Our target is to dominate 30% market share: TAM

Indonesia's positive economic growth is reflected in many sectors, particularly in the automotive industry. In the past two years, vehicle sales have increased drastically, surpassing the pre-recession level. The Jakarta Post's Tubagus Arie Rukmantara talked to PT Toyota Astra Motor (TAM) president director Johnny Darmawan about the company's strategy to retain its title of market leader and about the outlook of the automotive industry this year. Following is an excerpt of the interview.

Question: What do you think of the Indonesian automotive market's growth over the last five years?

Answer: Over the past five years GDP has grown 3 percent while automotive sales have shown a rising trend of 10 percent. This means the market has grown drastically since 2000.

In 2002, sales were around 300,000 vehicles. A year later, sales reached 354,000 and surprisingly increased drastically to 483,000 in 2004, far beyond our prediction of 430,000.

How did the growth affect your sales?

Our market share has always been in line with annual total sales. From 2000 to 2002, TAM's sales growth remained stagnant at 26.5 percent of the total market. But in 2003, we recorded a rise to 28 percent. Most surprisingly, in 2004, our sales jumped to 29.3 percent.

TAM broke through the 100,000 annual sales figure in 2003 by selling 101,000 vehicles. The following year, our sales increased 40 percent to 141,000. It was an excellent achievement for our company, the Indonesian arm of Japanese Toyota Motor Corp.

The record put us in fifth place of Toyota's global sales after the United States, which recorded sales of 2.2 million, Thailand (260,000), Australia (200,000) and Canada (171,000).

This tremendous achievement has helped us remain the leading automaker in the country. Plus, we managed to widen the gap between us and other carmakers here.

The gap between TAM and the second rank is more than 10 percent. In May, Toyota's domination in commercial vehicles was 38.6 percent, followed by Honda (18 percent) and Suzuki (17.4 percent).

What factors drive the market?

At the micro level, growth is an effect of low interest rates, consumer purchasing power and the great variety in vehicle loans. Another factor is the variety of products on the market. More and more new cars have flooded into the country in the last few years, giving people more options.

At the macro level, Indonesia's economy is growing, GDP is increasing, the government is promising for the market as there has been improvement in law enforcement through the war on corruption.

All of these factors create an good business climate that attracts investors in the automotive industry. Having foreign investors also improves Indonesia's automotive market.

For example, Toyota Motor Corp. appointed Indonesia as its production based for Innova and Avanza, increasing its investment by 30 percent.

That's good, but we are expecting even bigger investment. Perhaps its is waiting to see if an even better investment climate is created.

However, the government has yet to formulate any policy that supports the automotive industry.

What factors have contributed to TAM's achievement in maintaining its place as the market leader?

Our success story is influenced by three factors: high quality products, a complete lineup of cars and after sales service.

In terms of product lineup, we offer passenger vehicles such as sedans, MPVs, budget cars and premium cars as well as commercial vehicles.

Many of our competitors do not have such a complete lineup. Moreover, our products are offered at competitive prices.

What made Toyota headquarters choose Indonesia as one of its production bases, considering that our neighbors have better investment climates?

Investors' main concern is making good products at competitive prices. In the automotive business, prices can only be made competitive through increasing the production volume, which can only be achieved by producing vehicles regionally or worldwide.

Indonesia and Thailand attract Toyota's attention due to their big populations. Kijang is a promising product for the Indonesian market while Thailand's is the pickup.

TAM has a booth at the ongoing Gaikindo Auto Expo. What is your target at the event?

This one of the most prestigious auto expos, like the Jakarta Motor Show. The timing is also appropriate for the release our new product, the Fortuner.

We haven't set a transaction target for the expo.

We are emphasizing environmentally friendly technology, which is also the theme of the expo.

The message that we want to get across is that Toyota applies environmental friendly energy to its products.

At the expo, we are presenting our special exhibit cars, namely Toyota Fine-S and a cutaway engine of the Prius, the first massively produced hybrid car.

The cars are on display to make people understand the working process of hybrid and hydrogen-based-fuel cars.

The U.S. dollar has strengthened against the rupiah recently and we are facing a fuel shortage. Will that affect TAM's sales target this year?

Of course. The exchange rate of the rupiah against the dollar will effect prices, which I believe will have an impact on the market.

But Toyota is focusing on dominating 30 percent of the market here, no matter how many cars we sell by the end of the year.

Our sales target is 163,000 cars this year. With the recent average monthly sales of between 13,000 and 15,000, we believe we can meet our target.