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INDONESIAN COMMERCIAL NEWSLETTER
March 2010

DEVELOPMENT OF AUTOMOTIVE  INDUSTRY IN INDONESIA

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Backgrounds

The impact of the global financial crisis that struck in 2008 has affected the performance of the country's automotive industry especially in 2009. Based on a report from the Association of Indonesian Motor Vehicle Industries (Gaikindo)  car production and sales in 2009 dropped form the previous year. The production  shrank to 464,815 units in 2009 from 600,628 units in 2008 or a decline of 22.6%.

Meanwhile, sales fell 19.9%  from 603,774 units in 2008  to 483,548 units in 2009 although exceeding the target set by Gaikindo of  450,000 units. Sales in 2008 were the highest  in five years. The decline followed the falling value of the rupiah that resulted in an increase in prices. The price hikes forced consumers to postpone plan to purchase new cars.

In addition, high interest rate  set by banks and  financing firms  as a result of the global financial woes discouraged people from buying new cars. However,  sales of some major brands like Toyota, Daihatsu  and  Mitsubishi grew in 2009.

Meanwhile, exports also  dropped contributing to the decline in total sales of cars in 2009. Exports of cars in completely built-up  (CBU) form totaled 56,669 units  in 2009 or down 43.8%  from 100,982 units in the previous year. Among the sole agents and car makers succeeded in exporting cars are PT. Astra Daihatsu Motor (ADM). The assembler for Daihatsu cars exported 31,450 units of cars in  2009.  ADM's main export products are Gran Max and Terios which were exported to Japan, South Africa and Middle East.

Car sales on the domestic market are dominated still by Multi Purpose Vehicle (MPV). In this segment, Toyota's main products Avanza and  Inova led  in market share putting competitors behind like Xenia of  Daihatsu  and  APV  of  Suzuki.  

In 2010, the car market began to revive to follow the world's economic trend which is heading toward recovery. The country's auto industry, however, will face new challenge in 2010 with the implementation of the Asean China Free Trade Area (ACFTA), which became effect on  1 January 2010. It is feared that Chinese car makers would be more aggressive in their penetration of the domestic market. A number of Chinese car makers already have their agents importing cars from that country in completely knocked down (CKD) form and built production facilities in the country.

Structure of Motor Vehicle Industry

Characteristics of Motor Vehicle Industry in Indonesia
Motor vehicle industry  began to grow since the operation of brand holding sole agents (ATPM) early the  1970s' under a decision of the industry minister No. 295/1982  and  No. 428/1987. ATPMs were licensed to assemble, produce  and distribute their products  in Indonesia.
ATPM operates as  sole agents selling cars in the country  and  as car makers.

In the beginning the  government of  Indonesia hoped that ATPM  would become the embryo for auto industry through transfer of technology to produce cars with high local content.

However, after 30 years, there was no significant progress made toward  developing the assembling industry to manufacturing industry with high dependence on imports for components. As a result the prices of cars remain high.

In 1999, the government's deregulation measure killed the  idea of developing full manufacturing industry in the automotive sector. The policy allowed import of cars in CBU form. The role of ATPM became insignificant as non ATPM also were allowed to import any brand  of cars .

Foreign principals, therefore, decided to take over the production operations of their car products  allowing  the ATPM only to serve as the distributors.

Toyota Motor Corp. took over the manufacturing division of PT. Toyota Astra Motor (TAM) and made TAM as a distributor of Toyota cars in 2003. The manufacturing sector is operated by PT. Toyota Manufacturing Indonesia (TMMIN), which is  95% owned by Toyota Motor Corp.

Meanwhile, Suzuki Motor Corporation took over control of the manufacturing operation of PT Indomobil Suzuki International  and increased its share to 90%  from 40% earlier.  The remaining 10% is held by Indomobil Sukses International. Distribution of its cars is handled by PT Indomobil Niaga International 

Brand holding sole agents (ATPM)
Astra and Indomobil are two largest groups of automotive companies in Indonesia  cooperating with a number of foreign principals  and serve as ATPM  selling cars in  Indonesia.

