The ups and downs of general car importers

By Berni K. Moestafa

JAKARTA (JP): On driving along Jakarta's main thoroughfares one cannot but help notice the growing presence of exotic cars, previously seen only in automotive magazines.

The BMW Z series, Mercedes's new S class and once in a while a Porsche, join the lines of cars that jam Jakarta's streets every morning.

Boosting their presence here, was last year's deregulation of the automotive industry that made the imports of luxury cars a lucrative business.

In June, last year the government cut import tariffs on completely-built-up (CBU) sedans to between 65 percent and 80 percent depending on engine capacity, from 200 percent previously.

According to data from the Customs and Excise Office, imports of CBU cars have since reached 5,101 units during the period of July 1999 to April 2000.

The deregulation also gave birth to a new line of business, namely that of a general car importer, as opposed to the authorized car dealer.

The Ministry of Industry and Trade has listed 82 general importers, most of which were importers of the Mercedes Benz and Toyota brands.

On one side, the imports of these CBU sedans have given a thin market of well-to-do people a wider choice to define their esteem.

However, stories soon abounded of owners finding that their expensive cars came without after sales service.

Unlike authorized car dealers, most general car importers do not differ much from regular importers whose main business is simply trading.

The growing presence of general car importers has stirred controversy over their ability to go beyond the role of importers and show a commitment towards protecting consumers' interests.

The issue has been the main topic of an automotive seminar held by the Ministry of Industry and Trade last week.

Adirizal Nizar, technical director at PT Toyota Astra Motor and an executive at the Association of Indonesian Automotive Industries (Gaikindo), warned that consumers were prone to be neglected by general car importers.

According to him, the ease by which general car importers obtain their license from the government, gave people the opportunity to earn quick money without heeding the consumer.

Providing an after sales service is one of requirements imposed on general importers.

But Adirizal said the government did not really check the general importers's ability to provide after sales service. The government further required no bank statement to verify the importers' track record, he said.

"This is odd, because the government requests the statement but importers are free not to attach it in their application," Adirizal said.

In importing the cars, the government also made no verification on the requirement to import cars no older than two years since their production.

Adirizal said that most of the CBU cars were imported from the secondary market instead of directly from the producers.

Hong Kong, Singapore, Australia and New Zealand were among the secondary markets from which general importers purchased the cars, he explained.

Besides harming consumers, dubious general car importers might also harm government income by registering car prices at the Customs and Excise office below the cars' actual price.

The practice is called under-invoicing, which, according to Adirizal, could lead to conspicuous differences in prices of the same car types.

For example, he said, a Lexus GS300 would have cost authorized car dealers around US$77,122 as against $66,540 for general importers.

Adirizal said that the price difference would translate in tax and import tariff losses totaling $10,583.

He said that the Customs and Excise Office anticipated the price gap by setting up a database of prices for CBU imported cars, which they had recently revised upwards by 20 percent.

"But the prices on their database are still too low," he said.

However, Heriyanto Budisantoso technical customs director at the Customs and Excise Office said that the price database was based on catalogs obtained from the Ministry of Industry and Trade and various authorized car dealers.

He said the prices were therefore compliant to the international price list.

"It turned out that many authorized car dealers register their cars at a high price," he added.

He said, the prices in the database were also subject to the deduction of various foreign taxes such as sales taxes, luxury taxes, and goods and service taxes.

In England the deduction amounted to 50 percent, in Japan, Australia and New Zealand the deduction were 35 percent, while in Germany and the United States the deduction was 25 percent, he said.

Lower prices

Tommy Dwi Ananda, chief executive officer of general car importer PT Arinda said the automotive deregulation gave many benefits to customers because they could buy cars at lower prices.

He said prices of authorized car dealers were higher, as they must cover the cost of their extensive after sales service network and their large work-force.

He said his company, which imported some of its cars directly from the producer, had only one repair shop below its showroom.

Furthermore, he said several car producers offer international service cards, under which car owners could use the service of repair shops owned by authorized car dealers.

Commenting on the reports of under-invoicing practices, he said that there was no guarantee that authorized dealers would not do the same.

"It's all a matter of business ethics," he said.

Director general for Machinery, Electronics and Miscellaneous Industries Agus Tjahjana said that the government was considering ways to better regulate general car importers.

He said that the government might classify general importers based on the scope of services that they could offer.

"The classification would encourage general importers to increase their service quality," Agus said during the seminar.

The criteria, he said, could be based on the importers' management, the availability of spare-parts, repair shops and their import realization record.

Meanwhile Gaikindo chairman Bambang Trisulo advised consumers to be more careful in buying cars from general importers.

However, he added, it was not entirely necessary for general car importers to provide after sales services if the cars imported were highly exclusive.

"If I would buy a highly exclusive car than I would surely ask where to obtain the spare-parts," he told reporters.

He said that consumers simply needed to be more attentive to these matters.

However, he added, some "exclusive people" do not mind that neither the right spare-parts nor mechanics were locally available for their cars.

"They'll just look for the spare-parts themselves," he said.

Automotive analyst Suhari Sargo said that Indonesia was still new to the imports of CBU cars compared to Japan and Australia where CBU imports reached thousands per year.

He said that with the surge in CBU imports a transition time was bound to follow where all players must adjust to the new conditions of the automotive industry.

"The market is there for us not to resist but to take advantage of," Suhari said.