EXECUTIVE SUMMARY AUTO PARTS

Published on February 2017 | Categories: Documents | Downloads: 40 | Comments: 0 | Views: 368
of 17
Download PDF   Embed   Report

Comments

Content

Indonesia’s Automotive Parts and Component Market

DATA CONSULT ‘S REPORT : INDONESIA’S AUTOMOTIVE PARTS AND COMPONENT MARKET EXECUTIVE SUMMARY
Business Environment

• The past few years has undeniably seen substantial improvement in
Indonesia's macroeconomic performance. GDP growth is moderate yet encouraging, inflation and interest rates are declining, the exchange rate is stable and the stock market is buoyant. In 2007, for the first time after the era of post-Asian crisis, domestic economy moved using two of its driving forces: stability and growth. The economic growth continued to gather momentum and reached 6.3% in 2007 as compared to 5.5% in 2006, strengthened by improvement in household consumption and private investment. Rising purchasing power and the availability of consumer financing at reasonable cost, contributed to the increase in household consumption. • The interest and other monetary instrument rate continues declining following the decision of BI (Bank Indonesia) to gradually lower the BI Rate which was 8.0 % at the end of 2007 from 12.75% at the end of 2005. Loan interest rates also eased, as indicated by the fall in the base lending rate (BLR) from 15% at the end of 2006 to 12.92 % In February 2008. At end 2007, interest rates for working capital credit and investment credit fell to 13.01 % from the December 2006 level of 15.1%. The other lending rate for consumption credit was recorded at 16.13 % in December 2007, lower than 17.6% from December 2006. • The World Bank remained strongly upbeat in its projection for Indonesia’s 2008 growth, in line with other East Asian economies. It expects Indonesia’s economy to grow steadily at least through to the end of 2008 at 6.4%, following the estimated 6.3% in 2007. Bank Indonesia is also positive about 2008 growth, though the bank expects the growth slowed down to 6.3% , driven by slower growth of the global economy , pressure to the inflation rate as a result of high commodity price. • To stimulate the development of automotive component industry, the government of Indonesia has taken several measures such as exempting

1

Indonesia’s Automotive Parts and Component Market

tariff for imports of materials used by automotive component industry, namely for materials which have not been produced locally. Most of these materials consist of flat steel products, aluminum and copper products. However, this tariff exemption is valid only for one year until May 2008 and is now under request by component manufacturers for extension. Other measures include tariff harmonizations, improvement of certification institutions, and development of special port for automotive

Automotive Component industry dominated by foreign investment • Indonesia has been able to produce a vast range of automotive components totalling around 150 items. The sector has a diversified product range, comprising of casting, forging, engine, power-train parts and components, electrical equipment, brake and clutch parts, hydraulic and pneumatic systems, body panels, chassis frame and parts, seating and safety components, suspension systems, fixings, various plastics and aluminium parts, batteries and auto glasses. It should be noted however, that these locally made components are still strongly dependent on imported material / sub-components.

• There are around 400 companies involved in automotive component manufacturers , however only 136 companies are members of GIAMM (the Indonesian automotive parts and components association).The study has identified around 250 medium and large scale component manufacturers, of which 46 companies produce mechanical engine components and 42 companies electrical and electronic components. The biggest number of companies involved in producing multipurse components such as bearings, gaskets, gear, fastener, brackets, clamp, seal, hose, nuts and pins. • The Indonesia’s automotive component industry is characterized by strong domination of foreign investors. There are 180 foreign investment companies as compared to only 70 domestic investment companies. As the Indonesian automotive business dominated by Japanese makes, the component manufacturing business also dominated by Japanese companies . Of the total 180 foreign companies involved in automotive component industry in Indonesia, only 10 companies which have no connection with Japanese companies. The remaining 170 companies are Japanese joint venture or 100 % Japanese companies. They represent well-known Japanese brands in their business lines such as Denso, Toyota Tsusho, Aisin Seiki, Daihatsu Motor Co., Honda Motor Co., Bando Electric Co., Izumi Industries, Nittan Valve, Kayaba Industries, Sanden, Yuasa Corp, Daido Kogyo, Fujita Crankshaft etc

