Business Development Asia LLC
South East Asian Automotive News
Issue 2, August 1997
INDONESIA
General Motors will announce in August whether it is to end its 13-month freeze on investment in Indonesia. The freeze resulted from Indonesia's introduction of its national car policy in February 1996. GM's Indonesian investments are through General Motors Buana Indonesia (GMBI), a JV between General Motors and PT Mercy Buana, and include a US$110m assembly plant. GMBI will also announce which of Opel's new models will be available in Indonesia. GM, through its European arm Opel, sells three models in Indonesia: the locally assembled Optima sedan, the Blazer family jeep and the imported Vectra. The Blazer is GM's flagship model in the Indonesian market. GM set up its first Blazer right-hand drive assembly plant in December 1996. Other Asian and South African countries are targeted as export markets for this product. (July 12th, 1997)
Kia Motors of South Korea, a participant in the national car project, has won a US$50m order to export auto press facilities to Timor Industri Komponen (TIK) in Indonesia, a subsidiary of its Timor Putra Nasional. A Kia spokesman said that the company will relocate one existing press line from its Asan plant to Indonesia by the end of the year. Meanwhile, its sister company Kim Heavy Industries will build a 2,300-ton press and other capabilities to supply TIK by June 1998. (July 3rd, 1997)
Timor is cutting short its imports of finished autos duty-free from South Korea. Timor has permission from the government to import a total of 45,000 cars exempt from import duty and the value added tax for luxury goods. However, Timor announced that it will only import a total of approximately 40,000 units. The reduction is seen by some as an attempt to appease the WTO litigants and also reflects the difficulty Timor has had in selling its cars. (July 12th, 1997)
Timor has sold only 1,400 cars per month over the last few months, substantially less than its forecast of 2,500. The Timor costs US$13,500, 30% below the selling price of a comparative model of the market leader, Toyota Astra. (July 31st, 1997) Timor is having problems persuading local private banks to join the lending consortium formed by the Government to support the national car project. State-owned Bank Dagang Negara is organizing the project, but private sector banks Danamon, Niaga and Bank Central Asia are displaying a lack of enthusiasm to get involved. (July 31st, 1997)
Toyota Motor is joining forces with Daihatsu and Isuzu in Indonesia to manufacture auto parts, including crankshafts and camshafts, from 1999 on. Toyota hopes to raise its local content percentage to a level which would exempt it from import duties. A similar alliance is in place in Thailand where Toyota, Isuzu and Nissan Motors jointly produce cast parts. (July 1st, 1997)
The World Trade Organization has established a dispute panel, at the request of the US, concerning Indonesia's national car project. The national car is already the subject of a panel inquiry following complaints from the EU and Japan that the favorable tax and tariff treatment Indonesia gives the locally produced Timor breaches WTO rules. The panel will report back in the first quarter of 1998. If the final ruling goes against Indonesia, it will have to bring its policy into line or pay compensation for the value of trade lost to the complainants. (July 30th, 1997)
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