The Indonesian Automotive Industry Association (Gaikindo) has indicated that the complete import of commercial vehicles (Completely Built Up/CBU) is causing substantial pressure on the local industry. This was highlighted during the International Commercial Vehicle Exhibition (GIICOMVEC) held in Jakarta, where the association's Secretary General, Kukuh Kumara, noted that these practices lead to unfair competition and negatively impact the utilization of local factories.
Kumara explained that the local industry is capable of meeting market needs through domestic products, with current production capacity reaching 2.59 million units annually. However, actual production ranges between 1.3 million and 1.4 million units, with sales hitting 1.2 million units per year. Nevertheless, the utilization level of factories in the commercial vehicle sector does not exceed 40% to 50% of their production capacity.
Event Details
During the exhibition, Kumara pointed out that the influx of competitively priced imported vehicles affects the ability of local companies to compete, as these vehicles are produced in large quantities in their countries of origin, making them cheaper. He confirmed that this situation has led to a decline in vehicle sales in Indonesia, dropping from 1.2 million units to approximately 803,000 units by 2025.
He also added that this sales decline has impacted various aspects of the industry, including local suppliers and maintenance workshops, further complicating the economic situation of the sector.
Background & Context
The automotive industry in Indonesia is considered one of the essential pillars of the national economy, contributing about 1.28% to the Gross Domestic Product (GDP). However, the challenges facing the industry, including a decline in consumer purchasing power, have led to a drop in sales. In recent years, Indonesia has experienced increasing competition from neighboring countries, such as Malaysia, which has now surpassed Indonesia in vehicle sales volume.
Historically, Indonesia ranked first in the automotive market in the ASEAN region, but economic and political changes have led to shifts in this ranking. Global trade policies have also affected Indonesia's ability to maintain its market position.
Impact & Consequences
The repercussions of importing commercial vehicles extend beyond manufacturers, affecting local suppliers and maintenance workshops as well. With declining demand, these companies may face financial difficulties, potentially leading to job losses and increased unemployment rates in the sector.
Additionally, the decline in consumer purchasing power in Indonesia complicates the situation further, as the drop in sales reflects consumers' inability to purchase new vehicles. This scenario may exert additional pressure on local manufacturers, making it challenging for them to compete with the lower prices of imported vehicles.
Regional Significance
The automotive industry is a vital sector in many Arab countries, playing an important role in their economies. The challenges faced by Indonesia may be similar to those encountered by some Arab nations, where importing low-priced vehicles could impact local industries. Arab countries should learn from Indonesia's experience and work to strengthen their local industries through support and the provision of a competitive environment.
In conclusion, the current situation in Indonesia's automotive industry requires swift action from both the government and the industry to enhance competitiveness and improve the economic conditions of the sector.