market. The activities of the organization consist on the following:
To represent its members in discussions with the government on tax and custom concerns.
To cooperate with the government to issue proper standards to be implemented in the industry.
To sponsor important campaigns, like promoting the reduction of fuel consumption, traffic safety,
and environmental issues.
To conduct studies on various aspects relating to vehicles and sectors.
To strive to position the annual Indonesia Motor Show in the same level as other world’s leading
motor shows like the Tokyo Motor Show, Frankfurt Motor Show, Detroit Motor Show, and Geneva
Motor Show.
To promote joints studies and information exchange with its counterparts in other countries,
particularly regarding raw materials, components, and international commerce.
To participate in international automotive industry conferences and organizations like ASEAN
Automotive Federation.
To develop bulletin and website as hubs to disseminate information on progress and achievements
of the national automotive industry.
Chairman: Mr. Sudirman M. Rusdi
Contact:
Jalan Teuku Cik Diitiro No 6 D-E-F
Menteng, Jakata Pusat 10350
Tel.: +62 21 315 7178
Fax.: +62 21 314 2100
E-mail: [email protected]
Website: http://www.gaikindo.or.id/
GIAMM (Indonesian Automotive Parts and Components Industries Association)
The organization is composed of 161 members (95 joint ventures with international OEMs) representing
most of the key players in the car and components industry. The mission of the organization consists on the
following:
Establishing and maintaining a communication platform between its members on the issues
affecting the industry,
Building and maintaining a consultation forum with the governments and various institutions (local
and international) regarding all matters related to the development of the automotive industry,
Promoting the expansion of the Indonesian component market both locally and internationally
through joint promotion programs and partnerships.
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Relevant contacts
44
President Director: Ir. Hadi Surjadipradja
Contact:
Jalan Sunan Sedayu No. 43
Rawamangun, Jakata Timur 13220
Tel.: +62 21 3606 1289
Fax.: +62 21 472 0944
E-mail: [email protected]
EuroCham Automotive Working Group
The European Chamber of Commerce in Indonesia
EuroCham’s automotive working group is composed of all the major European car manufacturers and
suppliers active in Indonesia. The overall objective of the working group is to facilitate the
communication within the European business community and the Indonesian sector associations,
inform them on the regulatory changes, and establish a constructive dialogue with the Indonesian
Government.
The working group meets once a month in order to update the industry on any changes which could affect
their business and determine further action to be taken towards the Government of Indonesia.
Executive Director: Mrs. Femke Kramer
Contact:
Wisma 46, Kota BNI, 25th Floor
Jl. Jenderal Sudirman Kav. 1
Jakarta 10220
Tel.: +62 21 572 2056
Fax.: +62 21 572 2057
Email: [email protected]
Website: http://www.eurocham.or.id/
National Standardization Body - BSN
National Standardization Body was established by Presidential Decree No. 13 of 1997, later amended by
Presidential Decree No. 166 of 2000 regarding Position, Duties, Function, Authorities, Organization Chart
as well as Working Conditions of Non-departmental Government Institutions. A further modification by
Presidential Decree No. 103 Year 2001 made BSN a non-departmental government institution with main
responsibility to develop and conduct standardization activities in Indonesia. This agency was established
to replace the function of National Standardization Council – DSN. In performing its tasks, the National
Standardization Agency refers to the Government Regulation No. 102 of 2000 regarding National
Standardization which set out its responsibilities:
Assessment and preparation of national policy in the field of standardization;
Defining Indonesian National Standards (abbreviated SNI)
Organizing national and international collaboration in the field of standardization
Provide information systems on national and international standards;
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Relevant contacts
45
Serve as WTO-TBT notification and enquiry point
Chairman: Prof. Dr. Ir Bambang Prasetya
Contact:
Manggala Wanabakti Blg. Block IV, 4th Floor
Jl. Jenderal Gatot Subroto
Jakarta 10270
Tel.: +62 21 574 7043 – 574 7044
Fax.: +62 21 574 7045
Email: [email protected]
Website: http://www.bsn.go.id/
Ministries and Government Agencies
Coordinating Ministry for Economic Affairs
The Coordinating Ministry for Economic Affairs has the key task of assisting the President in synchronizing
and coordinating the planning, preparation, and implementation of all policies in the field of economy. They
are therefore coordinating the activities of all Ministries involved in the strategy they designed.
The Coordinating Minister for Economic Affairs, Mr. Charul Tanjung, is assisted in his tasks by several
Deputy Ministers each of them in charge of specific topics. The Deputy Minister for Industry and Trade
Affairs is a major counterpart of the automotive industry in Indonesia.
Deputy Minister for Industry and Trade Affairs: Mr. Bayu Khrisnamurti
Contact:
Gedung Utama Lantai 5
Jl. Lapangan Banteng Timur No. 2-4
Jakarta Pusat 10710
Tel.: +62 21 352 1835
Fax.: +62 21 351 1643
Email : [email protected]
Website:http://www.ekon.go.id/about-us/struktur-organisasi/deputi-iv-bidang-koordinasi-industri-dan-
perdagangan
Ministry of Industry
Among other industrial product sectors, the Ministry of Industry of the Republic of Indonesia is responsible
for mandatory marking of automotive products with the SNI label and the SNI number it refers to.
