'Car prices could drop following implementation of AFTA'

Adianto P.Simamora, The Jakarta Post, Jakarta

Car prices on the domestic market could drop this year following the implementation of the ASEAN free trade area scheme (AFTA), the country's car association said Thursday.

Association of Indonesian Automotive Manufacturers chairman Bambang Trisulo said car producers and traders were now discussing the possibility.

"I think there is a room to cut car prices this year," Bambang told The Jakarta Post.

He noted however that prices would not drop in the near future as traders and manufacturers would not make a decision until they felt sure that the reduction of tariffs in line with AFTA would make it feasible.

The traders and manufacturers could wait for six months before cutting prices, he said.

AFTA came into effect in six founding member countries of the Association of Southeast Asian Nations (ASEAN) on Jan. 1. Specifically Indonesia, Singapore, Malaysia, the Philippines, Thailand and Brunei Darussalam.

In line with AFTA, all but a few import tariffs should be reduced to between zero percent to five percent.

Indonesia, together with Thailand and the Philippines have agreed to include automotive products in the list of products, on which import tariffs would be reduced to between zero and five percent this year.

Consequently, cars imported from these countries could be sold at cheaper prices in Indonesia, while Indonesia-made cars could sell cheaper overseas.

Malaysia had asked for a delay until 2005 for its automotive sector to protect its national car maker Perusahaan Nasional Bhd., or Proton.

As such, Malaysian cars would be exempt from low import tariffs.

Bambang said that car prices did not just depend on low import tariffs.

"There are other factors that will affect prices, including fuel and electricity prices, which both impact on production costs.

"The country's continued political uncertainty and rupiah volatility could also discourage producers and traders from cutting prices," Bambang said.

Meanwhile, PT Toyota Astra-Motor spokesman Hendrayadi said car prices would depend on both demand and competition.

"So far, we have no plans to cut the prices for cars this year," he told The Post.