President Joko Widodo at IMS 2018 - Photo by Industry Ministry

JAKARTA (TheInsiderStories)—The automotive industry in Indonesia is experiencing rapid growth and contribute significantly to the national economy, said industry minister last week. The country targeting the car production will increase to 1.5 million units in 2020.

Last year, Indonesia’s cars rose up to 13-fold, from 6.2 million pieces in 2016 to 81 million unit in 2017. The minister Airlangga Hartarto explained, most of these exports consist of the completely knocked down (CKD) products while the completely built up (CBU) export increase from 194,000 in 2016 to 231,000 pieces in 2017.

“From the achievement, the government is targeting the production amount in 2020 will increase to 1.5 million units,” he said in the press statement received by TheInsiderStories on Thursday (19/4).

He added, that the increase also occurred in the production of four-wheeled vehicles, from 1.177 million units in 2016 to 1.216 million units in 2017.

During this time, the automotive sector in Indonesia absorbs a considerable amount of labor with more than 1.5 million people, distributed in various jobs ranging from assembly industry, first, second and third component parts industry, to official workshop, sales, service and spare parts.

Regarding efforts to boost the national automotive export market, Hartarto explained, his ministry along with the Coordinating Ministry for Economic Affairs and Ministry of Finance is preparing a policy of providing fiscal incentives to encourage the production of sedan type vehicles.

Indonesia has not an issue to boost automotive export capacity due to the sufficient production of a local automotive industry that reached 2,20 million units annually in 2017. Indonesia’s car production capacity jumped 70 per cent over the past six years.

However, the country faced an obstacle to penetrate the developed countries due to the low standards for safety and gas emissions. Indonesia’s car currently depends on the developing countries demand peers in Southeast Asia, Middle East, South America, and Africa.

Exports to the Southeast Asia region also faced obstacle due to the Vietnam’s new regulation which is poised to build its own automotive industry.

Vietnam issued in November last year a Decree No. 116/2017/ND-CP on car manufacturing, assembly, importation, and warranty offering. Car importers in Vietnam are now required to obtain a Vehicle Type Approval (VTA) certification, which details incoming vehicles’ quality, safety, and environmental protection. The VTA must be issued by the authorities of exporting countries.

Through the new regulation, Vietnam requires international standards for vehicle safety and emissions. Vietnam acknowledges that cars manufactured in Indonesia do not comply with the international standard on the safety and gas emission.

Indonesia is the third-biggest car exporter to Vietnam, after Thailand and China. However, the latest regulation can make Indonesia drop in the ranking.

Based on data from Statistics Indonesia, the value of exports of Indonesian passenger cars to Vietnam reached US$241.2 million in the January-November 2017 period, up to a whopping 1,256.5 percent year-on-year (YoY) from $17.78 million vehicles in the same period one year earlier.

Email: fauzulmuna@theinsiderstories.com

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