Higher local contents 'won't 'reduce' car prices'
Higher local contents 'won't 'reduce' car prices'
JAKARTA (JP): Increasing the local content of locally
assembled vehicles would not automatically result in lower sales
prices and competitiveness, experts said at the opening of an
auto expo here Saturday.
Automotive analyst Suhari Sargo said car prices depended
largely on the total efficiency of automobile companies rather
than on the reduction of import duties and luxury taxes.
But F. Soeseno, secretary-general of the Indonesian Automotive
Industries Association, argued that supply and demand would help
determine prices.
"We cannot guarantee lower prices for cars which have already
achieved a certain local content level because we follow the
forces of the supply-demand equation," Soeseno said.
Earlier this month, PT Citramobil Nasional, a unit of publicly
listed PT Bimantara Citra, slashed its sedan prices by six
percent because its cars higher local content brought about lower
import tariffs.
As Bimantara cars contain more than 20 percent local content,
the tariffs on the remaining imported components were reduced to
50 percent from 65 percent.
On top of import tariffs, cars are subject to a 35 percent
luxury sales tax and 10 percent value added tax.
In the United States and Malaysia the government monitored
closely prices of consumer products, including automobiles, to
maintain price fairness, Suhari said.
"Whenever prices are abnormal, the government takes steps to
force companies to bring prices back to a normal level," Suhari
said.
He said the Indonesian government could demand financial
statements from automotive firms to see whether their prices were
normal or not.
"We expect automobile assemblers to cut their prices whenever
the government grants them import duty or tax cuts," he said.
The director of the transportation industry section of the
industry and trade ministry, Noergardjito, said the government
would not intervene and would let market forces run normally.
But he said the government's national car policy had in some
ways forced the lower car prices on the domestic market.
Under the policy, announced in February 1996, the government
granted import duty and luxury tax exemptions to PT Timor Putra
Nasional as the sole producer of a so-called national car,
driving its cost down to only about 60 percent of the price of
its domestic competitors.
Timor Putra -- controlled by President Soeharto's youngest
son, Hutomo Mandala Putra -- is cooperating with Kia Motors Corp
of South Korea to produce the national car. It currently imports
the car fully assembled from South Korea as its production
facilities are still being built.
Noergardjito said the national car policy was introduced to
free the country's automotive industry from its dependency on
foreign technology and to correct the continuing lop-sided trade
imbalance in the sector.
Automotive imports were US$4.1 billion last year, up from $3.6
billion in 1995. But automotive exports were still less than $300
million, Noergardjito said.
Noergardjito officially opened the Indonesia Automotive '97 at
the Jakarta Convention Center which will run until June 22. (rid)