1) Indonesia's automotive components industry is less competitive than Thailand's due to inefficiencies in its industrial structure and incomplete supply chain integration. Thailand outproduced Indonesia in vehicle production in 2011 and has a more robust domestic components sector. 2) The Indonesian government has received 18 proposals worth $1.26 billion from global automakers to expand local components and vehicle assembly industries in an effort to strengthen the domestic industry and reduce imports. 3) Incentives like tax breaks aim to attract more investment in components manufacturing to support increased local production by automakers' plants and close Indonesia's competitiveness gap with regional rivals like Thailand.

1. JAKARTA: JAN 2012
Indonesia automotive components industry is less competitive compared to Thailand as the nearest
competitor countries.
It’s less competitive due to several factors like inefficiency and incompleteness of its industrial structure.
Therefore, Indonesia may have difficulties in narrowing the gap on four-wheel vehicle production from
Thailand.
According to the report from The Thai Auto-Parts Manufacturers Association (Tapma) obtained by Bisnis,
Thailand ranked in 13th position in term of car production globally as much as 1.45 million units
throughout last year, while Indonesia stayed at 19th spot with production of 837,948 units.
In the report analysis, the country’s complete supporting industrial facilities supports Thailand car
production, which is integrated with assembler companies in one special area.
Thus, component import can be reduced significantly as almost all the needs of general and main
components have been fulfilled domestically.
The number of components companies in Thailand reached 2,373 companies in 2011 or 11.26% higher
compared to 2,133 companies, including the 102 companies that hits by floods in July 2011.
From the total companies, 1,641 small and medium-scale companies engages in tier 1, 2, and 3. Tier 1
industry is core component sector, tier 2 is complement, and tier 3 is addition.
Meanwhile, 709 large-scale components engage in tier 1, 2, and 3. All Thailand component companies
are the supplier for 23 manufacturers (sole agents) in those tiers.
The number of components companies in Indonesia is smaller or 6.53% from the total components
companies in Thailand. According to the Association of Car and Motorcycle Equipment Industries
(GIAMM), the number of its members reaches 155 companies this year.
Far from ideal
Head of GIAMM Hadi Surjadipradja said the number of domestic industrial components, although has
been calculated by the Ministry of Industry, is far from ideal calculation.
His statement is in line with the data from Central Agency of Statistics. The import value of motor vehicle
and spare parts jumped 34.2% to US$7.71 billion in January-November 2011 compared to US$5.73
billion in the same period 2010.
In order to reach the ideal population scale, Indonesia needs at least 2,395 companies to reduce import.
Such calculation includes 245 companies in tier 1, 950 companies in tier 2, and 1,200 companies in tier 3.
“In term of industrial structure, our components sector is still not complete so that it creates many gaps.
It’s different with Thailand, which is relatively more complete. Therefore, this sector needs new large
investment to increase it,” he said yesterday.
In term of labors, Thailand components industry is more efficient compared to Indonesia. According to
Tapma, Thailand only needs 457,143 labors for 2,373 companies in the country.
Meanwhile, based on the data from the Ministry of Industry, the total labors in 800 components
companies outside GIAMM reached 646,500 labors. Thus, each component industry in Indonesia
employed 808 labors, while Thailand 193 labors in each companies.
Tapma Vice President Achana Limpaitoon through his analysis said Indonesia will become the largest
competitor for Thailand in components sector as the country’s political stability and investment continues
to improve as well as lower labor wages compared to Thailand.

2. Currently, Thailand components industry is less conducive since Thailand automotive principals urged the
government to cut vehicle import duty. (t06/msw)
JAKARTA: The government received 18 proposals from global automotive principals, for expanding
into components and assembling industry worth IDR1.26 trillion.
The Ministry's Director General of High Technology-Based Superior Industry Budi Darmadi said
those foreign investors are eyeing Indonesia as the future production base in automotive supporting-
industry starting this year.
The government’s plan to strengthen automotive components industry is expected to increase
investment in the motor vehicle assembling industry, which used 93.11% of its installed capacity last
year.
In 2011, car assembling industry has produced 837,948 units from the total installed capacity of
900,000 units per annum.
“Currently, there are 18 proposals for investing in components and assembling industry. Some of
them comes from US companies with total investment of IDR1.26 trillion,” he said yesterday, without
detailing the names of the companies.
Thailand is also interested to invest US$1.5 million in motor vehicle spare parts and components
industry. However, he declined to provide further detail regarding the component subsector that
Thailand and the US investor will develop.
Such investment may be used to develop the industry of fast moving components like filters, tire and
rubber parts, electric components, safety glass, air conditioning, compressor and evaporator,
radiator, battery, and car interior.
The automotive supporting industry is currently classified into tier 1 (core components), tier 2
(complements), and tier 3 (additions). The automotive downstream industry supplied 12 assembling
plants in Indonesia owned by companies from Japan, Korea, and Germany.
The government believes the expansion plan on domestic components industry is a serious matter
as the automotive principals had made careful consideration to make Indonesia as its production
base for automotive domestic and export.
“When automotive principals consider to build its production base, it means they are sure that the
country has spare-parts supply and supporting facilities for 10 years, apart from assessment on the
good prospect and stable economic outlook,” he said.
Various incentives
In order to develop motor vehicle components industry further, the government is intensively
providing various incentives in form of income-tax exemption through the government regulation No.
52/2011 as revision of regulation No. 62/2008.

3. The export-import ease based on Finance Ministry Decree No. 580/KMK.04/2003 as well as No. 176
/KMK.011/2009 about import duty exemption on machinery, goods and raw materials for establishing
the development of industry in the framework of capital investment.
The government also provided facility in form of human resources development through technical
trainings in manufacturing components.
The Association of Indonesia Automotive Industries (Gaikindo) predicted automotive-supporting
industry (spare parts), equipments, and sales-chain will add up investment at least IDR9 trillion this
year.
The component sector development is considered as integrated step to support the investment
realization of assembling plant in Indonesia owned by global automotive principals.
The data from Indonesian Automotive Parts & Components Industries Association (GIAMM) shows
the number of supporting industries is currently reaching 155 companies, i.e. 92 foreign companies
and 63 local companies. (t06/ags)