ASEAN KEY DESTINATIONS
Indonesia hopes to become auto center
General Motors and Peugeot’s decision last week to revive assembly of automobiles in Indonesia is positioning the country to become the leading automobile manufacturer in Southeast Asia.
Indonesia is already expecting more than US$1 billion in investment in the automotive sector starting this year. Nissan recently announced a $250 million expansion plan; Suzuki has announced an $800 million expansion; Chrysler a $100 million expansion; Daihatsu just carried out a $246 million expansion; and BMW a $12 million expansion. India’s Tata also expressed interest in building a production base in Indonesia.
A combination of investment, tax incentives, and a rising middle class has contributed to the manufacturing upturn. “Our domestic market is growing, and the principals want a bigger slice,” said Jongkie Sugiarto, a deputy at the Association of Indonesia Automotive Industries (Gaikindo). “They came here because our existing facilities are struggling to meet demand.”
Jongkie said that it would take only two years for Indonesia to overtake Thailand in terms of sales and production. He said the industry organization forecasts sales of 830,000 vehicles this year, 950,000 in 2012 and 1 million or more in 2013.
Companies in Indonesia produced 650,000 cars last year and sold 764,000, with imports making up the difference.
In Thailand meanwhile, 1.64 million vehicles were made last year, while 800,000 units were sold domestically and the rest exported, according to the Automotive Industry Club of the Federation of Thai Industries. The group expects domestic sales in Thailand this year to reach 850,000 units with exports at 1 million units.
Indonesia’s government announced this week that it would give tax breaks for investment over Rp 1 trillion ($117 million), and Jongkie, who is also the president director of Hyundai Indonesia, said that this package could attract more investors here, including the parent company Hyundai, based in South Korea.
“We have been lobbying our principal to build a production base here. We will tell them about these incentives, so that they will invest here,” he said.
Rising cost pressures in Thailand, a nation of about 70 million people, might make Indonesia more attractive for automakers that do business in both countries. Thailand’s newly elected prime minister Yingluck Shinawatra pledged to double the nation’s daily minimum wage to around $10, which would raise expenses for the likes of Toyota, Ford and Nissan.
Major locations for Indonesia’s automotive factories are in Bekasi and Karawang, located about 30 kilometers and 60 kilometers east from the center of Jakarta. Based on minimum monthly wages set by the government at Rp 1.3 million, the minimum daily wage in the Jakarta area would be around $8.
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