Indonesia competes with the Southeast Asian market in Automotive Industry – Part 2

Indonesia’s auto market has plenty of room to grow. CLSA Asia-Pacific Markets estimates the country had 32 vehicles for every 1,000 people in 2010, compared with 123 in Thailand and 300 in Malaysia. Indonesia’s economy and population are bigger than those two Southeast Asian neighbors combined.

U.S. carmakers still have a long way to go before catching up or even getting close to Japanese brands. Out of the 894,180 vehicles sold in the country last year, GM accounted for less than 1 percent, according to the nation’s auto association.

Sales in Indonesia will jump to 1.2 million units by 2016, according to IHS Automotive. Such growth would allow Indonesia to challenge Thailand, which saw domestic production tumble 11 percent last year after its worst floods in almost 70 years, as the auto industry’s Southeast Asian hub.

Indonesia is heading toward “full-fledged motorization” after gross domestic product per capita exceeded $3,000 in 2010, Nomura Holdings Inc. analysts wrote in a report last month. Turkey, Malaysia and South Korea are among markets that have seen growth in their automotive markets pick up after GDP per capita exceeded that threshold, according to Aditya Srinath, a Jakarta-based analyst at JPMorgan.

The growth of the Indonesian auto market faces risks, however. Currently interest rates at 6 percent are “favorable” for the auto industry said Davy Tuilan, a director at Suzuki Motors’s Indonesia unit. If the central bank decides to increase those rates, “it will affect the auto industry significantly,” he said.

Another risk is the price of fuel. The government plans to start reducing fuel subsidies from April. That would leave only public-transportation vehicles, motorcycles and fish-delivery vans eligible for subsidies and almost double the price of gasoline for other motorists, according to IHS Automotive.

“We are facing risks on how customers will react once the government implements its plan on limiting the fuel subsidy,” said Teddy Irawan, a vice president at Nissan Motor Co.’s Indonesia unit.

The government’s so-called Eco-car proposal to spur demand for low-emission, compact vehicles via incentives may take effect in 2013, according to IHS and JPMorgan. The plan, first announced in 2009, is still being completed, Budi Darmadi, a director general at the industry ministry, said in an interview.

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Posted by Usman Khalid on Jan 20 2012. Filed under Automobiles. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.