2

Indonesia’s Automotive Parts and Component Market

• However, in recent years, a few investments from non-Japanese 1st tier suppliers entered the country. For instance, Delphi of the USA has invested in wiring harness industry in Indonesia. The majority of pure local companies are in the 2nd tier, 3rd tier and in the AM ( after market ) business. • The domestic component industry produce components both automobile and motorcycle. Data from GIAMM members shows there are 14 companies specially produce components for motorcycle companies produce components both for motorcycle and automobile 91 companies produce only components for automobiles. for that , 30 and

• The study has identified around 250 medium and large scale component manufacturers, of which 46 companies produce mechanical engine components and 42 companies electrical and electronic components. The biggest number of companies involved in producing multipurse components such as bearings, gaskets, gear, fastener, brackets, clamp, seal, hose, nuts and pins. A single company may produce more than one category of components. • With a registered car population of 14.4 million and motor cycle popualtion of 33.2 million at the end of 2005, Indonesia provides a big market for automotive components, either for OEM or for after market / replacement market ( REM). Over the last three years, increase in car population from new cars totalled around 430,000 , while motorcycle around 4,800,000 units per year. • Eventhough domestic component industry has developed quite well, imported components still plays a dominat role in the market. Due to limited market size, not all of parts and components can be produced locally in sufficient amount to justify the economy’s of scale. The domestic component industry still strongly relies on imported sub-component and parts , therefore the statistic office still recorded a big volume and value of components and parts imported into Indonesia. • The domestic market size of automotive components reached its peak at around US$ 7.8 billion in 2005, following the robust production of car from around 420,000 in 2004 to more than 500,000 units in 2005 and motor cycle production from around 4.2 million in 2004 to some 5.1 million units in 2005. Unfortunately, the market size of components experienced a set back in 2006, resulted from sluggish automotive production due to 126% fuel price increase in October 2005. The study revealed that the domestic market size of automotive component rose from around US$ 3.6 billion in

3

Indonesia’s Automotive Parts and Component Market

2002 , reached its peak at US$ 7.7 billion in 2005, slumped to US$ 5.4 billion in 2006 , but rebound to US$ 6. 38 billion in 2007.

Import and export soaring • The import statistics show total imports of automotive components fluctuated from US$ 2,042 million in 2002 to US$ 2,788 million in 2004, hit its peak at US$ 3,445 million in 2005, but dropped to US$ 2,811 million in 2004 following slackened automobile industry. Driven by strengthened automobile and motorcycle industry, imports of components recovered to US$ 2,972 million in 2007. • Imports of mechanical engine components accounted for 31 % ot total imports representing the largest imports of components in 2007. The second and third largest components imported are power train ( 13.2%) and multipurpose components ( 11.8%). Other major group of components imported are wheel/ tire components and electrical components. • In 2007, the largest amount of imported components was for parts for spark-ignition type engines ( HS 840991), totalling US$ 386.3 million, followed by motor vehicle parts and accessories ( US$ 297 milllion) and part forf diesel and semi diesel engines ( US$ 190.5 million). Top twenty imported components totalled US$ 2.2 billion orf around 74 % of total import in 2007. • Japan is the biggest supplier of components and parts to Indonesia. Of the total import of some US$ 2.8 billion in 2007, some US$ 1.9 billion ( 49 %) from Japan. Thailand has emerged as the second largest supplier accounting for 15% of total import and toppled the USA which used to be the second largest supplier of automotive component to Indonesia. This phenomenon is driven by the fact that many multinational automotive and component industries have built their production base in Thailand. • Indonesia ‘s export of component has developed markedly from only US$ 1,106 million in 2002 , rose to US$ 1,793 million in 2004, and almost reached US$ 3 billion in 2007. Remarkable growth of export was experiennced by power train components. Export of this component rose from only US$ 32.7 million in 2002 to US$ 381.4 million in 2007.

