'National' cars hit the market

'National' cars hit the market

JAKARTA (JP): The Timor Sedan, free from luxury taxes and
import duties and made in South Korea but dubbed Indonesia's
"national car", made its market debut here yesterday, challenging
the Japanese domination of the country's growing car market.

PT Timor Putra Nasional, which plans to produce Timor cars in
cooperation with Kia Motors Corp. of South Korea, launched the
four-door, 1,500-cc sedan ahead of its original schedule of
September.

The Timor Putra's president, Hutomo (Tommy) Mandala Putra, told
a news conference that Timor sedans would cost Rp 35.75 million
($15,238), including on-road costs, which is about half the price
of comparable Japanese-made cars.

"We target to sell 70,000 Timor cars in 1997. With that
volume, we will reach the economies of scale needed to produce
the cars in Indonesia," said Hutomo, who is the youngest son of
President Soeharto.

The government has let Timor Putra produce and assemble its
cars in Kia's plant in South Korea until its local manufacturing
plant is ready. Timor Putra is the only car manufacturer granted
luxury tax and import tariff exemptions.

Starting next March, he said, the assembly of Timor cars will
be transferred from South Korea to local assembly plants,
including those owned by PT Indomobil and PT Indauda.

"By that time, we expect that Timor cars will contain 20
percent local components," he said.

To gain tax and tariff breaks, the company must meet the
government's local content requirement; namely, 20 percent local
content by the end of its first year of production, 40 percent by
the end of its second year and 60 percent by the end of its third
year.

Hutomo said Timor Putra had established three subsidiaries to
support the development of Timor cars: PT Kia Timor Motor, PT
Timor Industri Komponen and PT Timor Distributor Nasional.

Kia Timor Motor, a joint venture with Kia Motors, will
establish assembly and manufacturing plants in Cikampek, West
Java, later this year. Timor Industri Komponen will produce
components or buy components from existing manufacturers. Timor
Distributor will market the Timor cars.

Design

Hutomo said that Timor Putra plans to establish another firm
which will engineer and design new products.

"It will be the brain of our auto group," Hutomo said, adding
that his company plans to invest more than US$100 million setting
up a research and development center.

Meanwhile, the president of Timor Distributor, Suparto
Soejatmo, said that people's interest in Timor cars was good. The
company had received orders for 33,000 cars.

"We thank the people for their restraint (for not buying other
cars) and patience in waiting for Timor cars," Suparto said,
adding that Timor cars would be on display at 22 malls in Greater
Jakarta until Nov. 14.

When the government announced its national car policy last
February, many local car makers complained of decreased sales
because people were waiting to find out about the Timor car.

Governments and car manufacturers from Japan, Europe and the
United States have opposed Indonesia's national car policy on the
grounds that it breaches the provisions of the World Trade
Organization (WTO). They have threatened to bring Indonesia to
the WTO if it does not change its national car policy.

Hutomo, however, dismissed suggestions that the Japanese, who
control around 90 percent of the Indonesian vehicle market, could
take Indonesia to the WTO.

"We are looking for the best solution for the Japanese as they
know the national car program cannot be stopped and they need to
look for a compromise with the Indonesian government," he said.

The Americans, he added, now understood the program after a
recent visit to Washington by Minister of Industry and Trade
Tunky Ariwibowo, who attended yesterday's launch.

Tunky, speaking to reporters, defended the policy saying that
despite industry deregulation in 1993, car makers had failed to
increase local content.

He said under the new regulations issued last month, car
makers other than Timor Putra could get luxury tax breaks if they
met local content targets.

"As soon as local contents reach 60 percent, car makers will
have the same facilities as those of Timor Putra," he said.

Tunky reiterated that Timor Putra would be the only producer
to get special tax and tariff privileges for the national car
project.

He dismissed speculation that the government would extend the
same breaks to the Bimantara Group, controlled by Hutomo's elder
brother Bambang Trihatmodjo. Bimantara, through its auto
subsidiary PT Citramobil Nasional, plans to launch a 1,500 cc
sedan on July 23. It will be called Bimantara Cakra. (rid)