Over the past few years, Mazda, Chrysler, Ford and Toyota have also closed their manufacturing plants in Australia. Those decisions cost about 30,000 jobs. The question now is: can Indonesia - located not far from Australia - now become a key supplier of imported cars in Australia?

The Indonesian Automotive Industry Association (Gaikindo) sees opportunities for Indonesian car exporters and therefore immediately advised the Indonesian government (specifically the Trade and Industry Ministries) to include the automotive industry in negotiations between Indonesia and Australia regarding the Indonesia-Australia Comprehensive Economic Partnership (IA-CEPA).

Jongkie Sugiarto, Chairman of Gaikindo, said he received a warm response from both ministries about the suggestion of encouraging zero percent import tariffs for shipments of cars from Indonesia to Australia.

Previously, Indonesian Industry Minister Airlangga Hartarto had already met Paul Grigson, Australia's Ambassador to Indonesia, to discuss the possibility of setting zero percent import tariffs between both countries for three products. Australia requests zero percent import duties for milk products, copper cathode, and steel (hot rolled coil and cold rolled coil) that are shipped to Indonesia, while Indonesia requests zero import duties for textiles, footwear and clothing that is shipped to Australia. The shipment of cars may become a new topic in the next diplomatic meeting in the context of IA-CEPA negotiations.

However, there are a couple of problems that would block the flow of car exports from Indonesia to Australia. Firstly, Indonesia's automotive industry is mainly specialized in the manufacturing of multiple purpose vehicles (MPV). This model is highly popular in Indonesia because there is room in the vehicle for up to seven people. Abroad, however, including Australia, demand for this model is limited. This would mean that Indonesian car manufacturers have to develop new facilities to produce other car models (such as the sedan) specifically for export purposes. However, this would not be an effective business model - different facilities for domestic and global markets - and also requires plenty of capital to invest in new facilities (ultimately making the price of the new cars less competitive).

Secondly, in terms of European emission standards - which defines the acceptable limits for exhaust emissions of new vehicles sold in EU and EEA member states - Indonesia still lags behind. The Indonesian government officially launched a policy to certify the implementation of Euro 4 emission standard in March 2017. The policy is formulated in Ministry Environment and Forestry Regulation No. P. 20/MENLHK/SETJEN/KUM. 1/3/2017 on the Standard Exhaust Emission of Euro 4-Type Motor Vehicles. This regulation will come into effect in 2018. Meanwhile, Australia is currently already in the Euro 5 stage.

Read more: Overview & Analysis of Indonesia's Automotive Industry

Warih Andang Tjahjono, President Director of Toyota Motor Manufacturing Indonesia (TMMIM), said he is optimistic about the potential of shipping cars to Australia. Especially the medium sedan, such as the Camry or sport utility vehicle (SUV), should do well on the Australian market. Meanwhile, the MPV could be used for transportation services (taxi) in countries like Australia.

Meanwhile, Gaikindo today also released data regarding the latest car sales figures in Indonesia. Indonesia's car sales in September declined 5.3 percent on an annual basis to 87,645 vehicles (down from 92,541 units in the same month last year).

Indonesian Car Sales (CBU):

Month Sold Cars
Sold Cars
Sold Cars
Sold Cars
Sold Cars
January   96,718  103,609   94,194   85,002   86,324
February  103,278  111,824   88,740   88,208   95,159
March   95,996  113,067   99,410   94,092  102,336
April  102,257  106,124   81,600   84,770   89,623
May   99,697   96,872   79,375   88,567   94,091
June  104,268  110,614   82,172   91,488   66,370
July  112,178   91,334   55,615   61,891   84,905
August   77,964   96,652   90,537   96,282   96,466
September  115,974  102,572   93,038   92,541   87,645
October  112,039  105,222   88,408   92,106
November  111,841   91,327   86,938  100,365
December   97,706   78,802   73,264   86,547
Total 1,229,916
1,208,019 1,013,291 1,061,859

Source: Gaikindo