• Export of wheel and tire components is the primemover of the substantial
growth of Indonsia’s component exports. Export of this category soared from some US$ 404 million in 2002 to US$ 1,113 million in 2007. As

4

Indonesia’s Automotive Parts and Component Market

shown by the followin table , export of pneumatic tire rose markedlhy from US$ 237 million in 2002 to US$ 751 million in 2007. • The share of export to total sales was about 20% in 1999-2001 period, while in 2006 and 2007 , their share has doubled to more than 45%. Over the last 7 years, export of automotive components enjoyed an average growth of 22.2 % a year. • Exports of components from Indonesia are mainly done by companies connected with international brand of automotive components, particularly from Japan. Some of the components are exported to their own associated companies in several countries. • While Japan and Thailand are two largest exporters of automotive component to Indonesia, these countries also main importers of Indonesia’s exported components. This phenomenon reflected strong influences of multinational companies in the regional trading of automotive components. The bulk of the inter-regional trading in component is actually controled by these multinational companies. They have strong influence in deciding from which country they get the supply and to which countries they will sell the components. • In 2006 total component export to Thailand totalled US$ 321.3 million dominated by HS 8708 ( Parts and accessories for motor vehicle), HS 8414 (Air / gas compressor) , HS 8483 ( Transmission shafts&cranks, bearing housing; gearing ) and HS 4011( pneumatic new tire from rubber). In the meantime, export to Japan totalled US$ 521 million or 19% of total export of components in 2007. The third largest export destination was the USA amounting to US$ 300 million or 11% of total export. • Beside other Asian countries , the main destinations of Indonesia’s components are also Middle East Countries. Three major importers from Middle Easts are Saudi Arabia, United Arab Emirate ( UAE) and Egypt. The three countries contributed 6.3% of total component exports of Indonesia. The main components exported to these countries are tires and tubes and batteries. In 2006 UAE imported tires totalling US$ 53 million, while Saudi Arabia US$ 48 million and Egypt US$ 25 million. • Despite increasing export, the market share of Indonesia’s component in the main country of destinations is still relatively still small.. For illustration, Japan imported a total of US$ 4,495 million value of HS 8708 components ( parts and accessories) from around the world in 2006, while its import

5

Indonesia’s Automotive Parts and Component Market

from Indonesia totalled only some US$ 203 million, or about 4.5% of the total Japanese import of this component. In Thailand, the shares of Indonesia’s product for HS 8708 was 5%. Quite a notable share was achieved by Indonesia in Malaysian and Vietnam market. • While for HS 8708 product category , Indonesia still plays a small role, in the market for HS 4011 ( pneumatic rubber tire), Indonesia is quite leading in several countries. For illustration, in Japan, Indonesia controlled 22% of their total import, while in Thailand 32% and Malaysia 16%.

Automobile industry encouraging • The demand for parts for vehicles is the aggregate of the demand for original equipment parts used in the process of assembling new cars (OEM or Original Equipment Manufacturers) and the demand for parts in the after-market (original or OES and non-original). The demand for parts has a very direct relation with the sales of vehicles. • The country’s automotive industry has revived with a big pace since 2003 and touched its peak in 2005 with a total production of 500,710 units. Although, the production slackened in the following years due to 130% oil price hike in late 2005, but the industry is optimistic on the rebound of their production because of strengthened market demand. In 2006, car production dropped to 296,008 units but recovered to 411,638 units in 2007. In 2008, the industry is expected to resume to around 500,000 units. • Total car sales rose from 317,780 units in 2002, to 354,355 units in 2003, 485,148 units in 2004,and hit its peak at 533,913 units in 2006. In 2006, the sales dropped to 319,000 units, but recovered to around 433,000 units in 2007. In 2008, sales are expected to rebound to more than 500,000 units. • There are favorable factors contributing to high performance of the country’s automotive industry in 2003-2007 - first improved economic condition marked by Rupiah stability, low interest rate, steady growth of the economy at 5.5-6.2% – increasing purchasing power, second relatively stable security and political condition and – third facility offered to consumers to buy cars on credits . • Increase has been recorded in the production of all types of cars. Most impressive, however, was in the production of Multi Purpose Vehicle ( MPV

