Car exports surge as local makers look overseas

JAKARTA (JP): Vehicle exports may jump to 15,000 cars this year, from 8,000 cars in 1998, as most car makers opt for an overseas market to avoid the domestic slump, a senior automotive analyst has said.

Suhari Sargo said most car makers were focusing on foreign markets as political uncertainty would likely continue to drag down domestic sales.

"At least 4,000 cars were exported during the first three months of this year alone."

Selling the cars overseas was the right strategy for local automotive companies to survive the country's economic crisis, he said.

Indonesian automotive companies produce cars in cooperation with foreign partners to supply the local market. But they are also allowed to sell their products overseas in limited amounts.

He said cars were sold to right-hand drive countries, such as Papua New Guinea, Pakistan, India and Bangladesh.

Suhari said Indonesia's automotive sales may decline further to between 40,000 cars and 50,000 cars this year, from 58,000 cars last year, as demand remains low.

He said the car market would remain depressed due to political events in the country, such as the June general election.

Suhari said domestic sales remained sluggish in the first three months of this year.

According to the Association of Indonesian Automotive Industries, only 1,898 cars of all makes were sold in January.

"Sales figures picked up in February to 3,300 cars. The number is predicted to reach the same level in March. But it will plunge again approaching the campaign period and the general election."

He said the country's economic crisis together with political instability were the main reasons for the expected further decline in vehicle domestic sales during the next few months.

"Many people will suspend purchasing a vehicle, waiting until the political events are over and until certainty in both political and social conditions returns."

He said it would be difficult to predict when car sales would return to pre-crisis levels when annual sales often surpassed 400,000 units.

Sales dropped to 58,000 units in 1998 as the economic crisis, which began in the middle of 1997, became more severe and the country's political situation became tenuous following the downfall of former president Soeharto.

Suhari said most of the country's car manufacturers had stopped producing or had downsized their production capacity due to sluggish demand.

He added that 40 percent of the country's 300,000 workforce in the industry had been made redundant as of this month.

Suhari said if a plant was idle, the company would not only lose money but would also experience a technology setback.

He said many foreign car makers remained optimistic about the long-term outlook for the country's automotive market, due to Indonesia's vast territory and large population.

Several foreign car makers have intensified their involvement in Indonesia. U.S-based General Motors has bought its local partner Garmak Motor's stake so it could own 100 percent shares in GM Indonesia, while Ford would acquire some part of Indomobil's stake, he said.

Suhari urged the government to restructure the country's automotive industry as soon as possible to save the ailing industry.

"We already own infrastructures but we need investment. So we have to create a conducive climate for car investment, which includes business security and certainty and a healthy banking sector." (gis)