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Jakarta Post

Automakers raise regulatory challenges ahead of AEC

Khoirul Amin
Jakarta   ●   Tue, November 25, 2014

German car manufacturer BMW hopes for harmonization of regulations among ASEAN countries once the ASEAN Economic Community (AEC) kicks off, while Mercedes-Benz is demanding clearer rules to support its business.

BMW regional head of corporate and governmental affairs, Jan Ehlen, said recently that his firm expected harmonized export regulations as well as quality standards for automotive products within the Southeast-Asian region.

'€œIf you look at what is currently in place, I expect stable article agreement, which is basically the duty-free export intra-ASEAN when you have a certain level of local contents,'€ he said.

BMW, which annually sells around 25,000 units in the ASEAN market, currently has three manufacturing facilities in Thailand, Malaysia and Indonesia.

Thailand, which is BMW'€™s biggest production hub in the region, produces roughly 8,000 BMW cars a year for local sales, Ehlen said.

Ehlen said that companies like BMW would not really enjoy the benefits of the ASEAN single market unless ASEAN member countries applied the same regulations, customs processes and technical standards for the automotive industry.

Companies would still have to go through lots of bureaucracy and ensure heavy workloads if there was no customization, he said.

Another European automaker, Mercedes-Benz, raised similar concerns on the importance of regulation clarity.

Hence, Mercedes-Benz Indonesia president director Claus Weidner hoped for the clarity of regulations in the industry.

Strategic business development vice president for TÜV SÜD ASEAN'€™s automotive division, Choy Kin Man, said that adopting international regulations would be important for countries in the region to become production hubs.

'€œFor many manufacturers, they are looking at whether Indonesia adopts the United Nations [UN] regulation. And if they come to Indonesia and they don'€™t see Indonesia adopts [the regulation], it will be a problem, because basically the products are not certified,'€ he said, referring to a UN Economic Commission for Europe (UNECE) regulation.

UNECE'€™s regulation requires a certain level of standards that countries should apply for car manufacturing they carry out.

Auto-hub Thailand has ratified the regulation, while Indonesia '€” which has been widely predicted to replace Thailand soon '€” has yet to do the same.

The Association of Indonesian Automotive Manufacturers (Gaikindo) has predicted that car production capacity in the country will hit 2.2 million units per year in 2017, a surge from around 1.4 million cars this year.

The country'€™s automotive industry generated US$3.7 billion in foreign direct investment (FDI)