6

Indonesia’s Automotive Parts and Component Market

4x2 type ) particularly of CC< 1,5 lt , 1.5 lt<CC<30 lt In these categories include Toyota Kijang Inova, Toyota Avanza, Daihatsu Xenia, and Suzuki APV, and Mitsubishi T120. Car production of this type rose 43% from 197,343 units in 2006 to 281,763 units in 2007. • The largest car assembler is Astra International (Astra Group) followed by Indomobil Suzuki Internasional (Indomobil Group) and Krama Yudha Tiga Berlian. Astra group represents several wellknown brands i.e. Toyota, Daihatsu, Isuzu, Peugeot, and. Nissan Diesel . Indomobil group represents Suzuki, Hino, Nissan, Mazda, Renault, Ssyangyong and others. Krama Yudha Tiga Berlian represents Mitsubishi. • Japan’s automotive industry has rooted deeply in the country. Japan has played the host in the country in the automotive industry. Toyota, Mitsubishi, Suzuki, Daihatsu, Isuzu, Honda, Mazda, Hino, Nissan and Nissan Diesel have been as popular and familiar in the country as in Japan • In the past three years, three automotive giants Toyota, Mitsubishi and Suzuki, have continued to dominate the domestic market. In 2007, Toyota strengthened its lead with sales totaling 150,631 cars, followed by Mitsubishi with sales 61,548 units and Suzuki 58,095 units. • In the second layer are Daihatsu, Honda and Isuzu .While Honda stays close to Daihatsu , Isuzu is far behind due to weakening competitiveness of their Isuzu Panthers . • Toyota enjoyed a total 35 % share of the market in 2007, slightly dropped from 38% in 2006. Mitsubishi in the second position controlled 14 % of the market in 2007 and Suzuki 13.4 % in 2007.

Motorcycle industry soaring high • The domestic motorcycle industry has increased dramatically over the last 7 years. In 2001, production to 1.91 million units and in 2003 it totaled 2.8 million units , jumped to 3.8 million units in 2004, and hit its peak at 5 million units in 2005. The production did not include Chinese products assembled by the new players. High increase fuel price in October 2005 has contributed to the drop of production in 2006, which was only 4.47 million. However, in 2007, the production recovered to reach 4.7 million.

7

Indonesia’s Automotive Parts and Component Market

• The fast growth of the motorcycle industry is attributable partly to support from multifinance companies facilitating purchases with credit. Leasing or consumer finance companies offer attractive credit to buy motorcycles both those produced by AISI ( The Association of Indonesia’s Motorcycle Manufacturers) members and non AISI producers. • The country’s motorcycle industry has advanced into the level of full manufacturing industry with products already having a local content of 90%. The components which are still imported are carburetors, clutches, bearings and sub components like special bolts, special forged material, piston ring and other small components. • The country’s main producers of motorcycle are members of AISI (The Association of motorcycle industries). They are PT Astra Honda Motor ( Honda), PT Yamaha Indonesia Motor Manufacturing ( Yamaha), PT Indomobil Suzuki International ( Suzuki,) PT Kawasaki Motor Indonesia ( Kawasaki ) , PT Kymco Lippo Motor ( Kymco) and PT Semesta Citra Motorindo ( Kanzen). Two latest companies are assemblers of Korean brand motorcycles. Another member of AISI is PT Danmotor Vespa producing Vespa scooters. However, the latest company is not so active, because its market has been shrinking gradually over the last ten years. • PT. Astra Honda Motor (AHM) started the operation of its third factory in Cibitung, Bekasi in October 2005. This third factory has an annual production capacity of 1.2 million units. With the additional capacity, AHM has now an annual production capacity of 3.2 million units. AHM already has two factories – in Sunter and Pengangsaan Dua, North Jakarta with a total installed capacity of 2 million units a year. • Despite aggressive market penetration of several Chinese brand motorcycles and other brands from Korea, over the last five years, Japanese brand motorcycles have been able to keep their strong domination in the market. In fact, low price -Chinese motorcycles are now very difficult to stay in the market. • Three largest Japanese brands in the market, Honda, Yamaha and Suzuki controlled 98% of the market with Honda as the leader with 45.7% share. It is interesting to note that in 2007, Honda lost its share by 7.4 point , from 52.3% in 2006 to 45.7%. Meanwhile, Yamaha has strengthened their position as the second largest brand with its share increased from 33% to 39%. The success in marketing Yamaha Mio “Skutik” (automatic

