Indonesia Automotive and Component Market


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Frost & Sullivan analysis of the automotive and component market in Indonesia: the export potential for Malaysian companies.

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Indonesia Automotive and Component Market

  1. 1. Indonesia Automotive and Component Market: Export Potential for Malaysian Companies Mario Montino Consultant of Automotive & Transportation MATRADE Program - Jakarta, 19th October 2009 © 2009 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.
  2. 2. 1 Indonesia Automotive and Component Market Overview2 Opportunities and challenges for Malaysian companies3 About Frost & Sullivan 2
  3. 3. General Overview on Indonesia: Country of Opportunities •Indonesia is a very potential market with total population of 228.5 millions people in 2008 according to Statistic Agency. • Around 58% of the population live in Java island, although Java is only 7% of total land area in Indonesia. •Average per capita income is IDR 15.5 millions per year or equivalent to MYR 4,740. •The main driver for Indonesian economy is domestic consumption. •Economy is growing at the rate of 6% for the last couple of years 3
  4. 4. Indonesia slated to be one of the fastest growing countries in ASEAN;A very important country for Automotive Market GDP-Population Chart 2007 - 2012 1000 800 Indonesia US$ (bn) 600 Malayasia Thailand 400 Philippines 200 Vietnam 0 0 50 100 150 200 250 Population (mn) Size of bubble indicates per capita GDP 2007 2012 • All 5 ASEAN countries are likely to grow at a CAGR of 5-7% in the year 2012 • Average growth in population is between 1-2% for all countries • Region is going to see substantial increase in per capita GDP • Indonesia and Vietnam are likely to grow the fastest by the year 2012 4
  5. 5. Total Indonesia’s Import Trend from Malaysia has shown higher growth over Thailand for the last few years Indonesia Total Import Trend from Top 3 ASEAN countries 18 12000 16 Import CIF Value (millions US$)Import Volume (millions m.ton) 10000 Singapore 14 12 Singapore 8000 Malaysia Malaysia 10 6000 8 Thailand 6 4000 Thailand 4 2000 2 0 0 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 Source: BPS, Analysis: Frost & Sullivan 5
  6. 6. Indonesia’s Transport Equipment Import Value rankedsecond compared to other SITC Group Value of Import by SITC Group (2007) Miscellanous Raw materials, inedible Food & Live Animals Manufactured goods, classified by materials Chemical Machinery & transport equipment Mineral fuel, lubricant, and related material 0 5000 10000 15000 20000 CIF Value (millions US$) Source: BPS, Analysis: Frost & Sullivan 6
  7. 7. Indonesia’s Spare Parts & Accessories import trend Indonesia Parts & Accessories for Transport Equipment Import Trend (volume)Import Volume (thousands m.ton) 700 600 • Indonesia had shown significant drop 500 400 in spare parts and accessories import 300 volume and value during 1998 – 1999 200 period due to economy crisis started 100 from Thailand. 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 • Although Indonesia has managed to recover from crisis since 2000, but the value of spare parts and accessories Indonesia Parts & Accessories for Transport Equipment import has never achieved the same Import Trend (value) Import CIF value (millions US$) value as the previous value in 1996 4000 3500 •In overall, Indonesia is a very 3000 promising market for imported spare 2500 2000 parts & accessories, especially hi-tech 1500 components that could not be supplied 1000 by local manufacturer. 500 0 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Source: BPS, Analysis: Frost & Sullivan 7
