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Indonesia's Automotive Market Keeps Rising

03 September 2012

Jakarta – In 2011 Indonesia’s automotive sector recorded a sales increase of 17 percent with 894,180 vehicles being sold. The sector grew despite bottlenecks in the supply of parts and components caused by the natural disasters in Japan and Thailand. The automotive association Gaikindo expects that in 2012 sales will reach at least 920,000 units, while the 1-million units mark is expected to be reached in 2013. With the positive market outlook,manufacturers are expanding their capacities.

Indonesian automotive market is continuing to flourish. Despite the industry's problems related to supply of components as a result of the earthquakes in Japan and the flooding disaster in ThaiLand, data from the Indonesian Automotive Association reveals that in  2011 saLes in the market was up 16.9 percent from 2010, with 894.180 vehicles being soLd. Experts had expected more subtle market growth due to the aforementioned botttenecks. With the latest numbers coming in,a new sales record was set. Year 2012 market development forecasts reveal that  the Association made a rather cautious forecast, expecting this year's sales volume to be between 910,000 and 930,000 units.
Despite the  sLowing down of the market’s growth, the achievement of 1-million-unit sales target initially predicted for 2015, with current projections taken into consideration, may very well be achieved as early as 2013. Analysts from HIS Automotive are predicting that 1.2 mittion vehicles will be sold in 2016. Strong GDP-growth of approx . 6.5 percent, ever-increasing income and the growing number of offers in consumer credit for making motor vehicle purchases,are driving the increase in demand formotor vehicles. This demand is not only attributed to the expanding commercial vehicle segment of consumers, driven thanks to reduced inflation and currency stability resulting in increased purchasing power. Apparent investment growth in the industriaI sector and the nation's buoyant economy are also contributors for this strong demand in commerciaI vehicles. An increase in orders for heavy equipment trucks is corretated to the huge construction projects and mining investment in the country. Current stock of heavy trucks and,busses is outdated. A high replacement demand exists.
The supply in the motor vehicle market is met mostly through local production and assembly plants, which are operating under the supervision of internationaI manufacturers. This market is dominated by Japanese producers. The motor vehicle producers Toyota, Daihatsu, Mitsubishi, Suzuki, lsuzu, Nissan and Honda collectively represented a marketshare of 90.6 percent. ln the MPV-segment [" Multi Purpose Vehicles" ) the most popular models are "Toyota Avanza", "Daihatsu Xenia", "Suzuki APV" and Mitsubishi Maven".0ther manufacturers are attempting to penetrate the market. ln the beginning of 2012, PT Proton Edar lndonesia (PEl), a sister company of Malaysian manufacturer Proton, introduced its newest MPV-Model " Proton Exora Star".
ln the upper and luxury vehicle segments, car maker Mercedes-Benz and BMW are establishing assembly pants. Following the success of the 3-Series BMW, with a marketshare of 25 percent in lndonesia's Premium- Segment, is investing approx €8 million for the assembly of 5-Series in the country. The locally assembled models 520i, 528i and 520d and the imported 535i model, the Bavarian carmaker want to strengthen its presence. The total share of German manufacturers in the lndonesian car market remains small, although profits are being made due to the relatively high prices in the Premium class.
lndonesia's foreign motor vehicle remains a relatively minor contributor. lndonesia's totaI export of completely built up (CBU) vehicles in 2011 (2010) according to Gaikindo was 107,932 (85,796) units. At the same time a total of 83,709 (55,624) completely knocked down (CKD-Sets) vehicles were delivered to foreign buyers. The CBU-imports recorded 76,173 (76,520) vehicles.
ln 2011 commerciaI vehicles constituted the biggest share of local motor vehicle production totaling 837 ,948 cars, up 19,3 percent compared to 2010. Moreover, according to Gaikindo in 2011 271,943 trucks and Pick-ups as well as 4,142 busses were manufactured. About 63 percent of the 530,762 commercial. Vehicles produced comprised of the popular MPV with three seatig rows. Gaikindo forecasts an above average sates increase for the mini-MPV segment. For the "low-cost-car" being planned and prepared good sales opportunities are expected as well. The major manufacturing companies. Astra lnternational, (Toyota/Daihatsu/lsuzu) and lndomobil (Nissan) are trying, by 2013, to design an affordable car with a selling price of US$ 10,000 on the market. Astra lnternationaI with a marketshare of approx. 54 percent is the biggest manufacturing company in the motorvehicle segment in lndonesia.
Based on the overall positive market developments, motor vehicle manufactures and component producing companies are intensifying their business activities. The market dominating Toyota Motor Corporation (TMC) with a marketshare of 34,8 percent in 2011 announced in the beginning of 2012 several new projects. The Japanese manufacturer wants to add to the already planned investments of US$ 311 million for the expansion of annuaI production capacity from 110,000 to 180,000 cars now to another US$ 144 million to reach a capacity increase of 230,000 cars at the end of 2013. At the same time Toyota Astra Motor (TAM) is expanding its network of sales partners and service shops.
Project activities are also very buoyant in the area of motor vehicle supply industry. The Japanese Denso Corporation, manufacturer of sparkplugs, air-conditioning units, heaters and motor vehicle filters want to establish another plant in lndonesia. Similarly, the Chief of Denso,Nobuaki Katoh said in Jakarta the new production,plant will be errected in Cibitung, Bekasi covering an area of 20,000 sqm. Construction is planned for 2012. Denso already operates three factories in lndonesia, two in Bekasi and one in Sunter (North Jakarta). The company produces 14 types of motor vehicte components for an annuaI 800,000 cars.
Meanwhile, Nippon Steel Trading company, the sister company of Japanese Steel producer Nippon Steel, announced the forming of a Joint Venture with three locaI companies. Nippon Steel has a 30 percent ownership of the holding company PT lndoJapan Steel Center. ln remaining investors include PT Adyawinsa Dinamika (30 percent), PT Dwijaya Sentosa Abadi (30 percent) and PT Krakatau Steel (10 percent). PT Dyawinsa delivers various parts for prominent car manufacturers in lndonesia, such as Toyota, Daihatsu, Nissan and GeneraI Motors. ln the first phases of the project, the Joint Venture aims to invest US$ 38 million for the construction of a plant covering an area of 4,8 hectares in the lndustriaI Zone of Karawang (West-Java). The plant, with a production capacity of 120,000 tons of steeI ptates should go into operation in 2013.
ln early 2012, lndonesian air-conditioning manufacturer PT. Selamat Sempurna and Japanese Tokyo Radiator Mig. Company seated a Joint Venture to produce and market car air-conditioning units and other heat transfer components. The Japanese company wants to be known under the name PT Tokyo Radiator Selamat Sempurna 67 percent. The new plant should be constructed through an investment of IDR 24,7 billion (€ 2,1 million; 1 € = IDR 11,640) in Tangerang, the northern part of Jakarta. The plant is expected to produce 80,000 air-conditioning units. PT Selamat Sempurna produces a diverse range of motor vehicle components under the brand name ADR Radiator, Sakura Filter, Donaldson Filter and Acap Filter.
Source: Sorotan Vol. XXI/1/2012

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