By on February 26, 2015

Chevrolet-Spin-1

Indonesia has long been touted as one of the next major emerging markets, and only four years ago, GM was set to make a major push in the Southeast Asian nation. But in a major about face, GM is essentially giving up on Indonesia, ending an 80 year manufacturing presence and transitioning solely to a sales and marketing arm.

According to Reuters, GM will shutter its Bekasi factory which was producing the Chevrolet Spin minivan, a product that GM intended to go up against market leader Toyota and its Avanza minivan. Toyota dominates 90 percent of the Indonesia market and the Avanza is Indonesia’s most popular car. Of the top ten selling vehicles in Indonesia, the Spin ranked in 8th place last year, with brands like Toyota, Honda and Daihatsu (another Toyota brand) dominating the market.

Indonesia is a particularly enticing market for many auto makers. It is the most populous nation in Southeast Asia and the largest economy in the region as well. It also has one of the lowest rates of car ownership, with 32 vehicles per 1,000 people, compared to 132 per 1,000 people in Thailand and 300 per 1,000 people in Malaysia. The locally built Spin was supposed to give GM a leg up in Indonesia, but as another Reuters piece notes, GM only advanced seven tenths of a percent in market share during their 80 year run in Indonesia.

Reuters claims that GM will pivot to a more SUV and truck focused brand, along with establishing a foothold for its Chinese affiliate brands like SAIC’s Wuling. But the minivan is Indonesia’s most popular vehicle, since it allows for carrying multiple passengers in comfort while the high ground clearance is suited for the frequent floods and rough terrain of the island nation. While Wuling offers some low cost vans, offerings like Chevrolet’s Trailblazer and Captiva will likely be more expensive while offering qualitative disadvantages.

GM’s Stefan Jacoby told the news service

“We could not ramp up Spin production to boost the volume as we had expected … although the product was really good. The logistics chain of the Spin was too complex; we had low volume so we could not localize the car accordingly, and from the cost point of view we were just not competitive.”

While the Spin is popular in Brazil and other markets, it was unable to dethrone the Avanza, which uses crude but cost-effective body on frame construction which means it can be manufactured in a relatively easy, inexpensive fashion. Jacoby claims that the end goal is to turn Indonesia “into a sustainable business model.” If the last 80 years are any indication, it’s not looking good.

 

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22 Comments on “GM Retreats From Indonesia In Major Blow To Emerging Markets Strategy...”


  • avatar

    Mistake it’d seem. Reminds me of the French brands and Fiat choosing Argentina over Brazil in the beginning of the last century. Those who chose to make a go of it in our much less mature market at that time, benefited from a market that grew and grew while that market stagnated.

    The Spin is a good product. Though I gave it a negative review here on TTAC based on the old engine, that has not stopped it from being a hit. I understand better what GM is doing now with that car and buying one is something I’d consider.

    On the other hand, the SUV strategy is a good one, though probably limits sales because of cost. In big countries like Indonesia, local manufacturing is always important.

    • 0 avatar
      L'avventura

      The European brands choosing Argentina over Brazil made a ton business sense in the mid-late 90s.

      Argentina in the late 90s had become a country with a GDP per person that was three times that of Brazil at that time, it had buying power equivalent of most first world countries. Obviously, it crashed since, and the government has defaulted multiple times, and seems to be ready to default again soon.

      But the country was invested in because it had a meteoric rise. Its meteoric fall since illustrates how risky emerging market investments are.

      I understand your argument in getting in on the ground floor. But GM has been in Indonesia for 80 years as pointed out in the article. Moreover, its hard to predict which countries will actually be lucrative markets.

      Brazil, for instance, has been a hot market for the last decade, but the economy has been stuck in the mud for the last several years. Production and exports of cars dropped last year, and protectionist import laws make Brazilian car production difficult for export (compared to countries like Mexico which has signed a bunch of free-trade agreements and have low tariffs).

      GM rightfully seems to be reallocating resources to markets that they can possibly win. You can’t win every battle, and GM’s resources are better spent on other emerging markets in the area (like India).

    • 0 avatar
      Big Al from Oz

      Hey Marcelo,
      In the beginning of the 20th Century Argentina had one of the highest standards of living in the world, I think it was in the top 4.

      At the time it would of seemed a good idea.

  • avatar
    shadow mozes

    The Innova is the winner in this market.

  • avatar
    nguyenvuminh

    I spent 10 years in Vietnam and the Toyota Innova truly dominate that particular market as well. It’s a relatively small 3-row 8-seater (small seats mind you but Asians don’t mind that) that represents the practicality and flexibility that budget conscious families in SE Asia place high priority on. I can understand GM’s frustration with not being able to crack that Toyota-dominated nut but to try to change tactic to SUV/truck approach seems odd. Other than N America (and US in particular) and possibly Thailand (small pick up truck only), I can’t imagine how that segment will sell a lot in Indonesia.

  • avatar
    CoreyDL

    I’m not sure I can call a factory closure a “giving up” on a market. Just because they aren’t going to make them there any more, it’s very possible to exist in a market where things are shipped in. Lest we forget this was pretty much the only thing happening to cars before 1975. Home market manufacture, international ship.

