National car policy helps auto industry: Tommy

BOGOR, West Java (JP): PT Astra International's plan to produce low-priced sedans is driven by the government's national car policy, President Soeharto's son Hutomo Mandala Putra said Saturday.

"I think it is the impact of Presidential Instruction No. 2/1996 that they (Astra) are trying to conduct domestic manufacturing of cars," Hutomo, chairman of the well-diversified Humpuss Group, said while attending a gathering of 500 conglomerate owners with Soeharto at the Bogor Presidential Palace.

Presidential Instruction No. 2/1996 governs on the national car policy, which promises duty and tax breaks to wholly locally- owned firms which manufacture "national cars" bearing Indonesian names, that have a local content of 20 percent by the end of the first year of commercial operation and 60 percent by the end of the third year.

The government then appointed PT Timor Putra Nasional, owned by Hutomo, as the only beneficiary of the facilities during the next three years to manufacture national cars. Timor Putra currently cooperates with Kia Motors Corp. of South Korea to manufacture 1500cc Timor sedans, deemed as national cars.

On Saturday, Hutomo hailed Astra's plan to manufacture, not just assemble, family cars here, representing Japan's increased commitment toward Indonesia's automotive industry.

"Indonesia has given them (Japanese auto firms) 25 years to conduct home manufacturing of cars here. However, they never do it. And because of this presidential instruction, I heard Astra will do it... It is very good," Hutomo said.

Family cars

Astra's president, Theodore Permadi Rachmat, revealed recently that his company will carry out venture with Japanese auto firm Toyota Motors Corp. to manufacture 1500cc family cars, with an initial local content of 40 percent, by 1998.

Despite having a 40 percent local content at the time of launching, the car will not qualify for the status of national cars, which benefit from tax and duty breaks, because it will be produced by a joint venture firm.

Rachmat also said that Astra has been given more freedom by its Japanese principal -- Toyota Motors -- to further develop its Kijang multipurpose vehicles.

Kijang, which currently has a local content of about 50 percent, has dominated Indonesia's market by 18 percent of Indonesia's total auto market of some 380,000 cars last year. Astra plans to increase Kijang's local content to 60 percent by 1998 to benefit from duty and tax breaks.

Under the latest auto ruling, cars and vehicles with an engine capacity of 1500cc and below, and with a local content of more than 60 percent, will be exempted from import duties and luxury taxes, which currently make up 60 percent of a car's price in Indonesia.

"Actually, it is very easy for Astra or Toyota Astra Motor to increase the local content of their vehicles (Kijang) to 60 percent," Hutomo said. "It does need three years but they can pursue it in one year."

Besides Astra, a number of local firms, notably the auto arms of the Bimantara and Bakrie groups, have plans to manufacture their national cars locally.

Bimantara, through PT Citra Mobil Nasional in cooperation with Hyundai Motor Company, has launched its local-brand cars, Cakra and Nenggala, and plans to develop them to become locally- designed and locally-manufactured cars.

Hutomo also said Saturday that the government's national car policy has another positive impact, in terms of prices, because it has helped bring down local car prices close to normal levels. A number of local auto firms, including the Indomobil Group and Astra, have cut their prices by up to 25 percent.

"It proves that during the last 25 years of protection, local auto firms have enjoyed large profits," Hutomo said. (rid)