Australia Closes Car Industry, Opportunity for Indonesian Car Exports?
General Motors manufactured its last Holden car at the Adelaide factory on Friday (20/10), hence effectively ending the once-iconic Australian car industry. From now on Australians will have to buy cars that were imported from abroad. While other governments have been keeping national automotive industries alive after the financial crisis through bailouts, the Australian government saw no real economic reason to keep this industry alive.
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 2013 |
Sold Cars 2014 |
Sold Cars 2015 |
Sold Cars 2016 |
Sold Cars 2017 |
| 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