'Killing auto industry': Indonesia government faces pushback on US$2.4 billion Indian trucks import
‘Killing auto industry’: Indonesia government faces pushback on US$2.4 billion Indian trucks import
The 105,000 trucks are to support the government’s cooperative programme - a flagship initiative of Indonesia President Prabowo Subianto aimed at strengthening rural supply chains and advancing food security.
JAKARTA: Indonesia’s move to import up to 105,000 pickup trucks from India in support of President Prabowo Subianto’s plan to help rural communities through the Red-White village cooperative has sparked mounting political resistance and industry disquiet.
Opponents flag concerns that the imports could undermine the domestic automotive industry, even as the state-owned firm behind the 40 trillion rupiah (US$2.38 billion) procurement insists it had acted lawfully and in the national interest.
The orders - made to two different Indian firms - were by state-owned enterprise Agro Industri Nasional (Agrinas), which was formed last year to support food, energy and water security in the archipelago.
Agrinas said the trucks would support the government’s cooperative programme - known locally as Koperasi Desa Merah Putih - a flagship initiative of Prabowo’s government aimed at strengthening rural supply chains and advancing food security.
The president has made it his vision for Indonesia to become food self-sufficient within four or five years from his inauguration in October 2024.
His administration is focused on achieving food self-sufficiency as soon as possible, targeting rice independence in the short term by increasing national production, optimising land use, and strengthening village and national food barns.
But observers whom CNA spoke to said that the move to import the pickup trucks from India contradicts Prabowo’s push for domestic industrialisation and prioritisation of local manufacturing, with some calling on the government to reassess its plans - including to delay the procurement process or cancel the contracts altogether.
“I don’t think this is necessary for the domestic industry,” said Bhima Yudhistira, executive director of think tank the Center of Economic and Law Studies (CELIOS).
“There is a potential economic loss of about 39 trillion rupiah in workers who could have been employed instead (if the vehicles were produced in Indonesia).”
He added that the imports will create competition with domestic manufacturers, potentially resulting in about 330,000 workers being laid off.
WHAT IS THE AGREEMENT
Indian automakers publicly revealed export deals to Southeast Asia’s biggest economy at the beginning of February, before Indonesian authorities made any announcement of the procurement.
On Feb 4, Mahindra & Mahindra said in a press release that it would supply 35,000 units of its Scorpio pickup trucks to Agrinas this year, describing it as the company’s largest-ever export order.
The Indian firm described the deal as central to strengthening Indonesia’s rural supply chains, as it will enable village-level commerce and support Indonesia’s national food security transformation.
“We are looking forward to this association and to supporting Indonesia’s Koperasi through our partnership with Agrinas Pangan Nusantara,” said Nalinikanth Gollagunta, chief executive officer of the automotive division at Mahindra & Mahindra, in the press release.
“By deploying the Scorpio pickup as a part of the Koperasi, we are strengthening a reliable logistics backbone that connects farmers to markets more efficiently.”
The Scorpio pickup trucks are manufactured at a plant in Nashik, India and will be tailored to “meet the operating requirements of Koperasi - from rough rural roads to farm tracks”, the company said in the statement.
Four days later, India’s Tata Motors confirmed an agreement to supply 70,000 vehicles to Indonesia. These consist of 35,000 Tata Yodha pickup trucks and 35,000 Ultra T.7 trucks.
Asif Shamim, director of PT Tata Motors Distribusi Indonesia, said the two models are designed for “sustained performance, high uptime and efficient operating economics”.
“Their deployment will support agricultural logistics in Indonesia by improving connectivity, enabling more efficient movement of goods across rural and regional networks.’’
The announcements from both companies mean Indonesia will import a total of 105,000 vehicles from India.
HOW THE CONTROVERSY STARTED
The controversy erupted after news of the agreements circulated in Indonesian media.
This prompted the director of Agrinas to hold a press conference on Tuesday (Feb 24) in defence of the procurement, after criticisms intensified when reports emerged that around 1,200 Mahindra units had already arrived in Jakarta.
Joao Angelo De Sousa Mota last week said the move was made because manufacturers in Indonesia purportedly cannot meet Agrinas’ demands and are also more expensive, triggering debate.
On Feb 24, Joao said the decision to import the Indian vehicles was taken only after negotiations with domestic producers failed to secure sufficient production capacity and pricing.
He said locally manufactured vehicles from brands such as Toyota Astra, Mitsubishi, Hino and Suzuki were invited to participate, but they could not meet the volume or timeline requirements.
Thus, Agrinas ultimately committed to purchasing 70,000 units of 4x4 pickup trucks, split evenly between Mahindra & Mahindra and Tata Motors.
Joao said that the pickup trucks were necessary to navigate challenging rural terrain in Indonesia and claimed the procurement generated savings of up to 46.5 trillion rupiah, though detailed pricing was not disclosed.
He added that they are also cheaper than vehicles manufactured in Indonesia by 50 million rupiah per unit, adding that Mahindra & Mahindra and Tata Motors have said they could build a factory or spare parts centres in Indonesia in the near future.
Thus, repairments and after-sales services should “not be an issue”, he claimed.
“Therefore, besides solving after-sales service problems, it will also create new job opportunit