Indonesian automotive manufacturing sector:

The automotive industry of Indonesia has become an important pillar of the country's manufacturing sector. Attracted by low per capita-car ownership, low labor costs and a rapidly expanding middle class, various global car-makers (including Toyota and Nissan) decided to invest heavily to expand production capacity in Indonesia and may make it their future production hub. Others, such as General Motors (GM) have come back to Indonesia.

Moreover, Indonesia experienced a remarkable transition as it evolved from being a merely export oriented car production center (especially for the Southeast Asian region) into a major (domestic) car sales market due to rising per capita GDP. Indonesia accounts for about one-third of total annual car sales in ASEAN, followed by Thailand on second position. Indonesia not only has a large population (264 million inhabitants) but is also characterized by having a rapidly expanding middle class. Together, these two factors create a powerful consumer force.

Government developments plan for automotive industry:

The Indonesian government is eager to turn Indonesia into a global production base for car manufacturing and would like to see all major car producers establishing factories in Indonesia as it aims to overtake Thailand as the largest car production hub in Southeast Asia and the ASEAN region. On the long-term, the government wants to turn Indonesia into an independent car manufacturing country that delivers completely built units (CBU) of which all components are locally-manufactured in Indonesia.

The Indonesian government also has high hopes for the country's car exports (thus generating additional foreign exchange revenues), particularly since the implementation of the ASEAN Economic Community (AEC), which turns the ASEAN region into one single market and production area. The AEC and incoming implementation of Euro4 Emission Standards should unlock more opportunities for exporters as it intensifies regional trade.


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