Faisal Maliki Baskoro – With car sales set to hit a new record of one million units this year, more than double the amount just eight years ago, the rapid growth is not being matched by sufficient infrastructure development, the industry association said earlier this week.
In the past five years, the automotive industry expanded faster than manufacturing and for the economy as a whole, according to the Association of Indonesian Automotive Manufacturers (Gaikindo).
"The automotive industry growth is a blessing to us all because this sector now is among the largest contributors in tax revenue," said Johnny Darmawan, a member of the Gaikindo leadership board.
The association noted that in 2010, the automotive industry contributed Rp 80 trillion ($8.4 billion) to the country's tax revenues and the figure could be even bigger if added to by related industries like parts, components, car leases and financing.
In the same year, the automotive industry grew by 10.1 percent and shared 6.5 percent of the gross domestic product.
New car sales increased by 17 percent to 894,000 units in 2011 from the previous year and the figure is expected to reach a milestone of one million this year, according to Gaikindo data.
This target looked set to be fulfilled as sales already reached 630,000 units in the first seven months of 2012, representing a 26 percent rise from the comparable period last year, despite a regulation in June that raised the minimum down payment for car purchases on credit.
"With a big population and people's annual purchasing power above $4,000, we believe that Indonesia is going to be Southeast Asia's largest automotive market in the near future," Johnny said.
India's Tata Motors, which opened its local branch here just recently, also pinned hopes of acquiring a slice of the pie from the rapidly growing automotive market in Indonesia.
Automobile ownership in Indonesia is low at 40 cars for every 1,000 persons, compared to 140 cars for 1,000 people in Thailand and 300 in Malaysia, Tata Motors Indonesia president Biswadev Sengupta said in an interview at the Indonesia International Motor Show in Jakarta on Friday.
However, infrastructure continues to loom as the weakest link in the overall automotive industry.
According to Gaikindo's latest data from 2006, Indonesia's total toll-road length has increased by a mere 75 kilometers since reconstruction began in 1983, and that growth has been restricted to Java. That distance is equivalent to travel from Jakarta to Cikampek, a small town in West Java.
In the capital, according to a government survey, the average car speed was 8.3 kilometers per hour in 2010 due to traffic congestion.
Industry Minister M.S. Hidayat admitted that the gap between automotive growth and infrastructure development has caused massive traffic jams in cities and seaport areas.
"It's impossible to stop [car] production to deal with traffic jams. What the government can do to help is by infrastructure development. And car sales should not mainly focus on Greater Jakarta. I'm confident that we can solve this problem without compromising car production," he said.
The Ministry of Public Works has planned a budget of Rp 7.94 trillion to build 840 kilometers of new roads next year. The amount represents around 10 percent of the country's tax revenues from the automotive sector in 2010.
Poor infrastructure is also hampering the government's efforts to promote environmentally friendly and fuel-efficient cars, such as those powered by natural gas.
Autogas Indonesia, the main distributor of a device designed to convert engines using compressed natural gas from gasoline, said many car owners are eager to install the converter kits, but the company doubts that there will be enough natural gas stations to meet demand.
"Many people have installed the converter kits on their cars, but they are public transport or private cars," said Autogas business development manager Christianti. Company data show, though, that there are only 21 natural gas refilling stations available, mainly in Jakarta.
Christianti said she hoped the government would build more natural gas stations because the company was now competing to win a government contract to supply 14,000 cars with converter kits.
"Compressed natural gas is priced at only Rp 3,100 per liter while compressed liquid petroleum gas sells at Rp 3,600 per liter. The mileage is roughly the same as gasoline, about 10 kilometers for one liter," she said.
Tata Motors also might delay its plan to sell its CNG-fuled cars in Indonesia. "Before we sell Tata Nano CNG here, we need to make sure that the necessary infrastructure is available," Biswadev said.