Automotive Industry Indonesia Too Dependent on Imported Raw Materials

An example shows the strong influence of the rupiah-US dollar exchange rate on the price of Indonesian cars. When the low-cost green car (LCGC) was introduced on the Indonesian market in September 2013, the price of a Toyota Agya (a popular LCGC) was set in the range of IDR 97 - 120 million with the average exchange rate of about IDR 11,200 per US dollar in September 2013. Currently, however, the same car model is sold at a price range of IDR 110 - 132 million as the rupiah is now trading at IDR 13,711 per US dollar. The rupiah depreciated 22.4 percent against the greenback between September 2013 and November 2015, hence contributing to the average selling price of a Toyota Agya rising by 12 percent over the same period, despite the fact that government regulations require the LCGC to consist for (at least) 85 percent of locally-manufactured components (this regulation was one of the requirements for car manufacturers in order to obtain tax incentives for the manufacturing of the LCGC in Indonesia).

Raw materials that are imported from abroad for the automotive industry include automotive steel, resin, and aluminum. Such imports are needed as the domestic upstream manufacturing industry in Indonesia is still underdeveloped.

Fortunately, there are some positive developments. In mid-2014, Indonesia's largest steel producer Krakatau Steel formed a joint venture (named Krakatau Nippon Steel Sumikin) with Nippon Steel & Sumitomo Metal Corporation (NSSMC) to build a USD $400 million automotive flat steel factory in West Java. Production capacity of the new plant, which is expected to become operational in 2017, is designed to reach 480 thousand tons per year (state-controlled Krakatau Steel has a 20 percent stake in this project).

Indonesian Car Sales (CBU):

Month	Sold Cars 2012	Sold Cars 2013	Sold Cars 2014	Sold Cars 2015
January	76,427	96,718	103,609	94,194
February	86,486	103,278	111,824	88,740
March	87,917	95,996	113,067	99,411
April	87,144	102,257	106,124	81,600
May	95,541	99,697	96,872	79,375
June	101,746	104,268	110,614	82,172
July	102,511	112,178	91,334	55,615
August	76,445	77,964	96,652	90,538
September	102,100	115,974	102,572	93,038
October	106,754	112,039	105,222	88,325
November	103,703	111,841	91,327
December	89,456	97,706	78,802
Total	1,116,230	1,229,916	1,208,019	853,008

 

	2008	2009	2010	2011	2012	2013	2014
Indonesian Car Sales (number of car units)	607,805	486,061	764,710	894,164	1,116,230	1,229,916	1,208,019
Indonesian Exports (number of car units)	100,982	56,669	85,769	107,932	173,368	170,907	202,273

^{Source: Gaikindo}

Indonesian Car Exports

Currently, Toyota Motor Manufacturing Indonesia (TMMIN) and affiliated Astra Daihatsu Motor (ADM) are Indonesia's largest exporters of completely built up (CBU) vehicles. In the first eight months of 2015, shipments of Toyota vehicles stood at 122,000 units, up 25 percent from exports in the same period last year. However, Indonesia is still a small player in terms of worldwide car exports. This year, TMMIN targets to see 175,000 Toyota units (CBU) exported abroad. Two new markets that the company tries to tap are North Africa and Oceania (especially Australia).

Based on the latest data from the Indonesian Automotive Industry Association (Gaikindo), Indonesia exported a total of 163,828 cars (CBU) in the first nine months of 2015 (and imported 64,873 units over the same time). Total installed domestic car production capacity stands at 2 million units (per year).

Meanwhile, Mitsubishi and Daihatsu are the best brands in terms of customer satisfaction in Indonesia (followed by Datsun on third position) according to the latest Sales Satisfaction Index compiled by JD Power.

Further Reading:

• Overview and Analysis of Indonesia's Automotive Industry

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Donald Haromunthe | 19 November 2015 12:19

Wonder how is the progress of the planned //USD $400 million automotive flat steel factory in West Java// today. It's been almost one and a half year.