Why Does Ford Motor Company Leave Indonesia and Japan?

Indonesia is both Southeast Asia's largest economy and the largest car market. With per capita car ownership of Indonesia relatively low (it is estimated that less than eight percent of the Indonesian population owns a car), having a young and large population (implying many first-time car buyers are to come) and growing per capita GDP, Indonesia should be a very attractive market for any car manufacturer.

Regarding per capita GDP, Indonesia hit the USD $3,000 mark in 2010. Generally, this level is considered an important threshold as it tends to result in accelerated growth in a number of sectors including the automotive industry. Others put this threshold at USD $5,000 (per capita GDP) for consumer spending on large items (including cars) to start rising strongly. Provided economic growth of Indonesia will accelerate in the years to come the nation can hit the USD $5,000 per capita GDP threshold within five years.

After a dip in 2009 (caused by the impact of the global financial crisis), Indonesia's domestic car sales rose rapidly from 764,710 vehicles in 2010 to 1.2 million vehicles in 2013, before stagnating in 2014 (again recording 1.2 million sold units) and then falling to 1.0 million vehicles in 2015.

Read Analysis: Why Have Indonesia's Car Sales Declined after 2014?

Despite relatively weak car sales since 2014, there is still ample room for growth in the years ahead provided the country's economic growth accelerates. Many believe that the year 2016 is the year that will finally show an acceleration of economic growth after five years of slowing economic growth. Indonesia's GDP growth is expected to reach 5.3 percent (y/y) in 2016 from an estimated 4.7 percent (y/y) last year.

However, the main disadvantage for American and European car manufacturers is that Indonesia's car market is dominated by Japanese automakers. For example, in 2015 a total of 1,013,291 vehicles were sold on the Indonesian market. However, 928,317 vehicles were Japanese branded cars (with especially Toyota dominating sales in Indonesia), leaving very little for non-Japanese brands such as GM and Ford. The table below shows the declining trend of Ford's sales in Indonesia over the past five years hence causing the company's reduced profitability.

 Car Sales Ford Motor Company in Indonesia

Year	Sold Car Units
2015	4,986
2014	12,008
2013	9,907
2012	11,958
2011	15.670

^{Source: Gaikindo}

Indonesian Car Sales (CBU):

Month	Sold Cars 2012	Sold Cars 2013	Sold Cars 2014	Sold Cars 2015
January	76,427	96,718	103,609	94,194
February	86,486	103,278	111,824	88,740
March	87,917	95,996	113,067	99,410
April	87,144	102,257	106,124	81,600
May	95,541	99,697	96,872	79,375
June	101,746	104,268	110,614	82,172
July	102,511	112,178	91,334	55,615
August	76,445	77,964	96,652	90,537
September	102,100	115,974	102,572	93,038
October	106,754	112,039	105,222	88,408
November	103,703	111,841	91,327	86,938
December	89,456	97,706	78,802	73,264
Total	1,116,230	1,229,916	1,208,019	1,013,291

 

	2008	2009	2010	2011	2012	2013	2014	2015
Car Sales (car units)	607,805	486,061	764,710	894,164	1,116,230	1,229,916	1,208,019	1,013,291
Car Exports (units)	100,982	56,669	85,769	107,932	173,368	170,907	202,273	207,691

 

Brand	2014	2015	YoY Growth (%)
Toyota (Astra)	399,746	322,466	-19.3
Daihatsu (Astra)	185,226	167,808	-9.4
Honda	159,147	159,253	+0.06
Suzuki	154,923	121,805	-21.4
Mitsubishi	141,962	112,527	-20.7
Nissan	33,789	25,108	-25.7
Isuzu (Astra)	28,278	19,350	-31.5
UD Trucks (Astra)	854	560	-34.4
Peugeot (Astra)	65	40	-38.5
Others	104,029	84,374	-18.9
Total	1,208,019	1,013,291	-16.1

^{Source: Astra International}

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Lars Christiansen | 01 February 2016 02:51

The article asks a question, but does not provide an answer; That Japanese car makers dominate the market is not the answer, but an effect of SOMETHING. Hence, it would show real journalistic skill if the author of the article tried to answer his own question - WHY do Japanese carmakers dominate the market to MONOPOLY degree ? Does Japan have preferential tax exemptions, and what are the reasons for such, what are the benefits for Indonesia of such, and what is the downside of such ?

Journalist; Dont just convey information, - but background and intelligent analysis please !