Expansion of Indonesia's Automotive Industry: Raising Exports to Asia
Indonesia's automotive industry experienced some drastic changes in recent years. Originally regarded as a mere production hub due to cheap productions costs (particularly wages), it changed into a major car sales market as per capita GDP continues to grow and gives rise to an expanding middle class. Since 2011, domestic car sales in Indonesia have reached record highs and given that the country's per capita car ownership is still relatively low, there is room for more growth. But Indonesia is also eager to become an important car exporting country.
Suzuki Indomobil Motor (a joint venture between Suzuki Motor Corporation and the IndoMobil Group) and Astra Daihatsu Motor (a merger of Astra International and Japan's Daihatsu) are both tapping the export market for their low cost green cars (LCGCs). Suzuki Indomobil Motor started exporting the Suzuki Karimun Wagon R to Pakistan in December 2013, while Astra Daihatsu Motor is planning to export two models (Astra Toyota Agya and Astra Daihatsu Ayla) to the Philippines starting from February 2014. Indonesia's Minister of Industry MS Hidayat said that the export of LCGCs to the Philippines will number 1,000 units per month.
Hidayat also stated that the Indonesian government is eager to make Indonesia the global production base for car manufacturing and would like to see all major car producers to establish factories in Indonesia. The main aim of the government is to approach the position of Thailand as the largest car market in Southeast Asia. The government also wants to turn Indonesia into an independent car manufacturing country through delivering completely built units (CBU) of which all components are produced in Indonesia. Currently, many components still need to be imported. This can be a problem in times of sharp rupiah depreciation (against the US dollar) as these imports are paid in US dollars. Hidayat predicts that in the next five years, Indonesia will be able to produce cars of which all components are Indonesian-made.
In 2013, Indonesia's car sales reached a record high of 1.2 million units. In that same year, Indonesia's car exports were still relatively low at 170,907 units. In 2014, total car sales are expected to rise slightly to 1.3 million units, while car exports are estimated to increase by at least 17 percent to 200,000 units.
Indonesia's LCGC program was started in 2013. Through tax incentives the Indonesian government attracted producers that meet the requirements of fuel efficiency targets and aims to make the country the regional hub for LCGCs ahead of the start of the ASEAN Economic Community in 2015 (which will turn the ASEAN region into one single market and production base). The LCGC is also regarded as a solution to limit Indonesia's subsidized fuel consumption. For the government it is important to reduce the import of expensive oil in order to curb the country's current account deficit which is partly to blame for the depreciating rupiah exchange rate in 2013. With a price tag of only about IDR 100 million (USD $8,333), these LCGCs are significantly cheaper. It is claimed that Indonesia's LCGC program has attracted investments worth of USD $6.5 billion.
| Month | Sold Cars 2012 | Sold Cars 2013 |
| January | 76,427 | 96,719 |
| February | 86,486 | 103,279 |
| March | 87,917 | 95,996 |
| April | 87,144 | 102,257 |
| May | 95,541 | 99,702 |
| June | 101,746 | 104,278 |
| July | 102,511 | 112,183 |
| August | 76,445 | 77,962 |
| September | 102,100 | 115,974 |
| October | 106,754 | 112,039 |
| November | 103,703 | 111,741 |
| December | 89,456 | 94,069¹ |
| Total | 1,116,230 |
1,226,199¹ |
¹ preliminary figures
Source: Gaikindo
| 2008 | 2009 | 2010 | 2011 | 2012 | 2013¹ | 2014² | |
| Indonesia's Car Sales (number of car units) |
607,805 | 486,061 | 764,710 | 894,164 | 1,116,230 |
1,226,199 | 1,300,000 |
| Indonesia's Exports (number of car units) |
100,982 | 56,669 | 85,769 | 107,932 | 173,368 | 170,907 | 200,000 |
¹ preliminary figure
² future forecast
Source: Gaikindo
Further Reading:
• Car Sales in Indonesia Expected to Rise in 2014 amid Political Elections
• Popular Low Cost Green Car Boosts Indonesian Car Sales in 2013
• Gaikindo Targets 10% Car Sales Growth in Indonesia for 2014
• Indonesian Automotive Industry: Car Sales Expected to Hit Record in 2013