DOMESTIC AUTOMOTIVE INDUSTRY RELIES ON 3S

Indonesia Automotive Industry Association (Gakindo) sees that the domestic automotive industry relies on 3S (sales, service, and spare parts). Sales are related to service. So, the sole agent (ATPM) must provide service centers, especially workshops. Spare parts also determine consumer interest in Indonesia. “So it is not surprising, as Auto 2000 successfully developed 3S, it continued to expand. They open branches in Pontianak, Bengkulu and so forth, “Secretary General of Gakindo, Noegardjito, told Business News (September 19).

The manufactured automotive products must be able to seize market share. That is, the manufacturing company should be able to meet the 3S. Moreover, in conditions like in Jakarta and other big cities, people want to be practical and fast. Commonly, consumers choose products that provided satisfaction of service. “Suppose I live in Jakarta an work in Karawang (West Java). The car must be serviced. The car most be serviced. I left the car at Auto 2000, and I took cab to Karawang. I go home at 7 pm, and workshop is still open. But, if it is other brand (manufacturer), they closed at 5 pm. Of course, I chose Auto 2000. It is reasonable.”

Indonesian automotive industry recorded a very significant development. One of the is the in Indonesian government very significant trust. Indonesia is a production base, so that the range of services covers the domestic and export markets. Until now, there are 80 export destinations of Indonesia cars in addition to export destinations in ASEAN (Malaysia, Philippines, Thailand, and Brunei Darussalam), Pakistan, the Middle East, Latin America and Japan. Car exports from Indonesia are in the form of CKD (completely knocked down) or CBU (completely built up). Export of components or spare parts have been successfully destined to some parts of the world. “We have 20 thousand CKD cars and around 300 thousand CBU cars, so that there is an overall total of 320 units of cars exported. For CKD cars, there are parts (components), and all must be calculated for the production capacity.”

The government is targeting exports of Indonesian cars next year at 360 thousand units. Gakindo is optimistic that it can achieve these targets. Components or spare parts industry should continuously be encouraged. Even, the Ministry of Industry has recently issued a permit for about 30 component plants. “There are about 100 companies who filed a request. Perhaps in the near future, there are also five brands, such as Toyota, Suzuki, Honda and others, which will open component plants.

Most of foreign investment uses joint venture schemes. The fulfillment of the domestic market should be with the attainment of based load (primary load), which is equivalent to BEP (breakeven point) of 50 percent. “Suppose I invest for a production capacity of 100 cars, for the domestic market I should be able to sell 60 per cent. That is just starting to get profit or breakeven point. If you can export, it means that there is a profit. Thank God.”

The automotive industry in the country can be stable, even continues to increase, if transport costs are affordable. The current condition is that the costs are very high. The most significant thing to maintain competitiveness is the application of the amount of local content, Technology is not too significant, because it is a standard. The conditions are different from local content that must be increased in order to achieve competitiveness of Indonesia’s automotive industry. Unlike the American auto industry, which relies on investment activities. “Like General Motors who has investment principle, as long as there is market opportunity.”

Another factor that determines the success of the development of Indonesia’s automotive industry is infrastructure. It is generally accepted, in the sense of not only the automotive sector, but across sectors. The most obvious impact of infrastructure on the automotive industry is seaports. During this time, the distance between Karawang and Tanjung Priok port, North Jakarta takes around fours of travel. “For us, the travel time is a problem. We want it to be shorter.”

Although production absorption decreased this year, there is a shift of market to other cities and islands. Some cities, such as Bali, Pekanbaru (Riau Province), Makassar (South Sulawesi) and Medan (North Sumatra) experienced an increase in the absorption of the car market. In addition to high economic growth in these regions, the number of young executives in large companies, such as in Pekanbaru and Medan, continues to increase. They need a car, whether for prestige or job mobility.”

In addition, port infrastructure is very supportive to automotive industry development. During this time, many industrial centers and automotive markets time, many industrial centers and automotive markets shift from Jakarta to other cities. Car shipment to Borneo and Sulawesi should go through the ports, for example, Tanjung Priok port of Tanjung Perak port, Surabaya. “Each manufacturer has different calculation of transportation cost.”

The lesson learned from the success of the Thai automotive industry is the availability of infrastructure. Thailand’s automotive exports reached 50 percent (about 1.2 million units of cars) of its overall production capacity. Its success cannot be separated from the availability of infrastructure, especially ports and access roads. “Thailand can do exports with two ports for 1.2 million units of cars. While, Indonesia only exported hundreds of thousands of units, because it is only supported by one port (Tanjung Priok). Port capacity could only accommodate 3,500 units.”

Meanwhile, Minister of Youth and Sports, Roy Suryo, admitted that the regularly visited IIMs (Indonesian International Motor Show). Beyond his capacity as Minister of Youth and Sports, he is a collector of classic cars. So whenever there is an automotive event, he did not miss it. “The automotive world is not far from my daily life. I collect classic cars, and I often look for spare parts that are still good in Asem Reges Market (Central Jakarta), “Roy told Business News (September 19). (E) 

Business News - September 24, 2014