  8. 8. Domestic Motorcycle sales history and Future potential Indonesia Domestic Motorcycle Sales 1998 - 2008 • Motorcycle has emerged as a viable alternative method of transportation 7000 due to its affordability, loan support from financing companies and its fuel 6000 efficiency. •Japanese domination in motorcycleVolume (thousands units) 5000 manufacturing and sales is very strong, especially after the failure of Chinese 4000 motorcycles before 2001 •The Japanese players in motorcycle 3000 are Honda, Yamaha, Suzuki, Kawasaki while the non-Japanese players are 2000 Kanzen, Piaggio, Bajaj, and TVS. Kymco recently has stopped its 1000 operation in Indonesia 0 • Current ratio of motorcycle ownership; 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 is 5 persons per 1 motorcycle • Around 80% of total motorcycle sales is being supported by credit Source: AISI, Analysis: Frost & Sullivan 8
  9. 9. Domestic Car sales history and Future potential Indonesia Domestic Car Sales 1998 - 2009 •Despite of low volume during 1998- 1999 and 2 times market drop in 2006 and 2009, in overall Indonesia has 700 shown strong growth trend over the 600 past 10 years •The rise of petrol price and impact ofVolume (thousands units) 500 regional or global economy downturn are the most common things that were 400 responsible for market drops •Frost & Sullivan estimates of 2009 300 sales is 443,752 units; drop by 26.5% compared to 2008 200 • Despite of 2009 performance, the 100 future of Indonesian automotive industry is still promising due to the 0 current low ratio of passenger car 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009* ownership; which is 28 persons per 1 * Frost & Sullivan’s forecast passenger car; and government’s plan to support low cost eco car project Source: Gaikindo, Analysis: Frost & Sullivan 9
  10. 10. Fluctuating nature of Indonesia Automotive Market underlines factorsother than GDP growth rate are responsible for Growth or Decline Automotive Market Growth Rate Compared with GDP growth rate (Indonesia), 2002 - 2008 50% New MPV Avanza- Market rebound: low 40% Xenia responded interest rate for credit, 35.8% 39.3% positively by market favorite new MPV models, 30% rising commodity export 36.2% 20% 11.6% Growth Rate 10 % 10.5% 6.0% 5.2% 6.7% 6.1% 4.5% 4.8% 6.3% 6.2% 0% 2002 2003 2004 2005 2006 2007 2008 - 10 % -20% -30% Slowdown in automotive market -40% Growth Rate of Total Automotive Market due to rise in petrol prices Growth Rate of GDP -40.2% -50%Notes: Total Vehicles include Passenger Cars and Commercial Vehicles Source: Gaikindo, Ministry of Finance; Analysis: Frost & Sullivan 10
  11. 11. Indonesia Car Market is dominated by Multi Purpose Vehicles and Japanese brands Market Share by Type (2009-est) •Half of Indonesia car market is dominated by Multi Purpose Vehicle (MPV) models, especially 7-seater MPV CV 221,876 units Avanza-Xenia models from Toyota and Daihatsu 115,376 units (50%) (26%) •Government’s low tax and duty for MPV is the main driver for making Indonesia as MPV-based 4x4 Luxury production 1,331 units (0.3%) SUV •Commercial vehicle ranked second with 26% of Sedan Compact 47,925 units 16,419 units 40,825 units (10.8%) market share with Mitsubishi as the leading brand. (3.7%) (9.2%) •Japanese brands control and account for more than 92% of the Indonesian total car market Market Share by Brand (2009-est) •Toyota is the leader in Indonesia with more than Others 7.8% 37% estimated market share, at the end of 2009 37.6% • Around60% of Toyota sales was contributed by 3.5% Avanza, the most favorite model being manufactured in Indonesia 4.6% •Daihatsu, currently the rising star in the market, has managed to dislodge Mitsubishi from no.2 7.3% position in market share. 16.4% 9.9%Source & Analysis: Frost & Sullivan 12.9% 11
  12. 12. Indonesia 2008 production: 46% growth over 2007 beforeslowing down due to Global Crisis TIV : 600,844 • 2008 growth in production numbers is +46% higher than sales numbers TIV : 411,638 • This indicates that export of cars from +39% Indonesia has gone up • From volume perspective growth in TIV:296,008 4X2 is spectacular (113,000 units) • From % growth perspective growth in Sedan is the highest (277%) • This highlights export potential of Indonesia can be very high if right policies are implemented Source: Gaikindo; Analysis: Frost & Sullivan 12
