Indomobil to produce cheap cars<\/p>\n
JAKARTA (JP): Indomobil, the country's second largest car
\nassembler after Astra International, is to launch its first low-
\npriced sedans, with 60 percent local content, in four or five
\nyears' time.<\/p>\n
Indomobil president Soebronto Laras said here on Thursday, \"We
\nare currently thinking of one model with 60 percent local parts.
\nIn four or five years the car will come onto the market at a
\nprice lower than Rp 20 million (US$8,567).\"<\/p>\n
\"To do it viably we will have to produce at least 50,000
\nsedans a year. The car won't be worth making if the production
\nrate is just 4,000 or 5,000 a year,\" Soebronto said.<\/p>\n
Indomobil currently produces vehicles with Japanese and
\nSwedish brands -- Suzuki, Mazda, Nissan and Volvo -- with
\ndomestic components of up to 20 percent.<\/p>\n
\"To make the planned model, there will be no substantial
\ninvestment needed because we can use our existing assembly
\nfacilities,\" Soebronto said at the Danamon Tennis Center in
\nKemayoran, North Jakarta. \"But, of course, there will be
\nmodification costs, which I estimate at Rp 100 billion
\n($42,835.7).\"<\/p>\n
This move is an apparent counter to PT Timor Putra Nasional,
\nwhose sedans with 20 percent local content in its first year of
\nproduction will be available on the market at about Rp 35 million
\n(US$14,992) in September this year. This is half the price of
\nJapanese makes of the same class -- with engines of 1,600cc.<\/p>\n
Legal basis<\/p>\n
Surprisingly, Soebronto said that the legal basis for
\nIndomobil producing cheap sedans would be the May 23, 1993
\nderegulation package, not Presidential Instruction No. 2\/1996,
\nwhich was announced on Feb. 28.<\/p>\n
The February ruling stipulates that the government will lift
\nimport duties on components and luxury sales tax on cars which
\nare manufactured by a 100-percent domestic company with an
\nIndonesian brand name and local technology, engineering and
\ndesigns.<\/p>\n
Import duties on components and luxury sales tax on cars sold
\non the domestic market generally account for about 60 percent of
\nthe sale prices.<\/p>\n
The day the decree was announced, the government also declared
\nPT Timor Putra Nasional as the only company for the time being
\nwhich already met the requirements of the new ruling.<\/p>\n
The May 1993 deregulation package, on the other hand,
\nstipulates reduction of import duties on components used for the
\nassembly of vehicles whose volume of domestically-made components
\nis sufficiently high.<\/p>\n
\"Thus, for sedans with 60 percent local contents, the duty on
\nimported components will be 20 percent. This gives enough room
\nfor us to stay competitive,\" said Soebronto.<\/p>\n
\"That's why,\" he added, \"our immediate reaction to the package
\nwas applying to the government for a permission to produce cheap
\nsedans with a high local content. We sent the application on Aug.
\n17 last year,\" he said. \"However, we have yet to receive a reply
\nfrom the government, which, all of a sudden, announced the
\nFebruary presidential instruction.\"<\/p>\n
Soebronto added that \"in fact, when it comes to being ready to
\nproduce cars with a high percentage of local contents, I can say
\nwith certainty that it is Indomobil and Astra who are the most
\nprepared.\"<\/p>\n
\"Astra's total investment of around Rp 1.5 trillion and ours
\nof Rp 800 billion, plus so many years of experience in the indus
\ntry, should explain why we are the best prepared,\" Soebronto
\nsaid.<\/p>\n
Newly established Timor Putra, on the other hand, said it
\nwould invest $260 million in its Timor sedan project.<\/p>\n
Timor cars will be a clear threat to the Japanese car
\nmanufacturers who have their cars assembled and marketed in
\nIndonesia. But Soebronto, who met with executives of Indomobil's
\nprincipal companies in Japan last week, has advised them not to
\nfile any protests against the Indonesian government over its new
\npolicy.<\/p>\n
\"Yes, they questioned the policy and wanted to protest. But I
\ntold them not to do so because such a protest would be useless.
\nMoreover, every country has its own policies and we have to
\nrespect them,\" Soebronto said. (arf)<\/p>",
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