Bullish Indonesian Automakers Raise Production Bar

The Association of Indonesian Automotive Manufacturers (Gaikindo) wants the local auto industry to produce 1.4 million units this year and to boost its production capacity to 2.2 million by 2017.

Gaikindo officials tell the Jakarta Post the industry has been experiencing robust growth since the country’s per-capita gross domestic product reached $5,000 a year.

Production hit 1.2 million units in 2013 and in the first eight months of this year was up 14% year-on-year to 878,000.

Gaikindo Secretary-General Noegardjito tells the newspaper about 100 local and foreign businesses plan to build auto-parts factories to take advantage of the country’s growing car production and thus far 30 have received the green light from the Industry Ministry.

“Perhaps in the near future, the five big car manufacturers will also open component plants,” Noegardjito says.

The industry has developed a strong presence as an automotive production base with a reach beyond the region, he says, exporting to 80 countries including those in the ASEAN, the Middle East, Latin America and Japan.

Budi Darmadi, the Industry Ministry’s director general for high-technology industries, tells the newspaper production capacity is surging as a result of investment over the past two years.

“And with Mitsubishi and VW (Volkswagen) recently announcing their plans to invest this year, the production capacity at the national level could reach 2.2 million cars by 2017,” he says.

At that level, Indonesia could replace Thailand as the largest car producer in Southeast Asia.

Thailand is expected to produce 2.1 million cars this year, down 15.7% from prior-year.

The Indonesian government wants the industry to export 320,000 completely built-up and complete knocked-down units this year, and another 360,000 next year.

Budi is optimistic the industry will be able to surpass the government’s target. “If this year’s exports for CBU and CKD cars can reach 340,000 cars, we’ll be able to exceed the government’s 10% export target,” he says.