World Economy

Indonesia Can Be ASEAN’s Car Production Hub

Indonesia Can Be ASEAN’s Car Production HubIndonesia Can Be ASEAN’s Car Production Hub

Indonesia has the opportunity to become an automotive production hub for the ASEAN and gradually replace Thailand as a car production base, according to the Ipsos Business Consulting Firm.

“This is evident from the output trend of vehicle production, policies, and infrastructure, which continue to undergo improvements followed by increasing production capacity, domestic consumption, and export volumes,” Marcus Scherer, head of the Global Automotive Sector of Ipsos Business Consulting, stated here on Wednesday, Antara News reported.

Marcus hoped that the policy makers and stakeholders as well as automotive producers would consider this aspect as it will have a major impact on the supplies of automotive spare parts in the future.

So far, Thailand has been the largest automotive producer in Southeast Asia, with an annual production of some two million cars as compared to Indonesia, which produced only some 1.1 million units in 2015.

Indonesia has not yet been able to be at par with Thailand in developing its export market. It exported only some 23% of its domestic production in 2015, while Thailand was able to export some 55% of its domestic production.

In 2015, the production gap between the two countries was some 810,000 units, but in 2020, the gap is expected to narrow to 464,000 units only.

In order to take over Thailand’s position as the number one car production center in the ASEAN, Indonesia should be able to overcome the production gap through various combinations of solutions, Marcus stressed.

The solutions should encompass increasing the production capacity of factories. In 2015, Indonesia had a production capacity of two million units of which only some 62% was utilized. Therefore, Indonesia should increase its follow-up investment to nearly $2.6 billion for constructing new factories or for increasing the production capacity of the existing factories based on the assumption that utilization would remain unchanged.