Timor car may cost government US$900 million
Timor car may cost government US$900 million
JAKARTA (JP): The government will lose at least Rp 2.1 trillion (US$900 million) in revenues during the next three years from its granting of tax and tariff breaks to PT Timor Putra Nasional, according to the Association of the Indonesian Automotive Industry.
The association's secretary general, F. Soeseno, told a seminar on the national car program yesterday that the assumption behind the calculation is that Timor Putra will sell 150,000 sedans during the next three years.
"Such deficits borne by the government will be compensated by the availability of 150,000 cars with the Indonesian brand-name Timor sold cheaply," Soeseno said.
To ensure the Timor car's success, Soeseno calculated that the government has to provide at least US$750 million in foreign exchange for the importing from South Korea of the required components, with an assumption that the components for one car cost Timor Putra $5,000.
"It does not include additional foreign exchange needed to import capital goods for Timor Putra's production facilities," Soeseno said.
Timor Putra, controlled by President Soeharto's youngest son Hutomo Mandala Putra, is the only company to have been awarded tax and tariff breaks to develop a sedan under the brand-name Timor. It is operating in cooperation with Kia Motors Corp. of South Korea.
Timor Putra has said that the Timor car will be available in show rooms by September and sold at Rp 35 million each, or half the price of Japanese sedans of the same type.
Soeseno projected that the presence of Timor cars will greatly influence the market.
He said the sales of automotive vehicles are forecasted to reach 370,000 units, 7.5 percent less than the projection of 400,000 units made last year.
Last year, sales of vehicles reached 350,000 units.
"Some people will postpone their plans to buy vehicles, waiting for the Timor car, which will be very cheap," Soeseno said.
Demand
He also said that some people and institutions will probably cancel their orders with existing car dealers. There is a possibility that there will be a shift in demand from vans to Timor sedans.
Meanwhile, Sri Mulyani I. Sumartono, an economist at the University of Indonesia, disagreed with Soeseno, saying that the demand for cars other than Timor will remain high.
She argued that rich people will maintain their tastes. Meanwhile, most Indonesians live with extended families and thus, they need multi-purpose vehicles, including vans.
"My survey revealed that most families prefer multi-purpose vans as their second vehicles," Sri said. "Only those companies which produce sedans with prices close to Timor's will suffer." (rid)