Astra is agent for Asian and European cars including Toyota, Daihatsu, Isuzu, Nissan Diesel  and  Peugeot. Indomobil Group is sole agent for Suzuki, Volvo, Audi, Nissan, Ssangyong, Mazda, Hino, Renault  and  VW Caravelle.  There are also other smaller ATPM to operate as agents for a number of brands like PT Garuda Mataram Motor ATPM for  Audi  and  VW Caravelle, PT Nasional Motor Company  for Mazda  and  Hino ;  PT Daimler Chrysler Indonesia for  Mercedes, Chrysler  and  Jeep, and PT Grandauto Dinamika for Bentley, Daimler, Jaguar  and  Roll Royce.

Sales of VW Caravelle, product of Volkswagen, is handled by PT Garuda Mataram Motor  instead of PT Car & Cars Indonesia, which is the ATPM for Volkswagen in  Indonesia as it was already registered by PT Garuda Mataram Motor when it was first imported to the country for use in the APEX summit in 1992. Currently PT Car & Cars Indonesia is agent for only Volkswagen passenger cars/sedans.


Automotive products in  Indonesia are divided into two categories passenger cars and commercial cars. Passenger cars include sedans, MPV 4x2  and  SUV 4x4  that  consist of a number of types by engine capacity.

Commercial cars include Bus, Pick Up/Truck  and  Double Cabin 4x2/4x4 which consist a number of types by gross vehicle weight.
Production Capacity

There are still a  number of ATPMs operating both as a producer  and distributor, but other operate only as distributors as manufacturing divisions have been taken over by principals such as in the case of PT Toyota Astra Motor (TAM). Now TAM operates only as a distributor. Its manufacturing facility was already taken over in July 2003, by PT Toyota Motor Manufacturing Indonesia (TMMIN), which is 95% owned by Toyota Motor Corporation  and  5% by  PT Astra Internasional.

Suzuki Motor Corporation has also increased its  control  of  PT Indomobil Suzuki International as the ATPM for Suzuki in  Indonesia. PT Indomobil Suzuki International now operates only its manufacturing facility and sales  or distribution is handled by PT Indomobil Niaga International  as a sole distributor.

A number of other ATPM have no assembling plant or manufacturing facility  such as PT Tjahja Sakti Motor as the agent for BMW cars, PT Astra France Motor agent for  Peugeot, PT Pantja Motor agent for Isuzu cars, etc. Assembling of their cars is handled by other companies such as PT Gaya Motor, which is not  an ATPM  or other ATPM such as in the case of Ssangyong, the assembling of which is handled by PT Nissan Motor Indonesia. which belongs to the same group,  the Indomobil Group.

Toyota Manufacturing Indonesia (TMMIN) has the largest production capacity among the car makers in the country. It has an annual production capacity of 170,000 units per year. 

Meanwhile, Mitsubishi car maker the  Krama Judha Group , which earlier had the second largest capacity with two assembling plants - PT Krama Yudha Ratu Motors for commercial cars  and PT Krama Yudha Kesuma Motors for passenger cars - stopped the operation of PT Krama Yudha Kesuma Motors in 2005  resulting in cut in its production capacity  and a decline in its sales of passenger cars in Indonesia.

In 2008, PT. Astra Daihatsu Motor succeeded in increasing its  production capacity to 211,000 units per year  from 105,000 units per year.

In 2010, PT. Astra Daihatsu Motor plans to further increase its production capacity  by operating in two shifts  to 286,000 units per year. he company will spend Rp 250 billion on the expansion plan to start in the second half of 2010  to be completed in  2011.

Production down 22.6% in 2009....

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ICN - March 2010


FOCUS: TIME FOR THE MANUFACTURING SECTOR TO REBOUND

INDUSTRY PROFILE: DEVELOPMENT OF AUTOMOTIVE INDUSTRY IN INDONESIA

INDUSTRY PROFILE: DEVELOPMENT OF MOTORCYCLE INDUSTRY IN INDONESIA
  • Introduction
  • Production capacity increases
  • Producers invest in new factories
  • Producers increase Production capacity for automatic scooters
  • Production down
  • Production of automatic scooters
  • Sales down in 2009, predicted to shoot up in 2010
  • Yamaha and Kawasaki gaining in market
  • Sales of Honda sustained by cub type        
  • Market down in Jakarta and West Java in 2009, up outside Java
  • Exports remain small
  • Launch of new models strategy to attract buyers
  • Variation in engine capacity a strategy to expand market
  • Strategy of 3 S
  • ACFTA's effects on Indonesian motorcycle industry
  • Prospects and Conclusion
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