Era of cheap cars
Era of cheap cars
Putting the controversy aside for the moment, the government's
national car policy may have ushered in a new era of cheap cars
in Indonesia. Local car manufacturers may question the fairness
of a policy that favors a complete newcomer, and Japan and the
United States may make good their threats to take Indonesia to
the World Trade Organization, but it now appears that Indonesian
consumers will be the biggest winners from the policy.
When the government announced the new national car policy in
February, scant attention was given to how it would affect
consumers. The decision to grant a series of tax breaks to
businessman Hutomo (Tommy) Mandala Putra was intended to nurture
a truly home-grown car industry. The controversy that ensued
focused on the interests of the various players in the industry,
including their Japanese, Korean and American principals.
But now that the first of two models claiming to be the first
national cars have been launched, the benefits for consumers have
become apparent. First, Tommy's Timor, a 1,500 cc sedan, entered
the market on July 8, priced at Rp 35.75 million ($15,500). Then,
on Wednesday, Tommy's older brother Bambang Trihatmodjo launched
the Cakra, another 1,500 cc sedan, selling for Rp 41.7 million
($18,100). These cars are not cheap by international standards,
but they are real bargains for Indonesians who are accustomed to
paying double, triple and sometimes even quadruple what Japanese,
Americans and Europeans have been paying for sedan cars all these
years.
The Timor and the Cakra are essentially imported Korean cars
although the producers have promised to step up the local content
gradually to live up to their claim to be "national cars".
There is no secret about Tommy's pricing, given that it enjoys
such useful tax breaks. But Bambang's ability to sell his car at
just slightly over Rp 40 million without those privileges came as
a major surprise. Some people may put it down to business
strategy, but the important point is that these two models have
kicked other automotive players in the trunk. These
manufacturers, who for so long have controlled the Indonesian
market by assembling Japanese cars, are now racing to churn out
new models at equally competitive prices.
The overall impact of the national car policy for consumers
has been positive. We hope the reduction in prices does not come
at the expense of quality, as has so often happened in the past.
The task of the government is to ensure continued healthy
competition among car-makers, because this is one way of ensuring
that not only prices, but also quality, are competitive.
We do not believe that the era of cheap cars will necessarily
lead to a big surge in sales. Certainly, there will be some of
that in the beginning, but the market will eventually settle down
and various factors will continue to limit the growth of car
sales in Indonesia. In Jakarta, which remains the largest market
for car manufacturers in Indonesia, road shortage, worsening
traffic congestion, lack of parking facilities, the prospect of
stringent emission controls and the plan to build a new mass
rapid transit system will combine to limit sales growth in spite
of price cuts.
Already we are seeing an increasing shift in consumers'
preference away from passenger vans, which have long dominated
the Indonesian market, towards sedans, while overall sales has
remained more or less stagnant.
With the advent of cheap cars, consumers in Indonesia will
have a wider range of selection to choose from at lower prices.
This will free up more of their disposable income to spend on
other things, and this can only be good for consumers and the
rest of the economy.