8

Indonesia’s Automotive Parts and Component Market

transmission motorcycle), has great contributions to soaring market share of Yamaha in 2007. • The sales data released by AISI shows that there was some drastic change in the market structure of motorcycle . The sales of automatic cub ,known as “Skutik” has soared in the last three years from only 191,600 in 2005 to 385,500 units in 2006 and surged to 873,900 units in 2007. • The prospects of motorcycle industry in the country are still encouraging although the growth is not expected to be as fast as in the past few years to recover and continue growing. Key players in automotive components • Major component manufacturers are mostly connected with major group of companies in automobile / motorcycle business. Because of previous government “ Automotive deletion program”, car assembling companies / sole agents set up their own automotive component manufacturers to support their car assembling operation For illustration, PT Astra Otopart Tbk ( AOP), is the hand of Astra Group in component business. Beside having its own component manufacturing business, AOP is also a parent company of some 27 subsidiaries and associates. Several subsidiaries of AOP is also a major automotive component business, such as PT Denso Indonesia, PT EDS Manufacturing, and PT GS Battery .

• PT Astra Otoparts Tbk (AOP) manufactures and distributes a wide range of automotive components both for domestic and overseas market. The partners for their component business include Japan Storage Battery Co. Ltd., Aisin, Akebano, Denso, Izumi, Yazaki, Kayaba Corporation of Japan and SKF of Sweden. • There are 16 subsidiaries and associates of Indomobil group involved in component manufacturing. There are involved in engine and stamping, wiring harness, steering columns, tire , electrical components etc. Indomobil group is the second largest group in automotive in Indonesia with its brands : Suzuki, Nissans, Hino, Mazda, Renault, Volvo, Audi, Ssangyong and Volks Wagen (VW). Beside, Indomobil Suzuki International, major component companies under this group is PT Sumi Indo Wiring System, PT Jideco Indonesia and PT Indo VDO instrument, and PT Yamatogomu Indonesia.

9

Indonesia’s Automotive Parts and Component Market

• ADR group is one of groups prominent in automotive components without having ownership connection with car assemblers or sole agents. ADR group has 5 companies producing components . The prominent company within this group is PT Selamat Sempurna Tbk, a publicly listed company. In January 2007, other member of the group, PT Andhi Chandra Automotive Products, merged into PT Selamat Sempurna Tbk. In 2006, PT Selamat Sempurna gained a total sales turnover of some Rp 881 billion. In the first 9 months of 2007, their sales totalled Rp 794 billion. • In addition to supplying the local automotive manufacturers, domestic component manufacturers have increased their penetration in the export market. While in 1999-2001, the share of export to total sales was about 20% in 2006 and 2007 , their share has doubled to more than 40%. The substantial growth of component export was also influenced by global sourcing strategy of major automobile players. As the automobile industry is becoming more and more standardised, the production base of most of the giant auto-companies is being moved from the developed countries to developing countries, including Indonesia. • Although, automotive component industry in Indonesia is quite developed as indicated by growing domestic and export sales, but the industry is still largely dependent on technical assistances from overseas. Almost all major component manufacturers operate with technical assistance either from their foreign partners or from third party based on production license agreement etc. • Quite a number of Indonesia’s automotive component manufacturers have obtained IS0 9000/ 14000 certifications which are required for supplying to automobile / motorcycle industry as first tier suppliers. Holding this certification is also important to serve OEM market both in domestic or export market. In 2006 , there were 31 companies acquiring ISO/TS 16949 which are required for exporting to Europe and the USA.

Materials for components • Automotive-component production involves a multitude of inputs, including steel and steel alloys of various gauges, aluminum, brass, copper, resins for molding, rubber and rubber compounds, and various densities and compositions of foam and paper products for filters.