  13. 13. Japanese Manufacturers has established a very strongpresence – partnering mostly with ASTRA & INDOMOBIL ASTRA Group Own Factory PT. Kramayudha Tiga Berlian Motors 1. PT. Toyota Motor Manufacturing Indonesia ( Commercial Vehicle only) 2. PT. Astra Daihatsu Motor PT. Honda Prospect Motor 3. PT. Isuzu Astra Motor Indonesia PT. Mercedes Benz Indonesia 4. PT. Astra Nissan Diesel Indonesia PT. Hyundai Indonesia Motor 5. PT. Gaya Motor PT. Kia Mobil Indonesia INDOMOBIL Group 1. PT. Suzuki Indomobil Motor 2. PT. Nissan Motor Indonesia 3.PT. Hino Motor Manufacturing Indonesia 4. PT. National Assemblers 13
  14. 14. Indonesia Automotive component main source forproduction is from the domestic supplier Indonesia Automotive Component Source 2008 Thailand Japan 4.2% 17.8% Germany 0.5% Others Indonesia 0.2% 76.9% South Korea 0.5% 77% of production in Indonesia are assemble locally while the balance are via CKD / SKD assembly Source & Analysis: Frost & Sullivan 14
  15. 15. Indonesia component industry value chain overview Source : SENADA 15
  16. 16. Sample of Major Tier-1 and Tier-2 suppliers in Indonesia Sample of Major ASTRA Group Tier-1 Suppliers Sample of other Major Tier-1 Suppliers 1. PT. Toyota Motor Manufacturing Indonesia 1. PT. Mitsubishi Krama Yudha Motor & Mfg. 2. PT. Astra Daihatsu Motor 2. PT. Honda Prospect Motor 3. PT. Inti Pantja Press Industri 3. PT. Denso Indonesia 4. PT. Inti Ganda Perdana 4. PT. Selamat Sempurna Tbk. 5. PT. Tri Dharma Wisesa 5. PT. Bakrie Tosanjaya Sample of Major Tier-2 suppliers 1. PT. Dharma Polimetal 2. PT. Dharma Precision Parts 3.PT. Federal Izumi Manufacturing 4. PT. Sugity Creative 16
  17. 17. Indonesia First Tier or OEM Manufacturers Overview• First-tier or OEM manufacturers dominate the market for branded or “genuine” parts.• OEM producers concentrate on highest-value, fast moving products, including: - Electrical systems (batteries, battery cables, wiring harnesses, starters, halogen lamps, etc.), - Engine systems (air, oil, and fuel filters, valves, gaskets, pistons, etc.), - Brake systems (brake shoes, pads, and linings, disc brakes, etc.), - Cooling systems (air conditioning components, radiators, etc.), - Body and frame components (chassis, doors, windows, etc.), - Suspension systems (shock absorbers, front forks, dampers, etc.), and - A wide variety of plastic, rubber, and forged steel products.• First-tier component suppliers are typically joint venture or foreign investment companies.• The majority of these joint ventures are under ASTRA International or Indomobil Group•These ventures are primarily concerned with producing parts for the first-tier assemblymarket and are sold under well-known OEM brands.•First-tier suppliers also sell genuine parts directly to consumers though certified first-tierwholesalers, and in the aftermarket through subsidiaries. 17
  18. 18. Indonesia Second-Tier or Third-Tier Suppliers Overview•Second-tier suppliers that are capable of complying with strict requirements, playan important role in assisting first-tier companies.•Most second-tier suppliers are unable to produce all parts necessary for a singleautomobile or motorcycle.•First-tier suppliers usually contract several second-tier manufacturerssimultaneously to produce all of the parts and components required to assembleentire vehicles in order to maximize quality and efficiency.• Second tier suppliers are also play independent role and produce a number ofparts for the aftermarket. These parts are sold through OEM and non-OEM second-tier wholesalers and are marketed as branded and unbranded.•Examples of OEM brands include: ASPIRA from PT. Astra Otoparts Tbk.,Indoparts from Indomobil Group, while examples of non-OEM brands includeSakura Filter or ADR Radiators from ADR group of companies. 18
