Car Manufacture
The Association of Indonesian Automotive Industry reported car sales (from factories to dealers) as of October 2020 only rose 1 percent in October, from 48.55 units to 49,043 units - Photo by GAIKINDO Office

JAKARTA (TheInsiderStories) – Indonesian government’s steps in easing automotive export procedures is expected to speed up the growth of the industry. By the procedure simplification for completely built-up (CBU) vehicles export, the country aims to get almost 20 percent of CBU export increased this year.

In 2019, Indonesia targeted 400,000 vehicles export. Government expects that CBU can hold 95 percent by the easing. While last year, Indonesian vehicles export was 346,000 units, which consists of 76 percent CBU and 24 percent completely knock down (CKD). From those, Indonesian export destinations are Philippines, Saudi Arabia, Cambodia, Vietnam, and some Latin America countries.

According to Indonesia Vehicles Industry Association, CBU export grew 14.44 percent to 264,553 units last year. It was the strongest figure in the history.

Government sees a better vehicles export trend in the last few years. In 2014, vehicles export was 51.57 percent. Then in 2018, the sales abroad was 63.56 percent. And by increasing competitiveness, government hopes that vehicles export portion can be boosted to 70 percent.

No wonder Indonesia aims to be automotive industry manufacture hub which is now competing with India. Previously, President Joko Widodo said that he wants Indonesia to be the biggest vehicles producer in ASEAN and reach 12 biggest of the world’ vehicles export base.

While, Finance Ministry calculated that the new regulation can diminish five biggest exporters’ cost efficiency by Rp314.4 billion (US$22.43 million) annually. Logistic costs is estimated to fall by Rp750,000 per unit which consists of storing and handling costs at Rp600,000 per unit and trucking cost is Rp150,000 per unit.

Based on PT Astra Daihatsu Motor studies, the procedure simplification can reduce 36 percent average monthly stocks, from 1,900 units to 1,200 units. Moreover, trucking cost can be decreased by 19 percent annually from 26 units to 21 units. After all, logistic costs can be slashed by 10 percent.

In the third quarter of 2018, Indonesia’s biggest automotive company, PT Astra International Tbk (IDX: ASII) recorded an increase of distribution, warehousing, packaging by 1.38 percent to Rp3.26 trillion. The distribution, warehousing, packaging cost contributed only 2.35 percent of the total costs. Meanwhile, Astra International cost of revenue until that period was hiking by 15.6 percent to Rp138.17 trillion.

Astra International holds several licenses, trademarks, dealerships, and distributorships with foreign carmakers. Those are Toyota, Daihatsu, Honda, Isuzu, Mitsubishi Fuso, Peugeot, BMW, Volvo, and so on.

The regulation easing has blown a good sentiment to Astra International stocks. In the trade closing, Astra International shares hiked by 0.33 percent to Rp7,675.

With the new procedures easing regulation, Indonesia automotive industry investment and export are expected to move faster. Industry Minister Airlangga Hartarto claimed that Indonesia’s automotive industrial area can be compared to Detroit in the United States. Indonesia’s automotive industrial areas now are in Bekasi, Karawang, and Purwakarta.

Hartarto said that there will be $900 million investment to enter Indonesian automotive industry. The investors are from Europe and Asia. He kept quiet about the investors. But previously, Chinese Wuling Motors has stated its commitment to invest Rp9 trillion in Indonesia for developing some business supporting facilities.

by Linda Silaen and TIS Intelligence Team