Role of Heavy equipment sole agent in Indonesia 2010

INDONESIAN COMMERCIAL NEWSLETTER

June 2010

ROLE OF HEAVY EQUIPMENT SOLE AGENTS

Distribution System

The marketing of various brands of heavy equipment is handled by sole agents named by their principals. The use of agents was earlier required by regulation as foreign companies were not allowed to operate in distribution and retail trading business. Even producers of heavy equipment in the country had to name local sales agents.

In the 1990s the government abolished the regulation and allowed foreign companies to operate in retail trading and sell their own products in the country. However, many foreign companies still maintain their agents and distributors to help in marketing.

The sole agent for Komatsu is PT United Tractors, that of Caterpillar is PT Trakindo and that of Hitachi is PT Hexindo Adiperkasa.

The products of heavy equipment not yet produced but imported into the country include Kobelco, Volvo, Case, etc. See the following table.

The roles of sole agents in the marketing of heavy equipment are not the same, but depend on the contracts they sign with the principals.

The sales of Caterpillar heavy equipment and components in the country are handled only by PT Trakindo Utama and its branch offices in various areas. The agent is protected by its principal . No Caterpillar heavy equipment and spare parts are sold in the country other than through Trakindo.

PT United Tractors is the sole agent for Komatsu heavy equipment in Indonesia but Komatsu is not that tight . Traders are known to import Komatsu spare parts from its agent in Singapore to be sold in Indonesia.

One important factor to ensure success in marketing of heavy equipment is after sales service and maintenance and provision of spare parts. Caterpillar products , for example, are sold with after sales service and contract for spare part procurement.

Other brands like Kobelco allow greater freedom to import its products to be used in the country without going through its sole agent in Indonesia

Competitive Analysis

After the monetary crisis was over, the market of heavy equipment has changed. Previously corporate users accounted for 80% and small users having 1-5 units, accounted for the remaining 20% of heavy equipment market. Now, however, especially with the expansion of coal mining industry notably in Sumatra and Kalimantan, there are many small companies buying heavy equipment for own use and for rent to small coal mining companies. There are also small tin miners needing more heavy equipment in Bangka Belitung.

Meanwhile, large holders of mining concessions have handed over the job of mining to contractors boosting the growth of rental companies

It is estimated that small users now account for 30% of the heavy equipment market in the country.

There are three brands competing sharply in the market of heavy equipment Komatsu, Caterpillar, and Hitachi. Since the demand for heavy equipment surged in 2003, the producers of the three brands in the country could not meet the market demand. In 2004, order by indent could take up to 6 months before delivery was made. Since then brands like Volvo and Kobelco began to have substantial share of the market.

Other brands of heavy equipment from Korea like Hyundai and Samsung also began to gain from the strong demand in the country.

In 2000, Chinese products of heavy equipment also began to enter the domestic market. Many contractors of construction including infrastructure projects used heavy equipment from China as the prices were relatively cheap, but they soon lost the market as they were not competitive in quality.

The growing demand for heavy equipment in the country has encouraged investment in heavy equipment business but domination by the three major brands remain unchallenged in the market.

Competition in the market of heavy equipment especially for corporate users lies mainly in the after sales service and the ability to guarantee maintenance and availability of spare parts around the clock. Therefore, sole agents of heavy equipment like PT United Tractors (Komatsu), Trakindo Utama (Caterpillar), and Hexindo (Hitachi) have opened branches and offices to serve customers in the regions. The branches have workshops, technicians and keep sufficient stocks of spare parts and components.

With such high demand for services, it would not be easy for new players to enter the competition in the market.

Competition is open the wider for small users and rental companies as they need more different products of heavy equipment allowing more brands an opportunity. Prices and availability of spare parts will determine success in competition in this market ....

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