Volkswagen AG upbeat on Indonesia market

Volkswagen AG upbeat on Indonesia market

Dadan Wijaksana, The Jakarta Post, Singapore

Despite a modest sales performance last year, German car-maker
Volkswagen AG expects a better showing this year in Indonesia,
provided that the government is able to improve the business
climate in the country, the company said.

Compared to other Asia-Pacific countries, sales of Volkswagen
products in Indonesia have been lagging far behind.

Last year, the company only managed to sell 29 units of its
three latest models, namely the 1.6 and 1.7 liter Golf, 1.8 and
2.8 liter Passat and the new 2.0 liter Beetle.

With the Group's total sales of 461,000 vehicles throughout
the Asia Pacific in 2001, the Indonesian sales figures look
measly by comparison.

However, Wolfgang Glaser, the Vice President of the Group's
Asia Pacific Region, expressed optimism that his products would
gradually win a greater share of the Indonesian market.

"We were affected by many circumstances when we first returned
to the market, with the political uncertainties and all...and now
the floods.

"But we're looking at the future quite confidently, if
everything has stabilized, from a political and economic point of
view, then we will have a good business in Indonesia," Glaser
told The Jakarta Post on the sidelines of the Group's Asia
Pacific annual press conference here last week.

He was referring to the country's unstable political and
economic conditions following the devastating financial crisis of
1997-1998.

After a roughly 20 year absence, VW Group again gained a
toehold in Indonesia when it introduced the three passenger
vehicles in September last year.

Ivo Aryanto, the Vice President of PT Car and Cars Indonesia
(CCI), which is the Group's official distributor in the country,
echoed Glaser's optimism, saying this year's performance would be
much better than last year's.

"We entered the Indonesian market only after September 2001,
we hardly had time to promote the products. But I'm optimistic
that we will be able to achieve the 2002 sales target of 500
units," Ivo told the Post over the weekend.

Not only did the vehicles boast high standards of engineering
and a well-known brand name, competitive pricing would also push
sales higher, Ivo said.

Aimed at the upper end of the market, the new VW vehicles
carry a lower price tag than others in the same class.

The 1.6 and 1.7 Golf models sell respectively for Rp 298
million (US$29,000) and Rp 325 million, the Passat 1.8 and 2.8
for Rp 485 million and Rp 585 million, and the new VW Beetle for
Rp 445 million.

The Golf and Passat models are competing with luxury cars such
as the Audi A3, Mercedes Benz, BMW series 3 and Volvo S40, while
the new VW Beetle so far has no obvious competitor in this
country.

The Audi A3, for instance, sells for Rp350 million.

A sister company of Singapore-based Car and Cars Singapore,
CCI will market the vehicles, act as a spareparts supplier and
provide after-sales service for VW vehicles in Indonesia. It has
so far invested US$2.5 million.

In 2001, domestic car sales reached some 300,000 units,
according to data from the Association of Indonesian Automotive
Industries (Gaikindo).

Throughout the region, the VW Group posted above average
growth of 7.2 percent in 2001 against total market growth of 4.5
percent.

Of the total 461,000 sales, China took the lion's share with
sales of 359,000 units, followed by the recession-hit Japan at
70,000 units.

Claiming to control 5.5 percent of the region's car market,
the Group has pledged total investments of more than 2.5 billion
euros ($2.17 billion) over the next five years, with almost 80
percent of the amount going to China.