  • avatar
    Big Al from Oz

    Indonesia has a population approaching 260 million. But, Indonesia is a poor nation. Countries like Thailand, let alone Malaysia have a far better standard of living.

    I do dispute the fact that the Indonesian economy is the largest in SE Asia. It’s GDP as a nation is roughly 2/3s of the Australian GDP.

    Indonesia also has a rudimentary regulatory system in place that isn’t managed effectively. It has some ways to go before it can even afford to consider safety in vehicles, like, say Brazil.

    Toyota also has a strong foothold in many SE Asian nations. Honda’s are considered the equivalent of a prestige marque.

    • 0 avatar
      APaGttH

      I have read that driving in Indonesia is errrr, ummmmm, quite the adventure.

      • 0 avatar
        Big Al from Oz

        @APaGttH
        I drive in Malaysia and I’ve noticed in the past 20 years attitudes and driving culture is changing.

        My first experience in Malaysia was riding what we called “plastics”. They are step through motorbikes. I was lucky I ended up renting a powerful plastic. It was a Suzuki with a 125 2 Stroke.

        To get to the Island of Penang we used a ferry. The crossing took around 1/2 and hour or so. Cars were on the bottom and people up top.

        Disembarking of the ferry was one of the biggest adrenalin rushes in my life driving on a “public” road.

        When lining up to go on the ferry the vehicles were sorted into ranks. Motorbikes made one rank, cars, then trucks.

        Bikes were always the first on and naturally the first off.

        Disembarking was like a start for a MotoGP. I remember you went straight for around 50 meters, then you laid the bike over on a right hand curve (really a corner) around 10 abreast, elbow to elbow. You would at time be rubbing the guys alongside of you.

        Then another short straight for 50 meters then a hard left, all time going through the gears.

        Malaysians back in the early 90s used their bikes as the “family” wagon, I’ve seen 4 on one plastic! The husband, wife holding the baby and kid right at the back.

        There was this one busy intersection with a gas station on the corner. When the light was red the gas station was an alternative route to making the left hand turn.

        They still have the ferry but they also have Penang Bridge, it’s actually a huge suspension bridge that goes for miles from the mainland to Penang.

        Soon you’ll be able to drive from Singapore to all parts of China and even Ulan Batar in Mongolia on freeways. Laos is the last kink in the highway program.

        I’d bet one day you’ll be able to drive on a freeway from Singapore to Oslo, Paris, etc.

        Now wouldn’t that be a fun drive.

      • 0 avatar
        NN

        I rented a Suzuki Samurai back in 2002 and drove it around Bali, Indonesia. I’ve often said it was the scariest and most dangerous thing I’ve ever done in my life. Right hand drive, stick in the left hand, motorbikes all around you only a few inches from you in many cases, and then the general anarchy and lack of signage made things adventurous. I was told that the police like to pull over foreigners for bribes, but you just give them like 20,000 Rupiah (at the time about a dollar) and you’re on your way. I never had to but it was in the back of my mind the whole way.

  • avatar
    highdesertcat

    A nation made up of many islands, with many unimproved roads but a great Ferry system To me that is an opportunity to sell Subaru vehicles with their AWD systems.

    Maybe GM saw the competition from other automakers as just too formidable.

    I honestly never considered Australia as part of SE Asia but more like a continent itself as!de and separate of SE Asia.

    • 0 avatar
      RobertRyan

      Correct not part of SE Asia. Indonesia does have one thing in common with Australia and Thailand, RHD
      I think Big Al From Aust was giving a comparison on population density and poor car ownership in Inonesia

      • 0 avatar
        highdesertcat

        Thanks. I don’t know anything about Indonesia and I don’t see any reason for me to ever go visit there. But it must have been lucrative for GM to produce over there (at one time).

    • 0 avatar
      bd2

      Toyota, the dominant player, utilizes old/cheap (and hence, reliable) components which are sourced locally.

      GM could not compete on price.

      It’s like the same way Toyota hasn’t been able to make great inroads into the Indian auto market.

  • avatar
    Rday

    Been to Bali many times and driving there is very interesting. Crowded roads and subsidized gas prices. Toyota’s seem to rule the road. Why shouldn’t they? They are the best manufacturer IMO. GM Is completely out of their league against Toyota.

    • 0 avatar
      bd2

      Not really.

      A big part has to do with ability to source parts locally and Toyota has the advantage in Indonesia.

      GM, otoh, is much stronger than Toyota in China and in India, Suzuki and Hyundai hold the advantage.

  • avatar
    Moparmann

    My first impression of the Spin…what a hideous, BLOATED turd, sitting on what appear to be the smallest wheels available. I don’t know what the competition was offering, but surely it has to look better than this!!

  • avatar
    Varezhka

    I don’t know how good or bad of a vehicle the Spin was compared to its competitions, but they are having an about face after measly two years in the market? How quickly did they honestly think they can take a market that has been so entrenched by a dominant maker?

    It’s exactly this kind of rudderless, go where the wind blows that day management that brought the company to bankruptcy in the first place. With that kind of commitment, no wonder no one is buying their cars in Indonesia.

  • avatar
    psarhjinian

    That’s a nice looking vehicle, if nothing else. I like seeing rationally-sized rims and tires for a change.

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