The Indonesia Automotive Market
World’s Eighth-Largest Economy Offers Opportunities
As SEMA News continues its periodic series on promising global export markets for U.S. manufacturers, this month the focus is on Indonesia.
The fourth most populous country in the world (after China, India and the United States) with 270 million people, Indonesia presents opportunities and challenges for manufacturers of automotive specialty-equipment products. A recent World Bank report provided a positive picture of the growing economic climate in this archipelago nation. It enjoys an average annual gross domestic product growth rate of 5.6% and a rapidly growing middle class that now tops 52 million—20% of the population—and has become the world’s eighth largest economy in terms of purchasing-power parity.
The former Dutch colony has a young population with growing disposable income. More than 40% of Indonesia’s population is under the age of 24. Indonesia recorded national car sales of around one million units annually in recent years, according to the Indonesia car manufacturers association Gabungan Industri Kendaraan Bermotor Indonesia (Gaikindo).
The vast majority of passenger cars sold in Indonesia—some estimate nearly 70%—are compact multipurpose vehicles (MPVs), crossovers and SUVs equipped with three rows of seats. That would put the percentage of these light trucks at one of the highest in the world market. In fact, the best-selling model in the market is the Toyota Avenza—a compact MPV. Pickups are also popular.
Japanese vehicles, many which are built within Indonesia, captured the lion’s share of the market at 90%. Most of the remainder is captured by European and, increasingly, Chinese brands. BMW, VW and Mercedes-Benz all build vehicles in Indonesia and capture much of the rest of the market, along with Chinese brands such as Wuling that are assembled in Indonesia.
U.S. brands have a minuscule share of the market. With the closing of Ford and GM plants, no U.S. vehicles are manufactured in Indonesia. Most recently, GM announced that it will no longer sell GM-branded vehicles in the country, closing all of its dealerships. Ford vehicles are sold through a network of about 30 dealerships in the country, but Chrysler, though currently limited in its offerings and its sales network, is looking to increase the number of dealers and hopes to grow its market share.
The Jeep Wrangler and the Jeep Gladiator are currently sold in Indonesia, but the company plans to add to those offerings in the future, including the Jeep Compass Facelift 1.4, the all-new Grand Cherokee 3.6 and the New Jeep Grand Cherokee 2.0.
Dhani Yahya, COO of DAS Indonesia Motor, the newly appointed distributor of Chrysler products, was recently quoted in the media. “The growth of the Jeep market in Indonesia will be transformed from a limited market volume to a much larger market volume, with the market share of the premium segment growing from 2% to 15% to 20% in the next three to five years,” he said.
To grow the Indonesian automotive specialty-equipment industry, the National Modificator & Aftermarket Association (NMAA) has been established with the moto, “Standard is boring.” It seeks to grow the market by holding competitions to improve the skills of local builders and the knowledge of enthusiasts. The association sponsors a show called the Indonesia Modification Expo, with September 2019 being the second edition of the event. The association also hosts a weekly show “Modz Bidz,” among other activities.
The Indonesia Off-road Federation (IOF) was founded in 1999 to promote off-roading. It is based in Jakarta, the country’s largest city. It has regional branches throughout the country and hosts off-road competitions. Among the off-road activities that have been regulated by IOF are off-road racing, mud racing, rock crawling, car crushes and off-road adventures.
The vehicles of choice for both off-road recreation and racing are Toyota Land Cruiser FJ40s (known as Hardtops), the Suzuki Jimny, and Jeeps—particularly the older Jeep Willys. Also sold are the Mitsubishi L200 Triton, the Toyota HiLux and the Mitsubishi Pajero Sport.
The Indonesia Vintage and Classic Car Association is a 40-year-old group that boasts 2,000 members and local branches throughout the country. There is a preponderance of European vintage vehicles, but the U.S. Embassy reports that there is also interest in American musclecars.
Some well-known American musclecars with followings in Indonesia include the Ford Mustang, the Chevrolet Camaro and the Dodge Charger. Classic Jeeps and Jeep Willys vehicles may also be found. The association hosts show-and-shine events and vintage-car touring events, with a typical gathering featuring more than 300 vehicles traveling throughout
Overseas Brand Protection
Taking steps to protect your brand’s reputation is an important first step in any overseas market in which you wish to do business. It’s especially important in Indonesia as the U.S. government in 2019 as one of 11 countries worldwide with the most serious IP concerns. The United States Trade Representative identified Indonesia on its priority watch list due to the reported lack of adequate and effective IP protection and enforcement, local manufacturing and use requirements, compulsory licensing, and the lack of effective border enforcement against counterfeit and pirated goods as well as fair and equitable market access.
Unnecessary and Costly Testing
U.S. firms should be mindful of additional requirements for testing and certification imposed on a wide range of products. In many cases, U.S. exporters will need to pay for an Indonesian laboratory or certification body to conduct testing for individual shipments, adding to the overall cost of bringing goods to market.
The US Commercial Service sreports, in fact, that the NMAA has been in talks with the Indonesia Ministry of Industry. The association is urging the government to apply the Standard Nasional Indonesia (SNI) to automotive specialty products. The embassy reports that the NMAA hopes that it can protect local industry from foreign competition through SNI certification requirements, thus giving local industry a chance to grow. The U.S.Commercial Service noted that the compulsory two-year-old SNI certification on automotive lubricants has been shown to negatively impact many foreign small and medium lubricant players entering the Indonesian market.
All imported consumer goods must identify the importing agents. Previously, the Government of the Republic of Indonesia required that information on product labels be distinctly and clearly written or printed or shown so that it can be seen easily and understood. Those requirements were somewhat eased with the implementation of a new Indonesian Ministry of Trade regulation (Ministry of Trade Regulation No. 73/M-DAG/PER/9/2015), which allows the label to be stamped in Indonesian on the product or inserted into the packaging.
On the other hand, additional products have been added to the list of products requiring labeling. On October 2019, the Indonesian Ministry of Trade issued regulation 79/2019, which amended regulation No. 73/2015 by including a list of goods and the required labeling, including for electronics, building materials, automotive spare parts, textiles and textile products.
As one of the quickest-growing economies in not only Southeast Asia but also the world, and one of the largest in terms of population, Indonesia provides opportunities with its growing middle class and accompanying disposable income for enthusiasts to purchase aftermarket upgrades.
Paying close attention to the types of vehicles on Indonesia’s roads as well as its regulations and other requirements will help improve the chance of success in the market. The country has a high social-media usage rate, aiding U.S. manufacturers in reaching consumers in the country to provide the latest in products and trends for enthusiasts eager and adept at seeking worldwide information on how to upgrade their rides or improve their vehicles’ performance on the track.
SEMA wishes to thank the U.S. Department of Commerce’s International Trade Administration. Elizabeth Couch in Washington, D.C., Eduard Roytberg in Ontario, California, and Michael Rosales in San Antonio, Texas, have provided ongoing support to SEMA. Special thanks also to Mario Simanjuntak, commercial specialist at the U.S. Embassy in Jakarta, for pulling together information on the Indonesian automotive specialty-equipment market. Simanjuntak is an excellent contact on the Indonesian automotive market and can be reached at firstname.lastname@example.org.
For SEMA members interested in additional information on the Indonesian market, email email@example.com.
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