Russell Skelton, Tokyo – The bitter trade dispute between Japan and Indonesia over President Soeharto's controversial national car project has taken an unexpected turn.Japanese car makers, furious at the concessions handed out by the President to a company controlled by his third son, "Tommy" Mandala Putra, to build the 1.5-litre Timor, are determined to force the same deal for themselves.

They are preparing to lift the local content on their vehicles in an attempt to force President Soeharto to extend to them tax breaks granted to the Timor, Indonesia's so-called national car.

Toyota and Honda have both indicated that they will boost investment in Indonesia to lift local content on rival models to 60 per cent, the same level as the Timor - a hybrid built by South Korea's Kia Motors.

Japanese executives believe the President is unlikely to cave in to pressure from Japan, Europe and the US to drop tax breaks which have allowed the Timor to undercut rival models by 50 per cent.

But, in other developments, it appears the controversy over the Timor may be resolved in the marketplace. Since September, Japanese car makers claim only 7,700 units have been sold.

The Timor is believed to have lost much of its appeal with consumers after Timor Putra was forced to import the first batch of cars from South Korea. Thousands are now stored in the tropical sun by Jakarta's international airport.

Timor distributors are said to have lowered sales projections from an initial 4,000 vehicles a month to 3,000. Timor Putra has announced that it will begin assembling Timors in Indonesia in April in a borrowed plant.

But the haphazard planning and the failure to construct the plant on time is said to be complicating production schedules and allowing rival makers to come up with new models.

A consortium led by the President's second son, Bambang Trihatmodjo, and Hyundai plans to market a car only 25 per cent more expensive. The preferential treatment dispensed to Putra Timor is the subject of a World Trade Organisation investigation following complaints by the US, the EU and Japan. [Signpost] This material is subject to copyright and any unauthorised use, copying or mirroring is prohibited.