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INDONESIAN COMMERCIAL NEWSLETTER
April 2011


OVERVIEW OF AUTOMOTIVE INDUSTRY IN INDONESIA


Background

In 2010, automotive vehicles (which includes passenger and commercial vehicles) market was brisker following the recovery of the world's economy from previous year's slump. Automotive sales rose to 764,710 units in 2010 or an increase of 58.1% from 2009. Automotive sales in 2010 hit a new record well above the previous record of 603,774 units in 2008.

The crisis in 2009 adversely affected the country's automotive industry. Based on a report issued by the Association of Indonesian Automotive Industries (Gaikindo) the country's automotive production and sales shrank in 2009. Production fell to 464,816 units in 2009 from 600,628 units in 2008 and sales dropped 19.9% to 483,548 units.

The decline in sales was partly caused by the falling value of the rupiah that caused an increase in the price of cars, forcing many consumers to postpone or cancel plan to buy new cars.

In 2010, the condition improved and the country's automotive production and sales surged. Automotive production rose 51.1 % to 702,508 units.

The cut in Bank Indonesia key rate to 6.5% in August 2009, the lowest since its introduction in July 2005, has contributed to the surge in automotive sales. In addition, automotive manufacturers and sole agents have launched a program of interest subsidy that has helped boost sales.

The automotive market in the country is still dominated by Multi Purpose Vehicle (MPV). MPVs are more attractive than sedan cars in Indonesiaas MPVs are subject to a lower tax regime. In addition, major brands such as Toyota Avanza, Daihatsu Xenia, Nissan Grand Livina and Suzuki APV offer small engine capacity ranging from 1,000cc to 1,500cc which is deemed as more fuel efficient. Larger carrying capacity of MPVs is also another pulling factor.


Structure of automotive industry

Characteristics of automotive vehicle industry in Indonesia

Automotive vehicle industry in Indonesia began to grow with the operation of a number of Trademark Holding Sole Agents (ATPM) in the early 1970s under the decisions of the Industry Minister No. 295/1982 and No. 428/1987. ATPM are national companies appointed by the principal manufacturer to exclusively import, promote, distribute and maintain after sales service within a specific jurisdiction.
The Government of Indonesia originally hoped ATPMs would become the embryo of the country's automotive manufacturing industry through a process of transfer of technology using high local content.

However after 30 years, the industry did not change from its original position as the assembling industry still depended heavily on imports for components. There was little progress toward using more local content to create a manufacturing industry.

The goal of developing a manufacturing industry was even blurred with the 1999 deregulation which gave greater freedom for the import of automotive vehicles in Completely Built up (CBU) form. The role of ATPM became irrelevant as many non-ATPMs imported automotive vehicles in CBU form of which ATPMs originally held the monopoly in imports.

After the Government announced that relations between ATPM and their principals were based on business principles without involvement of the government, some of the foreign principals decided to take over control in production of automotive vehicles leaving the ATPM with the distribution task in the domestic market.

Toyota Motor Corp. took over the assembling division of PT. Toyota Astra Motor (TAM) with TAM becoming the distributor of Toyota in 2003. The manufacturing division was under PT. Toyota Manufacturing Indonesia (TMMIN), which is 95% owned by the principal Toyota Motor Corp.

Meanwhile, Suzuki Motor Corporation took over the production division in PT Indomobil Suzuki International after injecting a fresh capital to increase its stake to 90% from 49% earlier with the remaining 10% owned by PT Indomobil Sukses International Tbk.

Trademark holding sole agent (ATPM)

PT Astra International Tbk and PT Indomobil Sukses Internasional Tbk are the two largest automotive companies dominating the automotive market in Indonesia. The two groups have established cooperation's with a number of foreign principals to become ATPMs for several brands in Indonesia.

The Astra Group is the ATPM for several automotive trademarks, both Asian and European, namely Toyota, Daihatsu, Isuzu, UD Trucks, Peugeot, BMW and Lexus. As sole agents for the seven trademarks, Astra Group has a 52.4% share of car market in Indonesia. Among the main trademarks contributing to Astra's control of the market include Toyota Avanza, Innova, Rush, Daihatsu Xenia, Terios, Grandmax and Isuzu Panther. 