10

Indonesia’s Automotive Parts and Component Market

• Steel accounts for the bulk of the materials (around 60-70%), while plastic, aluminum and other materials accounts for the remaining 30%. According to University of Indonesia expert in composite materials, around 55% of the steel components consists of carbon steel and 15% special alloy steel. • There are three categories of steel used by the automotive industry -- flat (hot/cold rolled and plates for making vehicle bodies), long (used for making forged components) and pig iron (used by foundries for making cast components). • Indonesia has a limited capacity in steel production. Iron making, steelmaking, hot and cold rolling are all inadequate and in an unbalanced state. The region has long been relying on imported steel. The problem is not only in term of quantity, but also quality: downstream industries in the region depend on imported high quality steel. Automotive industry (car, motorbike) has been enjoying a booming time in the region but they rely greatly on steel imports, mainly from Japan. Only a fraction of steel needed has been sourced domestically, mainly because of quality reason. • The recent price increase in steel has sent shivers down the spine of the steel consuming industry including automotive industry as it witnessed a price hike of 25 per cent during the last three months. • The price of HRC (Hot Rolled Coil) already recorded a high level of US$ 710 per ton in January 2008, from only around US$ 500-600 per ton in 2007 . In March 2008, the price soared to around US$ 1000 per ton. Meanwhile CRC price soared to US$ 1100 per ton representing growth of more than 40%. The rocketed price was driven by 100% increase in iron ore price from only US$ 113 per ton ( January 2008) to US$ 229 per ton ( March • The steep prices of steel have given the auto industry a tough time. Major car manufacturers like Toyota , Suzuki and Mitsubishi has announced their plan to increase the price of cars at around 2-5% in May 2008. The industry is quite confident with this level of price hike , the market demand won’t be much affected. • Despite the selling price increase , the soaring steel price and other inputs including high fuel price is likely to reduce the profitability of component manufacturers.

11

Indonesia’s Automotive Parts and Component Market

• As the automotive industry addresses environmental concerns, the problem of fuel consumption and weight reduction has come to the fore. Reducing the weight of automobiles is one of the primary means by which their fuel consumption is lowered. There has been a trend toward the use of light metals and their alloys in automotive components, particularly automotive bodies. The most commonly used materials are aluminum, magnesium, and their alloys, though some research has also been done on the use of titanium, zinc, and nonmetallic materials.

Market segmentation • The market for parts and components can be divided into two main segments: the supply to the “original equipment manufacturer”, known as the OEM market, and the after-market ( AM) . Both markets depend on developments in the vehicle market. • Data of GIAMM ( The Federation of Automotive Component Manufacturers) indicated that before the economic crisis ( 1997), the domestic component market consists of 60% OEM and 40% AM. However during the worst economic crisis ( 1997-1999), the composition was reversed, where AM constituted 60% of the market share, while OEM 40%. In 2007, the composition of the market is 55% AM and 45% OEM . Please note that in addition to domestic market, local component manufacturers also export their products. Export share has been gradually increasing over the last 5 years. • The market value of OEM is estimated at around US$ 1.63 Million in 2002 , rose to US$ 3.8 billion in 2005 . The year 2006 has been quite turbulent in the OEM market when the market slackened to US$ 2.3 billion from previous year. . After sharp increases in car production in 2004-2005, the production dropped drastically in 2006 . Following the recovery of car production, the OEM market rose to US$ 3.1 billion in 2007. • The after-market ( AM) or some times refer to as Replacement Market ( REM) consists of all products needed for maintenance, repairs and improvements. Demand for replacement parts depends on the use of automobiles and other motor vehicles, as opposed to new sales thereof. Demand is thus likely to be more stable in the market AM segment than in the OEM. Based on the study on the total market value of component, the after-market is estimated to have been around US$ 2.3 billion a year in

12

Indonesia’s Automotive Parts and Component Market

2002-2004, rose substantially to around US$ 3 billion a year in 20052007. • In the after market, the component can be classified into four types based on the level of genuinity i.e. Genuine products, OES ( Original Equipment Supplier) products, Substitute Products, Faked ( counterfeit) products. • In the after-market, original equipment parts compete with non-original equipment parts. Nonoriginal parts are often mass-produced parts that have to be replaced quite frequently, like tires and exhausts. Because of the absence of large investments in research and development, nonoriginal parts are marketed at a substantial lower price. Original equipment is pre-dominantly marketed through the authorized dealer channel. More complicated parts, like engine or transmission parts, are not available within the non-original segment.

