Apart from Myanmar, the other Asean country
that is being closely watched is Indonesia, due to its stronger role in
regional politics and economics, as well as noticeable policy implementations.
A
number of automakers including Toyota, General Motors (GM), Ford and Tata have
raised their investment in Indonesia. These companies have announced plans for
the construction of new assembly plants that would roll out new models aimed at
tapping the fast-growing Indonesian middle class.
Toyota,
for example, announced that it would raise production to 230,000 units per year
in 2014 while GM is preparing to invest US$150 million (S$190 million) to
reopen its assembly plant for a seven-seater van after seven years. According
to GM, the plant would produce 40,000 vehicles per year for both the domestic
and export markets.
Auto
sales in Indonesia are expected to reach one million in 2012, making it one of
the world's largest markets. Meanwhile, its low vehicle ownership rate means
there is much room for growth. Indonesia, in any case, is one of the
fastest-growing markets in the world.
The
Indonesian government recently confirmed plans to become the leader of Asean.
It announced an eco-car project would hit the road this year and that the
country would become a full-scale production base for hybrid-powered vehicles
by 2020.
At the
same time, the nation's motorcycle market is the third largest in the world
after China and India. Honda and Yamaha are the market leaders in the market,
which is expected to reach saturation by 2015. The motorcycle ownership ratio
in Indonesia is two people for one motorcycle, very much on the opposite scale
as demand for cars grows amid the country's strong economic expansion.
Indonesian
Automobile Industry Association vice-chairman Johnny Darmawan said 249,589
vehicles were sold during the first quarter in Indonesia, up 10.6 per cent
compared to the same period last year. He said that auto sales are expected to
reach 960,000 vehicles this year, up from 870,000 in 2011. Growth is expected
to continue although the government plans to raise the minimum down payment.
The new
policies launched by the Indonesian Central Bank require vehicle buyers, who
apply for car loans at commercial banks, to place a 30 per cent down payment.
The Indonesian Finance Ministry also introduced a new regulation requiring
finance companies to ask for a 25 per cent down payment. Most buyers in
Indonesia purchase vehicles through auto loans from finance companies.
'We
will not adjust our forecast although the Indonesian government is likely to
raise fuel prices,' Mr Darmawan said, adding that his association is confident
auto sales will remain at 80,000 vehicles per month on average.
Indonesia
has been applauded for developing its democracy. After Suharto's reign ended
with the Asian financial crisis 1998, Indonesia struggled due to political
instability.
During
the second term of President Susilo Bambang Yudhoyono, Indonesia has been able
to create political stability and a rock-solid democracy.
Assistant
Professor Dr Kitti Prasertsuk, a lecturer at Thammasat University and
coordinator of the Asean Watch project, said Indonesia is classified as a
fast-emerging nation.
'Indonesia
is about to be included in the group of fast-growing economies or BRICS
(Brazil, Russia, India, China, South Africa) which could soon become BRIICS.
Economically, Indonesia has grown significantly in the last four to five years
with more than 6 per cent of gross domestic product (GDP) growth each year,' he
said.
'We can
see that apart from Proton, all other Asean-made vehicles sold in Thailand are
from Indonesia. This includes the Toyota Avanza, Honda Freed and many Suzuki
models. So if you ask me which Asean country will become Thailand's main
competitor in terms of the auto industry, the answer is Indonesia, not
Malaysia,' he said.
Indonesia
serves as an important production base for Asean and attracts as much
investment as Thailand. The Indonesian auto industry, like its Thai
counterpart, is a production base for Japanese automakers, which makes up 86
per cent of the market.
Indonesia
is also becoming a more interesting destination for investors thanks to various
factors, including government support.
Last
year, the country emerged as the largest Asean market for the first time with
sales of 850,000 vehicles, while auto sales in Thailand, which was affected by
the massive flood crisis, reached just 795,000.
In
2011, Indonesia designated itself as a major car manufacturing base for the
Asean region. It plans to produce one million vehicles per year by 2013 and two
million vehicles per year by 2020.
Indonesia
is presently the second largest auto producer in the region, with its 700,000
vehicle production in 2011 being less than half of Thailand's 1.6 million.
Among
the factors supporting Indonesia is its 240 million people, who make up as much
as 40 per cent of the total Asean population. This reflects the growth
opportunities of the country's auto industry, supported by the fast economic
growth that drives up demand.
There's
more demand than supply for cars in Indonesia, especially for vehicles with
engines below 2.5-litres as well as for light trucks 10 tonnes and under.
Moreover,
the Indonesian government has offered tremendous investment promotions, both in
terms of auto production and consumption to cater to increasing demand and to
also lower the number of imported vehicles. They include corporate tax
exemption for five to 10 years (plus 50 per cent reduction for another two
years) that was introduced in August last year. This privilege is for
investments of at least US$117 million (S$148 million), with investors being
required to hold 10 per cent of the investment amount in the Indonesian Central
Bank.
That
was followed by exemption of VAT and import duty for goods in the raw
material/intermediate material, which benefits imports of auto parts for local
assembly.
The
import duty for passenger cars and commercial vehicles ranges from 0 per cent
to 50 per cent, while the import duty for auto parts is 10 per cent, which is
waived for Asean members. This would also benefit Indonesian investors who
depend on raw materials from other Asean countries.
Indonesia
also lowered income tax for investors who produce eco-friendly (22 kilometres a
litre (kml) fuel economy, 80 per cent local content and Euro 3 emission) and
low-priced vehicles.
Being
part of the Japanese auto production network like Thailand, the relationship
between Indonesia and Thailand is interdependent. However, if the Indonesian
auto industry expands and is able to continuously attract foreign investors, it
could step up to become Thailand's arch rival.
Today,
Indonesia is Thailand's close trading partner in the auto industry. In 2011
Indonesia was the second-largest export market for Thai cars after Australia,
taking in 12.5 per cent of Thai automotive exports to the global market.
Passenger cars are the main product exported from Thailand to Indonesia (38.7
per cent), while auto parts make up 24.7 per cent.
Thai-made
vehicles make up the largest chunk in Indonesia's imported vehicle market - 35
per cent. In the imported passenger car segment, Thai-made cars dominate with a
62.5 per cent share, while in the commercial vehicle market, Thai-made vehicles
are ranked No. 2 after Japan, which has a 38 per cent share.
According
to the Indonesian Automobile Industry Association, the country imports
approximately 200,000 vehicles per year. It also stated that during the Thai
flood crisis, several auto assembly plants in Indonesia had to cease production
due to a disruption in the supply of parts.
While
auto production in Thailand concentrates on commercial vehicles such as the one
tonne pickup truck, auto production in Indonesia mainly focuses on passenger
cars, which makes up 71 per cent of total auto production.
Today
Indonesia may not have a big role on the global stage, ranking No. 34 in the
world in terms of auto and transport equipment export. The export value of
US$2.8 billion is just 0.3 per cent of global exports, while Thailand ranks
17th with a 1.7 per cent share. So at the international level, Indonesia needs
more time to strengthen itself.
However,
the increasing investments being made in Indonesia hint that the country is
quickly gaining acceptance as an attractive investment location.
Meanwhile,
the relationship between Thailand and Indonesia seems to be one of partners
rather than opponents.
This is
due to the difference in production. Besides, the growth in the Indonesian
automotive sector would help drive up demand for auto parts and components from
Thailand.
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