Japan's car makers to keep Indonesian assembly operations

JAKARTA (JP): Japan's automotive manufacturers said on Wednesday that they would maintain the operation of their assembly facilities here despite the recent removal of tax breaks given to vehicles with high local content.

Hiroyuki Nakamura, deputy general manager of the Japan Automobile Manufacturers Association, Inc. (JAMA), said maintaining the existing assembly facilities would make their cars more competitive.

Nakamura said Japanese car manufacturers mostly believed that improving the local content was still necessary in order to cut production costs.

He said the local content of Japanese cars assembled in the United States and the United Kingdom reached about 75 percent and 80 percent respectively although the countries did not provide incentives for cars with high local content.

"I believe that Japanese automakers will continue their existing investments in Indonesia here despite the removal of incentives for local content.

"But I don't know about new investments because it will depend on each manufacturers' policy, and most of the Japanese manufacturers are still studying Indonesia's new automotive policy," he said at a media briefing.

Nakamura said Japan's automotive manufacturers believed the future of the Indonesian car market remained bullish despite the current sluggishness of it.

"Sales are down, not because of the auto industry itself; it is political. If the country's political condition improves, car sales will improve," he said, adding that Indonesia was a big market for Japanese cars.

"The auto industry is facing a very tough period but I believe Japanese automakers have a very strong presence here and they will never pull out," Nakamura said.

Nakamura said the Japanese-based parent companies were still committed to providing fresh capital or loans to support their Indonesian subsidiaries cope with the crisis.

In November last year, Daihatsu raised its stake in its Indonesian joint venture to 50 percent, in order to support the quest for higher quality and more competitive costs.

Nissan Diesel is currently studying the feasibility to increase its capital and to adopt direct financing for its Indonesian venture.

Nakamura said Japanese car producers had arranged a number of approaches to help local operations, such as shifting the market to overseas and improving the workers' productivity.

Shinichiro Oka, JAMA's manager of the international division, said Japanese-based carmakers would also raise exports of their completely built-up vehicles or auto part products from Indonesia to offset the sharp drop in domestic sales.

The Indonesian-made Daihatsu Hijet van, which has been sold in China and Vietnam since 1996, was now exported to neighboring countries, he said. In 1998, the company had exported 79 units of Indonesian-made completely built-up (CBU) vans, 280 units of completely knocked-down (CKD) vans and 620 sets of body parts.

Daihatsu planned to export 100 units of completely built-up Indonesian-made Hijet vans and 1,800 sets of body parts to Malaysia this year.

Toyota plans to export 21,285 units of a gasoline engine type of its popular Kijang van to Japan, an increase from 11,225 units exported last year. Last year, Toyota's Indonesian affiliates exported 8,064 units of locally made Kijang to Brunei, islands in the South Pacific, Malaysia and the Philippines.

Isuzu is in progress of exporting its Indonesian-made cast parts and diesel engines to the Philippines and Thailand, and its transmission cases to the Philippines, Oka said.

Mitsubishi here has exported its Kuda dynamic family wagon to Brunei, FE trucks to Bangladesh and Colt T120SS to Tonga and Solomon Islands. The company also exports sheet panels and machine parts to the Philippines, pickup truck disc brakes to Thailand, and connecting rods and cylinder heads to Japan.

When asked if parent companies of Japanese-based carmakers would eventually buy out their local partners' shares while the companies' value was currently much lower, Nakamura answered the auto industry in his country was based on cooperation.

"They're not money-oriented businesses. It's difficult to gain profit in a short term because they have a long-term view," he said.

Japan has one of the world's strongest car manufacturing industries, with an annual production reaching 10 million vehicles.

The country's carmakers with partnership operations in Indonesia are Daihatsu, Hino, Honda, Isuzu, Mazda, Mitsubishi, Nissan and Nissan Diesel, Suzuki and Toyota.

Partnerships are in the form of joint ventures, technical assistance and production contracts. (gis)