Global and regional perspective • The automobile industry is one of the fastest growing sectors in the world. It has dynamic growth phases explained by the nature of competition, product life cycle and consumer demand. Today, the global automobile industry is concerned with consumer demands for styling, safety and efficiency; and with labor relations and manufacturing efficiency. The industry is at the crossroads with global mergers and relocation of production centers to emerging developing economies. As the automobile industry is becoming more and more standardized, the production base of most of the giant auto-companies is being moved from the developed countries to developing countries. Standardization is making production more profitable in developing countries due to low cost of labor. • Strong economic growth coupled with low car ownership rates and rising incomes has turned Asia into a gold mine for the automotive industry. The eventual shift in OEM's and auto-parts manufacturers focus toward Asia has led to a rapid growth in vehicle assembly in many parts of Asia, most notably China, India and South Korea. Thus, many countries in Asia are making a serious effort to grab this opportunity that include Thailand, India, China and Indonesia. • Multinational vehicle manufacturers have not only become a prominent part of the Asian components industry supply chain but have also started using

13

Indonesia’s Automotive Parts and Component Market

the local Asian suppliers for their regional and global component needs. Although targeted initially at servicing the burgeoning local vehicle manufacturing sector, new investments by suppliers could also become future substantial low-cost export bases for components. • ASEAN is a key strategic automotive market. There are many reasons for these. ASEAN population is around 570 million. Young population is the major share from this figure. Currently the car sales in this region have been increasing every year. For the year 2005 the sales is estimated at 2.1 million, and JAMA ( Japan Automobile Manufacturers Association ) projected that the demand will reach 2.6 million in 2010. With this amount, this region is the fifth largest in the world for car sales . • Gross Domestic Product (GDP) growth in Asean economies will maintain a Compound Annual Growth Rate (CAGR) of over five percent over the next five years (2005-09). It is this economic growth, combined with low car ownership rates and rising incomes that is making Asean countries a bright spot in the automotive industry causing major vehicle manufacturers and component manufacturers alike to focus on the region as never before. • The South East Asia region including Indonesia has cost advantages in terms of low labor cost and relevant labor skills. This is further reinforced by the region’s liberalization policies as well as its access to e-commerce and other technology.

• With the implementation of the ASEAN Free Trade Area by the year 2015,
top car makers are already positioning for the huge integrated market that offers preferential tariff of zero to five percent. • Automotive components is one of export products of Asean countries which experienced a high growth over the last 5 years ( 2002-2006). Their export growth rate for each category of products varies from the lowest of 16% our highest 51% a year. It should be noted however, that a substantial amount of the export is actually an intra-Asean trading . In 2006, export among Asean countries total around US$ 5 billion which is about 30% of total Asean export of automotive components. • Indonesia has been quite successful in expanding its exports, with average growth rates of 22.2% a year over the last 6 years from US$ 1.1

