Car market slump hits manufacturers
JAKARTA (JP): A slump in the country's car market has forced domestic automotive component producers to either halt their operations or decrease production.
According to the Indonesian Automotive Parts and Components Industries Association (GIAMM), 21 of its 125 members have closed their factory doors.
Association chairman Achmad Safiun said on Thursday that the lower demand for car components from local automotive assemblers had also forced the association's other 104 members to cut production up to 80 percent.
"Part of the car component industry has halted activities, while companies still producing are generally only running at no more than 20 percent of capacity, except for those exporting their products," Safiun told a seminar on the automotive industry.
He attributed the drop to the country's worsening economic crisis.
Public purchasing power has been cut drastically, forcing a sharp decline in the industry, he said.
Safiun said the crisis, triggered by the rupiah's fall against the U.S. dollar, first hit original equipment manufacturers' (OEM) sales due to a halt in component buying by local car assemblers.
At the same time, component manufacturers saw a pileup of newly arrived imported materials, he said.
Car parts makers were forced to reexport their materials since the stocks could not be sold.
While OEM sales slowed down, spare parts sales also declined, he said.
"Spare parts cannot be priced using the current exchange rate because people's buying power is very weak," he said.
Most of the country's licensed automobile firms no longer produce and assemble cars, due to an 85 percent drop in car sales since last year.
OEM products contribute about 60 percent of the turnover for GIAMM members, while spare parts sales make up the remaining 40 percent of the revenues.
Safiun said some of the component makers had begun shifting their market to foreign countries in order to survive.
"The condition forced us to export because that's the only solution to stay alive," he said.
As many as 60 GIAMM member companies are currently exporting their products, while another 10 are expected to follow suit. The remaining 34 members supply spare parts only to the local market, he said.
Safiun said car component exporters often faced barriers and restrictions from potential buyer countries, he said.
The United States and European countries, for example, require automotive parts producers to have a QS 9000 qualification, he said.
"GIAMM has lobbied car manufacturer General Motors (GM) in Indonesia to allow its members to supply GM factories abroad," he said.
The company has also reached an agreement with its Japanese counterpart, the Japan Automotive Parts Industries Associations (Japia), which agreed that its members would help their business partners in Indonesia stay alive by helping them export their products, he said. (das)