Mon, Mar 18, 2013 - Page 14 News List

European, US auto giants eye Jakarta’s roads

AFP, JAKARTA

Ferrari luxury sports cars are displayed in the lobby of an upscale commercial center in Jakarta, Indonesia, on March 9.

Photo: AFP

Bentleys and McLarens could become a more common sight alongside three-wheeled pedicabs and Japanese cars on Jakarta’s roads, with European auto giants making a push into the Indonesian market.

Western companies experiencing a slowdown in sales close to home are turning to Southeast Asia’s biggest economy, looking to take advantage of both a burgeoning middle class willing to spend and an elite looking for high-end toys.

Last year, Indonesia’s car market grew 25 percent to a record 1.1 million units, closing in on Thailand, the biggest car market in Southeast Asia with 1.4 million vehicles, IHS automotive analyst Jessada Thongpak said.

However, Indonesia, with its 240 million inhabitants, “will emerge as the largest market in the region from 2014,” Thongpak told reporters.

While Indonesia has enjoyed average growth of about 6 percent in recent years, car ownership is still at 45 vehicles per 1,000 people — compared with 145 percent in Thailand — leaving room for long-term growth in the market.

Indonesians are buying new motors in big numbers, with 288 new cars hitting Jakarta’s roads every day, worsening its already crippling traffic and polluted air.

However, Western car makers complain they are losing out to Japanese firms owing to Indonesia’s high tariffs on imported sedans and luxury cars, and the absence of a free-trade agreement. Japanese firms have the benefit of a trade agreement and no levies. Added to this is the fact European makers are subject to higher safety standards than their Japanese competitors.

The EU has been in talks with Jakarta on a deal to open its market and allow European firms to compete on a level playing field.

That comes as new-car registrations in Europe dropped 8.7 percent year-on-year in January to the lowest level for that month since 1990, the European Automobile Manufacturers’ Association said.

However, progress is slow and brands such as Mercedes, BMW and Chevrolet are upping assembly and output in Indonesia to get around the taxes — cars face a 40 percent tax if imported as finished products, but just 10 percent to 15 percent if put together in the country.

“All global brands are already in Indonesia and they are heavily investing and expanding their production capacity,” Thongpak said.

Germany’s Volkswagen is planning to build an assembly plant in the next four years and Chevrolet has revived its dormant plant outside Jakarta to assemble 40,000 cars a year, including its new multipurpose vehicle, Spin, which was designed for the Indonesian market.

However, Japanese brands are still the favorites, with firms such as Toyota and Nissan popular thanks to the development of cars that can carry families, while also being strong enough to negotiate tough driving conditions.

Driving around the busy Hotel Indonesia roundabout in the heart of Jakarta, every other car is a Toyota or Daihatsu, with those brands having more than 50 percent of Indonesia’s car market.

Taking Mitsubishi and Nissan into account, Japanese brands supply about 95 percent of the Indonesian market.

Toyota’s success began in the 1970s, when it produced the Kijang, a family car and favorite in Indonesia. It scored another success in 2003 when it began producing the Avanza and Daihatsu Xenia, multipurpose vehicles for under US$20,000.

However, cars are mostly bought by Indonesia’s affluent class, those with a disposable income above US$7,500 a month and who represent 6.6 percent of the country’s 240 million people, according to a recent report by the Boston Consulting Group.

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