14

Indonesia’s Automotive Parts and Component Market

billion in 2002 to around US$ 3 billion in 2007. Despite its remarkable growth, however, Indonesia’s exports was only a half of Thailand’s export of automotive component which just developed its automotive industry several years after Indonesia . Industry sources said ,that the inconsistent government policy in automotive industry was one of the reasons why this industry has developed slowly particularly in the beginning of 1990’s. • According to the Chairman of GIAMM ( The Association of Automotive Component Manufacturers), local component manufacturers will be ready to compete when AFTA comes in full force in 2015. At that time, Indonesia will have large automotive market that need a big amount of components. The big demand will create the potential for efficient, locally based component industry that increase their competitiveness in the local as well as export market . • According to GIAMM, supportive tariff harmonization scheme , is one of key success factor for Indonesia to compete in the export market . The recent government policy to exempt the import duty for raw materials used in the component production is considered effective in improving the competitiveness of local products. With relatively low labor costs and raw material advantages, Indonesia should be able to compete with neighboring countries like Malaysia and Thailand to capture larger share in the export market. • The opportunities to supply to other Asean countries is also quite encouraging as the share of Indonesia’s products is generally still small in Asean countries. In addition to Asean countries, the current largest importers of Indonesia’s automotive components i.e. Japan and the USA, are still prospective market for Indonesia. At present, the Indonesia’s share in these countries are still small. For category of “parts and accessories” of HS 8708, Indonesia’s share was only 4.5% in Japan and 0.3% in the USA. • The development of automotive sales in the first quarter of 2008 has sent a positive signal and optimism to the industry players. In the first quarter of 2008, the total sales of automobile experienced an impressive growth of 62% from the same period last year from around 105,000 units to around 136,000 units. Motorcycle sales are also encouraging totaling 1.43 million units or rose 35% compared with the same period. Based on the strong demand performance in the first quarter of 2008, Industry sources predict

15

Indonesia’s Automotive Parts and Component Market

that car production in 2008 will be larger than 500,000 units, namely around 520,000 units, or 23% higher than sales of previous years. • The government has made a projection that car production will touch 1,000,000 units in 2010 and 1.65 million in 2015. Some observers said that this projection is too optimistic, but an executive of major automotive company, Astra Daihatsu Motor ( ADM) sees that the target is quite realistic and export will contribute largely to the growth of car production. In the • Export of cars will be one of key drivers to the growth of car production over the next five years. Export of CBU ( Completely Built UP) cars has experienced an impressive growth of 90% in 2007 , from around 31,000 units in 2006 to 60,267 units in 2007. In addition , Indonesia also exported 105,000 sets of CKD ( Completely Knocked Down ) cars in 2007 . In 2008, the export of CBU cars is expected to exceed 100,000 units and CKD to reach 148,000 sets . • The Ministry of Industry has set a target to export 300,000 CBU cars in 2010. The government has taken several measures for achieving this target. This includes exempting import duties for motor vehicle parts to be assembled for export. • The automotive component market has been experiencing a high average growth rate of 16 % per year over the period 2002-07 . The domestic market is expected to increase further at a rate of 12-18 per cent per year over the period 2008-2012, driven by strong growth of the domestic car industry, which is growing at a spanking rate of over 15-20 per cent, driven by a rising consumer base and affordable loans, and expected growing export market. The domestic market is projected to amount to US$ 7.7 billion in 2008, rose to US$ 9.87 billion in 2010 and at about US$ 13 billion in 2013. • Assuming that 45% of the total market of components is for after market, the size of this segment is US$ 3.4 billion in 2008, US$ 4.2 billion in 2010 and US$ 5.5 billion in 2012. • In Indonesia, the competition in all sectors of the industry will escalate as more global manufacturers enter the market. Planning for a long term market growth, new entrants will strive to penetrate into the market while

16

Indonesia’s Automotive Parts and Component Market

existing ones solidify their market position. Japanese affiliated assemblers and parts manufacturers will continue providing support to strengthen their operations in Indonesia. • Included as a part of all the world majors’ global strategy, Indonesian vehicle industry will progress along the worldwide industry trends. While these global industry trends emerge to meet the needs of world vehicle manufacturers, they will have impact on the parts manufacturing industry particularly those small independent part manufacturers. • Guarantee of security, political stabilization, and a healthy competitive climate are some of the factors that should be ensured by the Indonesian government. Without the immediate fulfillment of those factors, it would be difficult to attract investors to Indonesia.

Please email to [email protected] for full study report

17

Sponsor Documents

Or use your account on DocShare.tips

Hide

Forgot your password?

Or register your new account on DocShare.tips

Hide

Lost your password? Please enter your email address. You will receive a link to create a new password.

Back to log-in

Close