ASEAN KEY DESTINATIONS
Indonesian content in luxury cars may be a long shot
Makers of luxury cars such as Mercedes-Benz and BMW are defying the government’s appeal to localize their spare parts and components to help the country’s automotive industry.
The reason cited is that the local parts industry cannot meet the high standards these firms demand, but this claim has not gone unchallenged from the producers of spare parts and components, most of whom are small- and medium-sized enterprises.
Industry Minister Saleh Husin, in appealing to car makers with assembly plants in Indonesia early this year, said the car industry was good enough to produce spare parts and components.
But the two top sellers in the luxury car segment, Mercedes-Benz and BMW, with assembly plants in Indonesia, say they still have not complied with the government’s request because of the substandard quality of locally produced spare parts and components.
Mercedes-Benz Indonesia, a subsidiary of Daimler AG, wants to support the government’s policy in developing the automotive industry, including in using more local content, said CEO Claus Weidner.
“However, that is impossible to do now because the suppliers are not ready to produce the spare parts that meet company standards,” Weidner told reporters on the sidelines of a reception to mark the 45th anniversary of Mercedes-Benz’s presence in Indonesia, adding that the company would be switching to more Indonesian content as soon as it became possible.
This has underscored a challenge for the economy to shore up domestic suppliers for car spare parts and components amid a goal to overtake rival Thailand’s crown as the largest automobile production base in the region.
While Thailand had about 2,300 autoparts suppliers, Indonesia had 800 as of last year, estimates show.
The domestic automotive industry has seen lackluster growth in recent years as the economy has cooled to its slowest pace in six years in the past few quarters. Annual car sales are expected to remain flat at 1.2 million from 2013 to 2015.
However, that has not stopped BMW AG, which runs an assembly plant in North Jakarta, from expanding here, with the growing Indonesian middle class leading to a number of luxury, international brands spreading their wings here.
However, to localize spare parts and components will be difficult because the parent company in Germany has set such a high standard, according to BMW, which recently launched its domestically assembled local favorite sports utility vehicle (SUV), the X5.
“In the future, we may turn to local suppliers,” BMW AG Indonesia corporate communications head Jodie O’tania said in April.
The Indonesian Automotive Parts and Components Association (GIAMM) challenged the claim of luxury car makers and said its members had the capacity to produce high-quality parts and components and that the onus was on the producers to show goodwill.
“How can we comply with what they need if they never help and share their knowledge with us?” association chairman Hamdhani Dzulkarnaen Salim said.
The transfer of knowledge and skills from luxury car makers would strengthen the nation’s car industry, including the skills of its workers, Hamdhani said.
With the exception of luxury car makers, most automakers in Indonesia are already using at least 50 percent local content, according to the Association of Indonesian Automotive Manufacturers. Japanese car makers Toyota and Daihatsu lead the local-content campaign with 86 and 87 percent respectively, the association said.
The luxury car market represents a small but growing segment of Indonesia’s rapidly expanding car market, reflecting the rise of the country’s middle class. Last year, the segment accounted for around 5,000 of the 1.2 million cars sold, according to figures from the Association of Indonesian Automotive Manufacturers (Gaikindo).
Weidner claims that Mercedes-Benz has captured 45 percent of the luxury car market.
Mercedes opened its assembly plant in Bogor near Jakarta in 1987 and now produces its C-Class, E-Class, M-Class and S-Class series. To mark the anniversary, this week the company launched the fourth generation of the locally assembled C-Class series. To enliven the top end of the market, Aston Martin this week opened its first showroom and after-sales facility in Jakarta, with the British-based company undeterred by the economic slowdown.
“Indonesia’s consumption of luxury goods is still increasing,” Aston Martin Jakarta CEO Joerg Kelling said. However, the manufacturer said it had no plans to assemble its cars locally, Kelling said. - See more at: http://www.thejakartapost.com/news/2015/05/07/indonesian-content-luxury-cars-may-be-a-long-shot.html#sthash.6IBBZWOx.dpuf
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