Similarly, the Indomobil Group is the ATPM for both Asian and European trademarks, namely Nissan, Volvo, Volkswagen, Renault, Audi, Hino Trucks, Volvo Trucks, Renault Trucks, Suzuki, Great Wall, Infiniti and Foton (light truck). Among the brands, Indomobil has a 17.3% share of car market in Indonesia. Brands with major contribution to the total car sales by Indomobil in Indonesia include Nissan Grand Livina, Suzuki APV and Suzuki Carry-Futura.

Other ATPMs outside the two large groups include among others, PT Ford Motor Indonesia for Ford cars, PT GM Auto World Indonesia for Chevrolet and PT KIA Mobil Indonesia for Kia.

China automotive manufacturers have also begun to tap the domestic market aggressively. Apart from Chery, there is Foton with two ATPMs - PT Indobuana Autoraya (Indomobil Group) for Foton Light Trucks and PT Foton Mobilindo (Modern Group) for Foton buses, MPV and heavy duty trucks.

Other Chinese automotive manufactures  include Geely, a Chinese top car maker entering Indonesia towards the end of 2010, with PT Geely Mobil Indonesia as its ATPM; and Great Wall (Indomobil Group), which made its appearance in the country more recently offering commercial vehicles through PT Wahana Inti Central Mobilindo (Indomobil Group)


There are two main categories of automotive products in Indonesia - passenger and commercial vehicles. Passenger vehicles include Sedan, MPV, SUV, Hatchback 4x2 and SUV 4x4 and each could be divided further by engine capacity.

Commercial vehicles consist of three types -- Buses, Pick Ups/Trucks  and  Double Cabin 4x2/4x4  each categorized by Gross Vehicle Weight.

Production capacity

Some ATPMs still have double functions - as producer and distributor, but some have been split into manufacturing company and marketing company such as in the case of PT Toyota Astra Motor, which now handles only sales with the manufacturing division taken over by PT Toyota Motor Manufacturing Indonesia (TMMIN) since July 2003. TMMI is 95% owned by Toyota Motor Corporation and 5% by PT Astra Internasional.

Meanwhile, Suzuki Motor Corporation has also increase its stake in PT Indomobil Suzuki International which is the ATPM for Suzuki in Indonesia. PT Indomobil Suzuki International now handles the manufacturing division and distribution is handled by PT Indomobil Niaga International.

Some ATPM have no assembling facility such as PT Tjahja Sakti Motor which is the sole agent for BMW, PT Astra France Motor for Peugeot, PT Foton Mobilindo for Foton, etc. Their automotive vehicles are assembled by other companies like PT Gaya Motor which is not an ATPM or by other ATPMs as affiliate in the same company group.

Toyota Manufacturing Indonesia (TMMIN) has the largest production capacity among the automotive manufacturers in the country with production capacity of 170,000 units/year in 2010. PT. Astra Daihatsu Motor and Nissan Motor Company have production capacity of 143,000 units/year and 52,000 units/year respectively.
           
Production up rapidly in 2011

In 2010, the country's production of automotive vehicles rose fast to follow the global and domestic economic recovery. Consumers who had postponed plans to buy new automotive vehicle in 2009 began to buy in 2010. The growing demand boosted production that surged 51.1% to 702,508 units in 2010. 

Considerable increase in production was recorded in almost all automotive vehicles in all categories in 2010. The MPV / SUV / Hatchback 4x2 category continued to lead in production which recorded 477,252 units out of a total of 702,508 units. Automotive production in 2011 is growing fast with production in January-April 2011 reaching 264,364


Sales in 2011 expected to exceed 2010

Automotive sales surged in 2010, hitting a new record at 764,710 units, after a sharp 19.9% fall to 483,548 units in 2009 from 603,774 units in 2008.  The increase was partly attributable to the steady cut of Bank Indonesia's key rate (BI rate) to 6.5%. The interest subsidy program offered by automotive industry players also contributed to revival of the market.


