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19 October 2020 (closed)
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Although it proves difficult for Indonesian car manufacturers to export their output to overseas markets, reflected by the declining number of local car exporters (declining from eight in 2013 to five at the start of 2018), Indonesia's car shipments have been rising steadily over the past five years. However, in absolute terms the figure remains modest with 231,169 exported car units from Indonesia in full-year 2017.
Indonesia's Industry Ministry targets to see the export of at least 20 percent of car units that are manufactured in Indonesia. Considering Indonesia produced a total of 1,216,615 car units in 2017, while exporting 231,169 units that same year, the ratio stands at 19 percent, just below the ministry's target.
Production capacity is not an issue in Indonesia's automotive industry. After several companies have been investing in expansion of their manufacturing plants in recent years, while there have also arrived some newcomers (although some others closed their plants in Indonesia), the country's total installed annual car production capacity has now reached an estimated 2.25 million. In fact, Indonesia's car production capacity surged 70 percent over the past six years.
These production expansion plans of the nation's car manufacturers are primarily encouraged by the still low per capita car ownership ratio of Indonesia. And although domestic car sales figures have been stagnating in recent years (a phenomenon that is usually attributed to the country's bleak growing purchasing power) there is still ample room for car sales growth in Indonesia in the future.
A major problem in terms of car exports is that Indonesia's car shipments can currently only reach developing nations, such as its peers in the Southeast Asian region, South America and Africa, as well as the Middle East. The reason behind this is that these countries have not set high standards for safety and gas emissions.
Indonesia also lags behind, rather far, in terms of safety and gas emissions regulations. Through Environment and Forestry Ministry Regulation No. P. 20/MENLHK/SETJEN/KUM. 1/3/2017 on the Standard Exhaust Emission of Euro 4-Type Motor Vehicles, published on 10 March 2017, the Indonesian government orders all domestic manufacturers of four-wheeled motorized vehicles to adjust to the Euro-4 emission standard. The Indonesian government announced that it would provide an 18-month period to local car or bus manufacturers to adjust to the new standard, while diesel vehicles were given four years to adjust. Currently, most automotive manufacturers in Indonesia are still in the Euro-2 phase.
While several advanced nations already started to use the Euro-2 standard back in 1997, Indonesia only followed suit in 2003 (while the Euro-2 standard fuel is still not widely used around the Archipelago today as many Indonesians are still using RON 88, also known as premium). And while advanced nations started to comply with the Euro-4 standard since 2005, Indonesia is barely ready to introduce it in 2018.
Read also: Indonesia's Automotive Industry
Indonesian Industry Minister Airlangga Hartarto added that most advanced economies have adopted the standard that is formulated in the United Nations Economic Commission for Europe (UNECE), while Indonesia is yet to adopt this and therefore misses opportunities in terms of car exports. In 2017 the Indonesian government already decided to adopt the UNECE and make it the reference for the National Indonesian Standard (in Indonesian: Standard Nasional Indonesia, or SNI) for a selection of car components, including tires and windows. However, it is a process that is still underway.
Meanwhile, car imports into Indonesia have been declining over the past five years. This can possibly be explained by the launch of various good quality and attractive car models by domestic car manufacturers on the domestic market, hence limiting demand for imported cars.
Car Data Indonesia:
Domestic Car Sales in Indonesia (CBU):