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Mercedes-Benz allocates $20m to increase trucks’ local content

Charmed by the infrastructure craze in Indonesia, the German automobile manufacturer Mercedes-Benz has decided to ride the bullish business by launching its first on-road trucks in the country

Stefani Ribka (The Jakarta Post)
Sat, March 18, 2017

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Mercedes-Benz allocates $20m to increase trucks’ local content

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harmed by the infrastructure craze in Indonesia, the German automobile manufacturer Mercedes-Benz has decided to ride the bullish business by launching its first on-road trucks in the country. It even promised to increase the local content by almost half.

PT Mercedes-Benz Indonesia has allocated about US$20 million through 2018 to engage with local suppliers and equip the existing plant in Wanaherang, Bogor, West Java, to increase the local content of the trucks by 40 percent.

“That [the $20 million] is separate from our plan to develop more dealerships,” said Maximillian Knorr, general manager of Daimler South East Asia Pte. Ltd, part of Daimler AG — the parent company of Mercedes-Benz Indonesia, on Thursday.

Mercedes-Benz Indonesia will produce seven out of the 11 types of trucks locally this year, while the remaining four will continue to be produced in India. It will start by using local tires before moving on to other components.

The trucks are tagged at Rp 500 million (US$37,453) to Rp 800 million per unit across the archipelago, mainly on Java, Sumatra, Kalimantan and Sulawesi. To boost the sales of the commercial vehicles, Mercedes-Benz aims to increase the number of its dealers to between 25 and 35 in the next five years, from 11 outlets today.

The on-road trucks — modifiable into container trucks and even into cement mixers — have long been built in India for years with a load capacity of 16 to 37 tons. The firm claimed to have exported them to about 40 countries worldwide, including to Africa and Latin America.

“[We entered into the on-road truck segment today because of] the potential market here amid surge in infrastructure projects. And, everyone believes that it’s the right time to add more local production here. The government has been doing a tremendous job with attracting more investment,” Maximillian said.

Mercedes-Benz Indonesia aims to add 120 more jobs in the truck lines alone next year. Its sole plant in Wanaherang can produce up to 4,500 trucks annually, besides passenger cars that it has been producing for dozens of years.

The government lauded the firm’s commitment to invest more and increase the local content as such expansion was in line with the government’s ambition of becoming an auto hub in the region by 2020.

The country aspires to produce 2.5 million cars by that time, from 1.1 million last year, said Yan Tandiele, director of maritime industry, transportation and defense equipment with the Industry Ministry.

Other automotive giants, such as Japan-based Mitsubishi and Chinese SAIC General Motors Wuling (SGMW) Motor, are scheduled to start building new plants for producing passenger cars this year.

The supporting industries are also gearing up toward the auto-hub dream. Petrochemical giant PT Chandra Asri Petrochemical recently launched a resin production-line for automotive plastic components.

Commercial trucks enjoyed an 18.72 percent rise in sales to 88,773 units along 2016 compared to 74,769 units in 2015, data from Indonesia Automotive Manufacturers Association (Gaikindo) showed.

Gaikindo general secretary Kukuh Kumara said the commercial truck segment is on the rise amid the surge in infrastructure projects. He hopes the infrastructure boost will oil the economic growth and jack up the sales of non-commercial cars, too.

“Once infrastructure is done, the economy will grow and we’ll need more vehicles,” he said over the phone. Vehicle sales grew by 6.8 percent to 1.08 million units in 2016, from 1.01 million in 2015.

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