Arab Today, arab today european us carmakers race japanese in indonesia
Last Updated : GMT 21:16:36
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European, US carmakers race Japanese in Indonesia

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Arab Today, arab today European, US carmakers race Japanese in Indonesia

Jakarta - AFP

Bentleys and McLarens could become a more common sight alongside three-wheeled pedicabs and Japanese cars on Jakarta's roads, with European auto giants making a push into the Indonesian market. Western companies experiencing a slowdown in sales close to home are turning to Southeast Asia's biggest economy, looking to take advantage of both a burgeoning middle class willing to spend and an elite looking for high-end toys. In 2012, Indonesia's car market grew 25 percent to a record 1.1 million units, closing in on Thailand, the biggest car market in Southeast Asia with 1.4 million vehicles, IHS automotive analyst Jessada Thongpak said. But Indonesia, with its 240 million inhabitants, "will emerge as the largest market in the region from 2014," Thongpak told AFP. While Indonesia has enjoyed average growth of around six percent in recent years, car ownership is still at 45 vehicles per 1,000 people -- compared with 145 percent in Thailand -- leaving room for long-term growth in the market. Indonesians are buying new motors in big numbers, with 288 new cars hitting Jakarta's roads every day, worsening its already crippling traffic and polluted air. However, Western car makers complain they are losing out to Japanese firms owing to Indonesia's high tariffs on imported sedans and luxury cars and the absence of a free trade agreement. Japanese firms have the benefit of a trade agreement and no levies. Added to this is the fact European makers are subject to higher safety standards than their Japanese competitors. The EU has been in talks with Jakarta on a deal to open its market and allow European firms to compete on a level playing field. That comes as new-car registrations in Europe dropped 8.7 percent on-year in January to the lowest level for that month since 1990, according to the European Automobile Manufacturers' Association. But progress is slow and brands such as Mercedes, BMW and Chevrolet are upping assembly and output in Indonesia to get around the taxes -- cars face a 40 percent tax if imported as finished products but just 10-15 percent if put together in the country. "All global brands are already in Indonesia and they are heavily investing and expanding their production capacity," Thongpak said. Germany's Volkswagen is planning to build an assembly plant in the next four years, and Chevrolet has revived its dormant plant outside Jakarta to assemble 40,000 cars a year, including its new multi-purpose vehicle (MPV) Spin which was designed for the Indonesian market. But Japanese brands are still the favourites, with firms such as Toyota and Nissan popular thanks to the development of cars that can carry families while also being strong enough to negotiate tough driving conditions. Taking a spin around the busy Hotel Indonesia roundabout in the heart of Jakarta, every other car is a Toyota or Daihatsu, with those brands having more than 50 percent of Indonesia's car market. Taking Mitsubishi and Nissan into account, Japanese brands supply around 95 percent of the Indonesian market. Toyota's success began in the 1970s, when it produced the Kijang, a family car and favourite in Indonesia. It scored another success in 2003 when it began producing the Avanza and Daihatsu Xenia, MPVs for under $20,000. But cars are mostly bought by Indonesia's affluent class, those with a disposable income above $7,500 a month and who represent 6.6 percent of the country's 240 million people, according to a recent report by the Boston Consulting Group. This figure, says Boston, will reach 16.5 percent in 2020. And European carmakers are looking to build on their share of the high-end market, with BMW and Volkswagen introducing more expensive motors for those who need not worry about the huge tariffs. Expensive European cars, usually considered those that cost upwards of $55,000, presently account for just one percent of market share. Luxury and sports cars are becoming a more common sight, particularly in the capital, as Indonesia's elite grows. It is forecast to jump from around six million people to 16.6 million, according to the report. "I live in Jakarta and it's fascinating. In Brussels, you can drive around for many kilometres, and you won't see any Ferraris," trade first secretary for the EU in Indonesia Walter van Hattum said. "But in Jakarta, you have Rolls-Royces parked next to a shopping mall." British brand McLaren is preparing to launch its first showroom in a Jakarta shopping mall lobby in May beside Bentley and Jaguar showrooms. McLaren Automotive Asia told AFP that it expects to each year sell 20 units of passenger cars with off-road price tags between $670,000 and $740,000 to add to the current 12 McLaren cars in the country. "Key for us is the desire by Indonesia's discerning elite to own a McLaren," its Asia Pacific director Ian Gorsuch told AFP in an emailed statement. "Obviously they will not be able to enjoy its full potential during the rush hour," he admitted.

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