And Now, Indonesia

When people talk about red hot car markets, the usually mean BRIC: Brazil, Russia, India, China. Nobody ever mentions Indonesia. Indonesia? That island nation has some 235m people, three quarters the population of the U.S.A. But it’s very under-motorized. Last year, Indonesians bought only 486,000 cars, 20 percent less than in the year before. Indonesia’s car production is not much to write home about either. According to OICA, Indonesia produced 464,816 motor vehicles last year. In 2005, they made 500,710. So let’s forget about them, right? Not so fast.

The Indonesian government wants to revive production in their country. According to The Nikkei [sub], “Indonesia is expected to grow quickly in the next several years as the government is preparing a tax incentive and manufacturers are raising output capacity.”

Currently, the government charges a 10 to 30 percent tax, not when the car is sold, already when automakers sell vehicles to dealers. According to new plans, that tax will be greatly reduced for small cars, likely with engines of a liter or less, and costing below 100 million rupiah (11,200 dollars).

As a reaction, Indonesian makers are beefing up capacity.

• PT Astra International, Indonesia’s largest carmaker, plans to raise capacity at its joint-venture factory with Toyota to 150,000 units a year. Astra International also wants to boost annual capacity to 280,000 units at its joint-venture with Toyota’s Daihatsu.
• PT Indomobil Sukses will double the capacity of its joint-venture plant with Nissan to 100,000 vehicles a year. Their joint venture with Toyota’s Hino will build a factory able to turn out 25,000 small trucks annually. Indomobil will also increase the number of models it produces for Volkswagen AG.

And they are not sitting on their hands. The Association of Indonesia Automotive Industries predicts that automobile sales in Indonesia will hit a record 700,000 units in 2010, and that production will total about 620,000 units. As a start.

Now check the involved joint venture brands and tell me: Who’s missing out on the bonanza-in-the-making? It’s not just Indonesia. All ASEAN markets are waking up, as the picture illustrates.