Reyhan Fabiano and I. Christianto, Contributors, Jakarta | Mon, 12/13/2010 12:04 PM
Total domestic car sales in Indonesia rose remarkably by almost 60 percent to 694,750 units in January-November this year compared to the corresponding period in 2009, according to the Indonesian Automotive Association (Gaikindo).
Data from the association shows significant sales in recent months. If car sales in December reach at least a moderate forecasted figure of 50,000, total sales in 2010 will reach 744,750 units, up by 54 percent from 483,548 recorded last year.
In 2009, the car sector was gloomy with a 20-percent drop in sales in contrast with the previous year. Car sales in Indonesia reached 318,904 in 2006 (a drop of 40.3 percent due to fuel price increase in 2005), the figure rebounded to 434,341 units in 2007 (up by 36.2 percent), and to 603,744 in 2008 (up by 39.32 percent).
So be ready if traffic in Jakarta comes to a standstill earlier than 2015 as predicted by several city planners and environmentalists, because more cars are being sold in the city, the biggest market in the country with about 30 percent of the country’s annual car sales.
The car sector seems to be enjoying a renaissance. Almost all brands have a higher production level than the same period in the previous year.
This is due to the good macroeconomic conditions with a growth of 5 percent-5.5 percent, the strengthening exchange rates of the rupiah against the US dollar, the relatively lower lending rates and the better purchasing power of the middle-class communities.
However, compared to China, the car market in Indonesia is far lower in terms of volume, according to the chief executive for Daihatsu sales of PT Astra International Tbk Suparno Djasmin. Citing a recent media report, he said China is the world’s largest car market with estimated sales of 18 million units this year. “China is the biggest player in the world overshadowing the US.”
For the car market to reach a level like China, for example, Indonesia’s automotive sector needs support from the government. A top car executive says in the free trade era, the government should issue regulations to filter the imports of automotive products. “With a free-style import of finished products, the domestic automotive industry will be difficult to develop,” he said.
Analysts believe the supporting sectors such as steel, plastic and related components can grow rapidly in line with the growth in the automotive market. However, if the imports of finished products last, players in the supporting industry will find it difficult to grow and prefer to import as it’s easier while the risks are also fewer.
The plan to implement environmentally friendly cars, for example, should also support the development of the national automotive industry. If not, the businesses will just import eco-cars like those developed in Thailand.
Nonetheless, with various challenges, the national automotive industry will probably continue to grow. “National car sales in 2011 are forecast to grow following the trend growth of 2010,” said President Director of Indomobil Group Gunadi Shinduwinata.
Djasmin even predicted that sales would reach 1 million by 2013, sooner than 2015 as initially projected.
Despite the global financial crisis, domestic political and economic turmoil, car sales in Indonesia will keep growing. Djasmin said sales reached only 70,000-100,000 units in the 1970s and rose to 200,000-300,000 in 1990 and to around 700,000 this year.
He added in Asia, Japan is among the largest car markets with around 5 million sales, while Indonesia is projected to over take Thailand in total car sales this year.
As the world’s fourth most populous nation, Indonesia indeed offers a huge market. Carmakers from Europe, Japan, Korea and now China — like PT Geely Mobil Indonesia (GMI), which has just launched its latest type, Panda — have entered and are looking for more profits in the archipelago.
The government has changed its paradigm in developing the car sector. It’s not about the creation of a domestic automotive industry, once adopted by the former New Order regime which aimed to create a product and brand independent from international influence.
A national car is now defined as a car assembled in Indonesia by principals with large amounts of local components. It’s a matter of time, Indonesia will someday have its own national car when it’s ready to face the stiff competition in the world and is supported by huge investment and sophisticated research, technology and highly qualified human resources.
At present, the government is happy if car sole agents increase their collaboration with the world’s car makers, by assembling cars like the popular Kijang van. Fortunately, the international car business now tends to have local partners in developing their products.
Indonesia is currently poised to compete with Thailand as the base for automotive production. Supported by much better social, political and economic conditions, Indonesia is also one of the places offering the lowest production costs in the world.
