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NEWS UPDATES Asean Affairs         25  June 2011

Indonesia’s auto growth attracts investment

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Indonesia’s automotive sector is experiencing a surge of investment that could take it back to its glory days in the 1990s, and possibly even overtake Thailand as the Detroit of Southeast Asia.

Johnny Darmawan, president director of Toyota Astra Motor, said that with the country’s strong economic growth, young population and availability of resources, it was inevitable the company would step up its investment plans here.

“No need to be surprised,” he said. “Other brands are doing the same thing. We are an industry player and must always anticipate the next one to two years in advance.”

Johnny said it was just a matter of time before Indonesia took Thailand’s title as a regional base for the auto industry.

Indonesia’s car production in the 1990s outstripped Thailand’s until the government issued a national car policy in 1995 that benefited just one operator — President Suharto’s youngest son, Hutomo “Tommy” Mandala Putra.

In response, auto manufacturers moved to Thailand, which was offering a range of incentives to attract their business. The policy was eventually scrapped and Indonesia’s auto industry started to recover only in 2004.

Sudirman Maman Rusdi, chairman of the Indonesian Automotive Industries Association (Gaikindo), said he was optimistic this year’s car sales would continue to grow on the back of stable interest rates, a strong rupiah and solid economic growth. Bank Indonesia has maintained its key rate at 6.75 percent over the past four months, helping to keep car loan interest rates down.

“The only challenge for this year’s sales is the removal of fuel subsidies,” he said. “It will take time for the industry to adjust to that.”

Automobile sales in Indonesia reached 764,088 units last year, while sales in Thailand stood at 800,357 units. This year through May, sales in Indonesia jumped 22 percent to 347,530 units from a year earlier. In Thailand, sales climbed 26 percent to 361,753 units.

Gaikindo forecasts Indonesian sales to rise to one million units by 2014, having lowered its growth forecast on the country’s automobile industry after the Japan earthquake and tsunami in March, citing a slowdown in shipments of automotive parts from Japanese factories.


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