Timor car not to be deterred by price war

Timor car not to be deterred by price war

JAKARTA (JP): The Timor car, produced in South Korea but
dubbed the "national" car of Indonesia, is determined to compete
head-to-head with other auto firms in the local market.

Benny Koernadi, a director at PT Timor Industri Komponen -- a
company assigned to provide local components for the Timor car --
said yesterday that recent price cuts made by a number of local
auto firms will not hurt the Timor's prospects.

"The Timor car is still strong enough to compete as it is not
in the same class as the (Bimantara) Cakra, but in the class of
(Bimantara) Nenggala," said Benny, in reference to vehicles
produced by PT Citramobil Nasional -- a subsidiary of the well-
diversified Bimantara Group -- in cooperation with Hyundai Motor
Company of South Korea.

The Timor sedan -- with a 1,500 cc engine to be produced by PT
Timor Putra Nasional in cooperation with Kia Motors Corp. of
South Korea -- will sell for Rp 35.75 million (US$15,199) (on the
road), while the 1,500 cc Cakra and the 1,600 cc Nenggala will
sell at Rp 45 million and Rp 59.5 million (on the road),
respectively.

In addition to the Cakra and Nenggala, the Timor is also being
challenged by the Suzuki Esteem, whose prices have been lowered
by Rp 5 million to Rp 35.9 million (off the road) for the 1,300
cc version and Rp 39.9 million (also off the road) for the 1,500
cc version. The new 1,600 cc Suzuki Baleno will sell for Rp 43.5
million (off the road).

On-the-road prices are usually about 10 percent higher than
off-the-road prices.

A. Safiun, chairman of the Indonesian Automotive Parts and
Components Association, noted that the price war, which was
instigated by the Timor's arrival, has helped bring local auto
prices closer to "fair" price levels.

Local auto firms have been enjoying relatively large margins,
he said..

"Their claim that government taxes are responsible for the
expensive automobile prices has turned out to be wrong. In fact,
their margins were just too high," Safiun said.

He noted that Indonesia's national car policy has created a
healthier and more competitive auto market by forcing Japanese-
affiliated firms to cut down their margins.

Despite the import duty and luxury tax exemptions that it
enjoys, the Timor is still expensive by comparison. Kia's Sephia
sedan, which is the same as the Timor save for the name, sells
for US$8,000 (on the road) in Korea.

Benny's response: "Don't look at our price that way because
the price covers not only the car's production costs but also the
cost of research and development as we plan to establish our own
research and development center here."

Benny added that his company is trying to keep down the price
of the Timor by speeding up the production and use of local
components, which are cheaper than imported parts.

Executives from 12 South Korea auto vendors were in Jakarta
yesterday to explore investment opportunities in the auto
components industry that will support the production of Timor
cars here.

The visit was the second made by Korean businesses after 16
vendors from the country came on an investment mission here last
June.

Safiun said the 16 vendors were committed to starting their
investments here in September, in cooperation with local
partners. He added that the 12 vendors in town yesterday will
realize their investment plans as soon as they find local
partners.

Benny noted that Timor Industri Komponen will willingly form
partnerships with foreign vendors that cannot find local vendors
for partners.

He said that the Timor will have a local content make-up of
38.8 percent by the end of its first year of being assembled in
Indonesia. Timors destined for the Indonesian market are
currently being assembled in South Korea, but will be produced at
local assembly plants by March 1997. (rid)