  19. 19. Indonesia After Market Component Overview• The domestic aftermarket provides customers with alternatives to expensive genuine parts.•Most of the parts in the after market came from China, Taiwan, Thailand, and Vietnam withvery cheap price, sometimes could be lower than 20% of the price of the same parts withgenuine tag.•Given the increase in cheap imports, Indonesian second and third-tier componentmanufacturers are losing their ability to compete on price at the bottom-value level of theaftermarket.• These second and third-tier companies have started to move into the mid-value domesticaftermarket segments. This market niche switch has been pioneered by brands andfranchises such as Indoparts, FAST, and Sakura.•This new segment is an important market opportunity for second and third-tier producersbecause it is high value enough to relieve market pressures from hyper-price sensitiveimports, and not too high, where producers will have to compete head-to-head with first-tierOEM producers 19
  20. 20. Component distribution overview•Genuine parts are distributed through authorized dealers and ATPM authorizedworkshop networks•There is a general market trend that owners of motorized vehicles have inclinationto use genuine OEM parts for the first three years of their ownership of newvehicles. This corresponds with typical warranty periods offered by the OEM.•After warranty periods expire, customers typically switch to less-expensive,imitation parts.•Based on a research done by US Aid, in 2007, around 10.5 million owners of 2-wheeled vehicles, and 1.5 million owners of car would switch from the OEM parts tothe imitation parts•This is one of the main reasons the demand for domestic and imported non-OEMparts has increased rapidly for past few years. 20
  21. 21. 1 Indonesia Automotive and Component Market Overview2 Opportunities and challenges for Malaysian companies3 About Frost & Sullivan 21
  22. 22. Component business opportunities & challenges inIndonesia1. Parts that have the best opportunity for Malaysian companies will be:• Fast Moving Part that is replaced within three months or 10,000 km. for example: Fuel filter, Air filter, Oil filter, etc.• High Value Part with high profit margin or high volume for example: universal accessories and fitments2. Malaysian companies should be aware of the quality perception by Indonesian people, that it would be better to promote the brands properly to the distribution partner and customers in Indonesia. For example, currently some Indonesian customers sees non-Japanese car or component as “second grade” compared with Japanese brand.3. To play a significant role as second-tier or third tier supplier, a good market penetration strategy can come in the form of opening representative office or partnering with qualified local player, depends on the products and target market.4. Proper pricing strategy and proper market research at the targeted parts segment ideally shall be done before entering the market to maximize the result with minimum “trial & error”. 22
  23. 23. 1 Indonesia Automotive and Component Market Overview2 Opportunities and challenges for Malaysian companies3 About Frost & Sullivan 23
  24. 24. About Frost & SullivanFounded in 1961, 48 years of experience: The growth partnership company - Growth Consulting: customized growth research and consulting servicesExclusively - Growth Partnership Service: unlimited access to research findings, events and our analystsfocused - Growth Excellence Matrix: dynamic performance tracking vis-à-vis key competitorson growth - Growth workshops: interactive sharing of best practices and validating of strategiesGlobal - Over 1700 consultants and analysts across 36 global locations, covering 6 continentsPresence, - Partner with over 10,000 clients worldwide, including emerging companies, governments,Perspective, the global 1000 and the investment communityCoverage - Continuous monitoring of 10 industry verticals and 32 markets, globally and regionally360 degree- •Markets Skilled & experienced growth resource teamsperspective •Technology Market analysts Economic analysts •CustomersResearch Industry researchers Best practices trainers •Competitorsprocess & •Regulations Technology analysts Financial analystscapability Proprietary approach Strategy consultants Growth consultants •IndustriesValued opinionleader in localand globalMedia 24
  25. 25. For Additional Information Dewi Nuraini Corporate Communications Indonesia Phone : (021) 571.0838 / 571.3246 Email : 25
  26. 26. Thank You!