Japanese carmakers committed to Indonesia

Novan Iman Santosa, The Jakarta Post, Tokyo/Jakarta

Japanese carmakers still see potential and opportunity in Indonesia's auto market, particularly when combined with the regional market of Association of South East Asian Nations (ASEAN), with its population of 500 million.

However, they have warned that the Indonesian government needs to pay special attention to this sector, so that its potential can be turned into real profit, or neighboring countries will reap the windfall.

Indonesia is considered to lack basic infrastructure and supporting industries, especially those of auto parts production.

Most major car manufacturers currently choose Thailand as their production base, which could offer better infrastructure as well as a more stable situation.

Japanese car makers, however, still turn to Indonesia, particularly due to their belief that concentrating business in only one country is not a wise strategy.

Japan's largest carmaker, Toyota Motor Company (TMC), said it was committed to continuing business here, while calling for major improvements.

"As a business, we want to see a stable economic policy as we firmly believe that Indonesia has the potential for growth," said Toyota's spokesman Tetsuo Kitagawa on the sidelines of the Tokyo Motor Show last October.

Toyota has set upon Indonesia and Thailand as the production center for its planned global vehicle-and-parts supply network, called the Innovative Multipurpose Vehicle (IMV) project, for the ASEAN region.

"Indonesia and Thailand have recovered rapidly from the 1997 economic turmoil as shown by sales. They have surpassed the sales-record before the crisis," said Kitagawa, who is also IMV's project manager

"ASEAN market has become part of Toyota's global market network. It is no longer a local market but has become part of the international market."

The investment is US$180 million in Indonesia and 15 billion baht (US$384 million) in Thailand, to produce multipurpose vehicles (MPV) and pick-up (trucks).

In Indonesia, the annual MPV production is set at 70,000 units, of which 10,000 will be exported within and beyond the region. Gasoline engine production is set at 180,000 units annually, 130,000 of which will be designated for export.

Meanwhile, annual pick-up and MPV production in Thailand is set at 200,000 units, half of which will be exported to more than 80 countries and territories within and beyond ASEAN.

Toyota will also set diesel engine production in Thailand at 240,000 units a year, and expects to annually export 130,000 units.

Kitagawa said that Toyota ultimately wanted 100 percent local content for the IMV project.

In another effort to strengthen its presence in Indonesia, Toyota announced on Dec. 12 its cooperation with Daihatsu by launching Toyota Avanza and Daihatsu Xenia in a project called the Under IMV or U-IMV.

Meanwhile, Honda Motor Co. chief of operations for Asia Oceania Operations, Satoshi Toshida, also saw Indonesia as a huge potential market.

"We will improve not only the quantity of our cars but also the quality.

"Improving the quality is important to satisfy the customers, which in turn will make them loyal to the brand," he said.

Last September Honda Motor Co. opened two factories in Karawang, West Java.

Located in Bukit Indah Industrial Park, some 70 kilometers southeast of Jakarta, the total investment is $134 million, with 3,000 workers employed at the two factories.

One of the plants, PT Honda Precision Parts Manufacturing, is Honda's first sophisticated automatic transmission and engine valve plant established outside of Japan and the United States.

It is expected to achieve a production of 250,000 automatic transmissions and 550,000 engine valve sets this year.

The transmission and valve products will be mostly supplied to Honda's automobile plants within ASEAN and Europe.

The other plant, PT Honda Prospect Motor, will assemble three of Honda's models --the Civic, the CR-V and the Stream.

Indonesia is the only country outside Japan that produces the Stream minivan. The plant is expected to produce 40,000 Streams this year, with a larger portion to be exported.

However, the automakers called for stability on investment regulations, market liberalization and the provision of local parts makers.

"We cannot cope with our investment if the regulations keep changing. Automaking is a long term business.

"It takes about 10 years to develop a new product from the initial design process. That's why we need stability of some sort," Toshida said, adding that stability would also help in establishing local business partners and content, both of which needed much time and effort to build.

Vice president of the Japan Automobile Manufacturers Association (JAMA), Takao Suzuki, also said that it was important for Indonesia to have a stable automotive development policy.

"We have already invested a lot in Indonesia but there is still room for more, but we would first like to see improvements in taxation and certification systems, as well as technical regulations.

"All these improvements are needed in anticipation of the ASEAN Free Trade Area (AFTA) which will open more opportunities for marketing the cars in the region."