Producers of luxury cars stick to local market despite slump
JAKARTA (JP): Producers of foreign luxury cars in Indonesia are promising to stay and increase their investment in the country despite the domestic automotive market's gloomy prospects for the next few years.
Makers of upper-market automobiles say they are willing to inject fresh capital to bolster their ailing operations here, or even purchase the entire stake in the local company so they can maintain their Indonesian presence.
"We understand that the whole market is in dire straits, we must do what we can to help our partner here," Vice President of Volvo Cars Asia Pacific Jack Dirckx told The Jakarta Post last week.
Dirckx, who oversees the Indonesian office, said he expected car companies to inject fresh capital or increase their stakes in their local joint venture companies here in the future in order to maintain their operations.
"I'm sure there will be a change in ownership structures in the car business here, and Volvo is part of this," he said.
"Partners may have to take the majority stake in local partners or companies to help them survive. But in several years, this may change again, local companies should be able to increase their stake again by then," he said.
Volvo is currently uncertain over its partnership with the Salim Group's Indomobil, the sole authorized assembler and distributor of Volvo cars in the country because there has not been a final decision on the future of the partnership.
Dirkx presumed Indomobil had been taken over by the Indonesian Banking Restructuring Agency (IBRA) since Salim's Bank Central Asia could not repay central bank's liquidity credits of about Rp 35 trillion (US$4 billion) by the Sept. 21 deadline.
Dirckx said Volvo Car Corporation might inject capital to bolster its Indonesian operations.
"The current situation is not a market you can live for, but we have a number of customers in the country, so at the least we would have to stay here to serve them," he said.
Volvo stopped production in Indonesia in August and is unlikely to assemble any more cars in the country for the rest of the year, Dirckx said.
But although sales are estimated to drop to 116 cars this year from 736 cars last year, Volvo's market share in its competitive passenger car segment rose to 10 percent this year from 8 percent in 1997, he added.
Mercedez
German car producer Mercedes-Benz might increase its stake in the Mercedes-Benz Group in Indonesia because its local partner, PT Lima Satria Nirwana owned by the H.M. Joesoef family, is unlikely to be able to raise its investment in the joint venture.
The president of the Mercedes-Benz Group in Indonesia, Frank Messer, said his parent company in Germany had agreed to inject capital into the three companies under the group -- PT German Motor Manufacturing, PT Star Motors Indonesia, and PT Star Engines, Indonesia.
Mercedes assembles and sells both sedans and trucks in Indonesia through the three companies.
"We'll have a capital increase of about US$10 million this year, and about $20 million to $30 million early next year, and I have a feeling that our partner won't do the same, so automatically their percentage will be reduced," he told the Post.
He said the German principal company was prepared to buy from Lima Satria if the latter had no choice but to sell part of its stake.
Mercedes Benz currently owns 49 percent in Star Motors, 40 percent in Star Engines and 33.3 percent in German Motors, while Lima Satria owns the remaining stakes in the three companies.
General Motor's Opel also reconfirmed its commitment to the country, especially now that it owned the whole of PT General Motor Buana Indonesia (GMBI).
"We expect to continue raising our share in the sport utility car segment," GMBI's public relations manager, Helena Abidin, said.
Helena boasted that Opel had increased its market share to 45 percent in the competitive segment as of August from 35 percent last year.
She said the incentive package of three years or 5,000 liters of free gasoline and free servicing and spare parts for every Blazer purchased had managed to push sales to 100 units in the June to August period, while the competitors mostly sold fewer than 20 units a month.
"Overall, our sales dropped 63 percent from January to August year-on-year, which isn't as bad as the 80 percent slump of the domestic car market (as a whole)," she told the Post.
Opel currently produces about eight cars a day to suit orders, she said. Its workforce had shrunk 26 percent since May to 424 people, she said.
In November 1997, General Motors bought the 40 percent stake in GMBI owned by Garmak Motor of the Mercu Buana Group so that it owned the whole company. (das)