The Ministry of Industry of the Republic of Indonesia is divided into several Directorates General each
handling specific product sectors.
Directorate General of High Technology Based Leading Industry (for car manufacturers)
Contact:
Jl. Jenderal Gatot Subroto, Lt. 9
Jakarta Selatan 12950
Tel.: +62 21 525 2693 – 525 5509
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Relevant contacts
46
Fax.: +62 21 525 2893
Website: http://www.kemenperin.go.id/struktur/iubtt
Directorate General of Manufacturing Industry Base (for car components’ manufacturers):
Contact:
Jl. Jenderal Gatot Subroto, Lt. 9
Jakarta Selatan 12950
Tel.: +62 21 525 1127 – 525 5509
Fax.: +62 21 525 2978
Website: http://www.kemenperin.go.id/struktur/bim
Ministry of Transportation – Directorate General of Land Transportation
Within the Ministry of Transportation, the Directorate General of Land Transportation is responsible to
formulate and implement the policies in the fields of road transportation and traffic, inland waterways and
ferry transport, urban transport and land transport safety.
They also formulate and implement standards, norms, guidelines, criteria and procedures in all the fields
listed above as well as provide technical guidance.
Director General: Suroyo Alimoeso
Contact:
Jl. Medan Merdeka Barat No. 8
Jakarta 10110
Website: http://www.dephub.go.id/organisasi/?Id=4
Ministry of Trade
The Ministry of Trade of the Republic of Indonesia is responsible for the following:
Trade standardization (labeling)
Quality control of export/import products. (registration of import/export licenses)
Consumer Protection
Directorate General for International Trade Cooperation
Contact:
Ministry of Trade
Jl. M.I. Ridwan Rais No. 5, Main Building, 8th Floor
Jakarta 10110, Indonesia
Tel: +62 21 2352-8601, 385 8171
Fax: +62 21 2352 8610
E-mail: [email protected]
Website: www.depdag.go.id
Directorate General of Customs and Excise
Under the Ministry of Finance of the Republic of Indonesia, the Directorate General of customs and excise
has the responsibility to:
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Relevant contacts
47
Formulate the technical policies in the field of customs and excise, in accordance with the policy
determined by the Minister and the prevailing government regulations and laws.
Plan, implement, control, evaluate, and secure the traffic of goods entering and leaving the customs’
territory.
Plan, implement, control, evaluate and secure the operations in the field of import duty and excise
levies.
Contact:
Directorate for Customs and Excise Information
Ministry of Finance, Building A, 1st Floor
Jl. Jend. A. Yani 108, By Pass
Jakarta 13230
Tel: +62 21 489 1581
Fax: +62 21 489 2859
E-mail: [email protected]
Website: www.beacukai.go.id
Indonesia Investment Coordinating Board - BKPM
The Indonesia’s Investment Coordinating Board (BKPM) is the primary interface between foreign
companies interested in investing in Indonesia and the Government of Indonesia. BKPM has a ministerial
status (reports directly to the President of the Republic of Indonesia) and is mandated to boost domestic
and foreign investment by creating a conducive investment climate. The agency also plays a role of
matchmaker for investors.
Prior to investing in an Indonesian company, any foreign business must apply for a registration approval
from BKPM, and inform the agency of the nature of the intended investment (investment source, line of
business of the Target Company, production capacity, etc.). More information on the procedures can be
found on their website.
