Kia faces tough competition in commercial auto market

JAKARTA (JP): The entrance of South Korea's tax-exempt commercial vehicles into Indonesia will not erode the market shares of the existing commercial vehicles, two market experts have forecast.

"It will be hard for Korean vehicles to compete with the existing commercial vehicles, considering that the latter have extensive marketing networks and after-sales services," Sofyan Wanandi, chairman of the Gemala Group, said yesterday.

Kia Motors Corp. of South Korea announced on Tuesday that it would expand its controversial Indonesian auto project by increasing its tax-exempt commercial-vehicle exports.

Moch. Ircham, an executive of PT Timor Putra Nasional, Kia's Indonesian partner, said yesterday that his company is yet to import any commercial vehicles from Kia. He said the vehicles would enter the Indonesian market in September next year.

He said Timor Putra plans to manufacture commercial vehicles in its own production facilities, which are currently under construction and should be ready for operation in 1998.

He declined to reveal details about the specifications and pricing of the commercial vehicles, saying that such matters are still being negotiated with the Korean partner.

"If they rely on prices, I don't think they can really compete with the existing commercial vehicles, considering that there will be no big cost differences," Sofyan said.

He said the pricing structure of commercial vehicles in Indonesia is already competitive because most of the vehicles are already exempt from duty on component imports.

Sharing Sofyan's view, automotive analyst Suhari Sargo said Kia and Timor Putra would have to work hard to build extensive after-sale services, such as the provision of spare parts, and to assure local motorists that they can maintain such services.

"Timor Putra, first of all, has to promote its new vehicles. It will take some time for Indonesians to feel comfortable with the new automobiles," Suhari said.

He said the Timor sedans, which are produced by Kia in South Korea but are deemed as Indonesia's national cars, have not sold well even though their prices are almost half that of Japanese cars.

Kia, South Korea's second-largest automaker, has shipped about 10,000 four-door sedans with 1,500-cc engines, named Timor in Indonesia and Sephia in South Korea, to Indonesia under the national car project since September.

Although the cars are imported duty-free and sold here tax- free, informed sources have said that not more than 2,000 Timor sedans have been delivered to customers.

Most local auto consumers feel comfortable with existing commercial-passenger vehicles -- commercial vehicles converted into vans -- because of the excellent after-sale service and the abundance of spare parts, Suhari said.

Due to high car prices in Indonesia, there is a strong market for Japanese commercial vehicles which have been modified into passenger vehicles. The most popular commercial passenger vehicles are Toyota Kijang, Isuzu Panther, Daihatsu Espass and Suzuki Sidekick.

Five Japanese-affiliated makers, Toyota, Daihatsu, Isuzu, Suzuki, and Mitsubishi, currently control more than 90 percent of the country's commercial vehicle market.

Commercial vehicles make up 70 percent of the total automotive market, with sales reaching 270,313 units last year, compared with the sale of 37,835 passenger cars.

Sales of commercial vehicles are projected to drop by about 240,000 units this year because of the government's tight monetary policy. Sales of passenger cars are expected to remain steady. (rid)