In 2010, sales of MPV and SUV 4x2 types of automotive  accounted for 504,510 units of the total automotive sales in the country with Pick Ups/Trucks contributing 204,654 units.


An automotive sale in 2011 is growing fast. As at end of April 2011, sales reached 37.5% of total sales in 2010.

Tight competition in sales early 2011

In 2011, automotive market remained brisk. The economic growth (which exceeded 6% in 2010), the strengthening of the rupiah against the US dollar and relatively low interest rate are factors driving sales since the start of 2011.
Coordinating Minister for Economic Affairs, Hatta Rajasa, said the faster economic growth in the first three months of 2011, and indicated that the purchasing power of the people remained strong. According to the Central Statistic Agency (BPS), the country's economy expanded 6.5% in the first quarter of this year. Improved purchasing power of the people contributed to increase in car sales in the first quarter of the year.

Toyota, Daihatsu and Nissan are among the best selling brands in March 2011. Toyota maintained the largest market share spearheaded by Avanza, Innova, Yaris and Rush. Daihatsu came up with Xenia and Terios, and Nissan with Grand Livina and Nissan March, a new comer in the Hatchback market, showed an impressive growth in sales .

Data from Gaikindo showed that in March, Daihatsu Xenia was relegated by Kijang Innova in sales. Sales of Kijang Innova reached 5,293 units against Daihatsu Xenia 4,681 units. Toyota Avanza maintained strong lead with sales sreaching 16,993 units.

Sales of Xenia in February were 5,018 units, down from 6,619 units in January. Meanwhile, sales of Kijang Innova reached 5,293 units in March, or a significant increase from 4,012 units in February after sliding from 5,158 units in January.

Noteworthy was  the sharp growth recorded in the sales of Nissan Grand Livina  in March 2011 pushing it up to  the top four  from the top six  among its classes  in February  with sales of  2,552 units, pushing aside Suzuki APV which had sales of 2,309 units.

Nissan Grand Livina, which entered the Indonesian market in 2007 remained the star performer for Nissan in the MPV market  this year.  In 2010 its sales totaled 22,560 units.

Hoping to grab a larger share of the market in 2011, Nissan came up with a face lift for Grand Livina, expecting to post sales of 2,000 units per month.  Nissan also offers Nissan X-Trail to remain competitive in the SUV market in Indonesia. In 2010, sales of Nissan X trail reached 4,682 units.

Nissan recently launched Nissan March, which made its first appearance in the Indonesian market in December 2010, to maintain lead in the hatchback market. For 1st quarter 2011, sales for Nissan March reached 4,894 units or 26% of the Hatchback segment in Indonesia.

In the first quarter of 2010, sales of Honda cars reached 13,364 units, as compared to 13,679 units in the same period in 2011. Sales of Honda Jazz reached 4,674 units or 25% market share in the hatchback segment

Honda Freed, a new star performer of Honda, expected to push up the total sales of Honda car in the country. In March 2011, sales of Honda Freed reached 1,454 units, up 58% from the previous month of only 915 units. Previously Honda had relied more on its CRV model, the sales of which reached 1,741 units in March 2011.

Market dominated by MPV

Seven seat MPV model are the best sellers in Indonesia based on a number of factors - lower in price due to the tax regime, more fuel efficient and larger in seat capacity.

Almost all ATPMs in Indonesia have a share in the MPV automotive market. TAM still leads in the MPV car market spearheaded by its Toyota Kijang, followed by Toyota Avanza, and Daihatsu Xenia, which are produced in cooperation with affiliate Astra Daihatsu Motors (ADM).
Nissan Grand Livina has contributed significantly to increase in the domination of MPV in the country's automotive market. A sale of Grand Livina has seen good growth and it is close to becoming one of the top 3 brands.  Meanwhile, Suzuki relies on its APV type to keep market foothold in the  country  and Isuzu still relies on Isuzu Panther  in the market of  medium MPV  competing with Kijang Innova......



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