Chairman: Mr. Mahendra Siregar
Contact:
Investor Relations’ Unit
Jl. Jenderal Gatot Subroto No. 44
Jakarta 12190
Tel.: +62 21 5292 1329-30/5292 1334-35
Fax.: +62 21 5264 211
Email: [email protected]
Website:http://www.bkpm.go.id/
Abbreviations
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Abbreviations
AEC ASEAN Economic Community GDP Gross Domestic Product
AFTA ASEAN Free Trade Area GIAMM Indonesian Automotive Parts and Components Industries Association
APEC Asia Pacific Economic Cooperation HMI Human machine Interface
ASEAN Association of South-East Asian Nations IKD Incomplete Knocked Down
ASEAN MRA ASEAN Mutual Recognition Agreement KADIN Indonesian Chamber of Commerce
and Industry
ATPM Agen Tunggal Pemegang Merk (Trademark Holding Sole Agent)
KAN Komite Akreditasi Nasional National Accreditation Body of Indonesia
BAPPENAS
Badan Perencanaan dan Pembagunan Nasional (National Development Planning Agency)
LCE Low Carbon Emission
BKPM Badan Koordinasi Penanaman Modal (Indonesian Investment Coordinating Board)
LCGC Low Cost Green Car
BSN Badan Standardisasi Nasional (National Standardization Bureau)
MP3EI Masterplan “Acceleration and Expansion of Indonesian Economic Development”
BPS Badan Pusat Statistic MPV Multi-Purposes Vehicle
CBU Completely Built Unit NAM Non-Aligned Movement
CEPA Comprehensive Economic Partnership Agreement
NGO Non Governmental Organization
CEPT Common Effective Preferential Tariff NTB Non Tariff trade Barrier
CKD Completely Knocked Down OEM Original Equipment Manufacturer
CNG Compressed Natural Gas OIC Organization of the Islamic
Conference
DPD Regional Representation Council SME Small and Medium-sized
Enterprise
DPR People’s Representative Council SNI Standar Nasional Indonesia (Indonesian National Standard)
EPA Economic Partnership Agreement SUV Sport Utility Vehicle
EuroCham The European Chamber of Commerce in Indonesia
TBT Technical Barriers to Trade
FDI Foreign Direct Investment UN/ECE United Nations Economic Commission for Europe
GAIKINDO The Association of Indonesia’s Automotive Industries
WTO World Trade Organization
Trade Fairs in Indonesia
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Trade Fairs in Indonesia
Indonesia International Motor Show: 18-28 September 2014 (annual) - JIExpo Kemayoran – Jakarta, Indonesia http://indonesianmotorshow.com/
Tyre and Rubber Indonesia: 18 – 21 March 2015, JIExpo Kemayoran – Jakarta, Indonesia http://tyre-indonesia.net/
INAPA JAKARTA 2015: 18 – 21 March 2015, JIExpo Kemayoran – Jakarta, Indonesia trade fair for automotive parts, accessories, equipment and services
http://inapa-exhibition.net/
The Indonesia International Bus, Truck & Components Exhibition(IIBT): 18 – 21 March 2015, JIExpo Kemayoran – Jakarta, Indonesia http://www.iibt-exhibition.net/
IndoAutomotive: 17-19 September 2015, JIExpo Kemayoran – Jakarta, Indonesia http://www.indoautomotive.com/
References
www.eibn.org 50
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Tempo, LCGC replaces MPV market, 06.02.2014. Available at: http://en.tempo.co/read/news/2014/02/06/056551523/LCGC-Replaces-MPV-Market-Businesses-Say The Jakarta Globe: BMW Indonesia posts 28 per cent sales volume growth in 2013, Carla I. Octama, January 24 2014. Available at: http://www.thejakartaglobe.com/business/bmw-indonesia-posts-28-percent-sales-volume-growth-in-2013/ Daihatsu Ayla hits the road, Carla Isati Octama et al., 10.09.2013. Available at:
http://www.thejakartaglobe.com/business/daihatsu-ayla-hits-the-road/ Luxury Auto tax hike has few fans, Muhammad Al Azhari, September 19 2013. Available at: http://www.thejakartaglobe.com/business/luxury-auto-tax-hike-plan-has-few-fans/ Mercedes-Benz Indonesia Unveils M-Class, November 22, 2012 Toyota announces Rp. 26 Trillion Indonesian Investment Plan, Arientha Primanita, November 10 2012. Available at: http://www.thejakartaglobe.com/archive/toyota-announces-rp-26-trillion-indonesian-investment-plan/ Volkswagen to Start Investing in Indonesia Early Next Year, March 11, 2013. The Jakarta Post: BMW to boost production with USD 11.7m investment, June 01, 2011 Indonesia rides its way to being the next Auto hub, Linda Yulisman, April 14 2014. Available at: http://www.thejakartapost.com/news/2014/04/14/indonesia-rides-its-way-being-next-auto-hub.html Indonesians spend most time on smartphones in the world, Khoirul Amin, June 5 2014. Available at:
http://www.thejakartapost.com/news/2014/06/05/indonesians-spend-most-time-smartphones-world.html The new rich drive demand of luxury cars, Linda Yulisman, November 18 2013. Available at: http://www.thejakartapost.com/news/2013/11/18/the-new-rich-drive-demand-luxury-cars.html Tirebusiness, Pirelli breaks ground on Indonesia M/C ire plant, August 19 2013. Available at: http://www.tirebusiness.com/article/20130819/NEWS/130819927/pirelli-breaks-ground-on-indonesian-m-c-tire-plant
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Trademaps. Available at: www.trademaps.org Wards Auto, Gm returns to Indonesia with 150 million Manufacturing bet, May 16 2013. Available at: http://wardsauto.com/plants-amp-production/gm-returns-indonesia-150-million-manufacturing-bet World Bank, World Statistics, Available at: http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTHEALTHNUTRITIONANDPOPULATION/EXTDATASTATISTICSHNP/EXTHNPSTATS/0,,contentMDK:21737699~menuPK:3385623~pagePK:64168445~piPK:64168309~theSitePK:3237118,00.html
Disclaimer
Figures in this report are EU-Indonesia Business Network’s best estimates of the value of the
corresponding variables. Although due care was taken in the preparation of the report, the EU-Indonesia
Business Network (EIBN) makes no warranty as to its accuracy or completeness and is not to be deemed
responsible for any error or loss resulting from its use. Other organizations quoted herein are in no way
responsible for the content of the report or the consequences of its use.