Sign in to follow this  
NINETY EIGHT REGENCY

Indonesia: GM's next big market?

1 post in this topic

Indonesia: GM's next big market?

Rising middle class, ready credit opens market for autos

BY TIM HIGGINS

FREE PRESS BUSINESS WRITER

JAKARTA, Indonesia -- While the U.S. government's majority ownership of General Motors may prove uncomfortable in some parts of the world, President Barack Obama's involvement with the Detroit automaker is a selling point in Indonesia.

Chevrolet salesmen in Jakarta, the capitol city of the world's fourth-largest country, say customers are clamoring for the new Chevy Cruze small car, in part, because of a belief that Obama likes it.

Obama, who lived in Indonesia as a child, has given some attention to the vehicle following GM's trip through government-backed bankruptcy, visiting the Lordstown, Ohio, plant that will make the car for the U.S. market and signing a Cruze hood. "The car of the future," he wrote.

"President Obama signed the car. ... This makes it kind of interesting to customers," M. Juansyah, 30, a Chevrolet salesman, said through an interpreter. "It showed that President Obama himself is interested in buying this car. So why don't you? ... Obama is very well known here."

It's the kind of help GM is sure to welcome as it aims to capture at least 10% of the Indonesian market, which is viewed as holding the potential to substantially increase the automaker's overall sales and help boost the bottom line.

GM's share here last year was just 0.5% in a market that's grown tenfold over the past decade, to more than 483,000 sales last year. In five years, it's projected to near 1.3 million.

While GM is mum about its expansion plans, Jakarta locals say GM is considering reopening an assembly factory in the country.

Tim Lee, president of GM International Operations, said there's a lot of opportunity in Indonesia. "I'm very, very optimistic," he said.

Indonesia sets record pace for car shopping

Standing outside a Chevrolet dealership on a congested road here, 29-year-old Ronaley Suhendra admired the new Chevy Captiva SUV that he purchased.

He wanted something with more room for his growing family after getting married a few months earlier. The marketing executive from an IT company liked the vehicle's size, interior and reputation for reliability.

"Chevrolet is a Western car," he said proudly of the vehicle that cost him 320 million Rupiahs, or about $34,500. He financed the purchase, saying it was easy to find a loan.

"Chevrolet is a very, very good brand," he continued. "Every model is very good."

As Indonesia's political and economic environment continues stabilizing, the world's fourth-largest country is expected to see explosive growth in auto sales.

Auto sales shot up to more than 483,000 last year, from 58,000 in 1998, according to the Association of Indonesia Automotive Industries. The group predicts an auto sales market approaching 1.3 million in 2015, which would put it nearly on par with Russia's new vehicle market last year.

GM aims to capture 10% of that growing market, and Indonesians interviewed during a recent visit spoke fondly of GM vehicles, often commenting on their styling and their perceived prestige of the brand.

The one concern raised by Indonesians was about repair costs of GM vehicles and the perception that it would be easier to find parts to fix a Toyota, the dominant player here.

Salesmen at the Chevy dealership acknowledged hearing such concerns and said they're trying to combat those perceptions with vehicles loaded with extra content and assurances to customers that GM is expanding in Indonesia.

"A huge concern in any emerging market is the repair costs," Tim Dunne, an expert on the Asian auto industry at J.D. Power and Associates, said. "Where am I going to get spare parts when this thing breaks down, and how much are they going to cost?"

Tough competition

Those are just some of the challenges that GM and Ford face as they fight to gain market share in Indonesia.

Ford re-entered the Indonesia market in 2000 after a local distributor stopped selling the Dearborn automaker's vehicles during the Asian financial crisis in the late 1990s that led to a financial meltdown of several Asian countries and impacted economies around the world.

"There were no dealers left, it was nothing. It was a clean sheet of paper," Will Angove, president of Ford Motor Indonesia told the Free Press in an interview from his Jakarta offices.

Ford's 35 dealerships in Indonesia sold 6,477 vehicles last year. Its best-selling vehicles in Indonesia are the Ford Ranger 1-ton pickup, which makes up 70% of sales, and the Everest, a midsized SUV based on the Ranger platform.

Prices start at $13,000 for the Ranger and $25,000 for the Everest.

GM, meanwhile, has 33 dealerships in Indonesia that sold 2,616 vehicles last year. Through the first quarter of 2010, GM already had sold 1,000 vehicles, capturing 1% of the market, according to J.D. Power and Associates' data.

"We're very underrepresented share-wise. ... We should be ... at least 10%," Tim Lee, president of GM International Operations said.

The Detroit automakers face stiff competition from Toyota, which held 58% of the market through the first quarter of this year, according to J.D. Power. Toyota has 195 dealerships in Indonesia, according to the company.

The market's top seller was the Toyota Avanza. Customers bought 34,978 in the first quarter, a gain of 62% compared with the same period last year.

Indonesia stabilizes, grows

In comparison to nearby Thailand, which for years has enjoyed a stronger auto industry for years, Indonesia's political situation has become much more stable. That has allowed the economy to rebound.

"There's a stable democratic government in place, which is in its second term. ... Interest rates are at an all-time low," Angove said. "People are feeling pretty good about things."

Jim Castle, a Jackson native who is now a prominent consultant in Jakarta helping Western businesses operate in the country, expects consumers to purchase 650,000 cars this year.

"The reason it is growing is very simple: the availability of consumer financing and the growing middle class," he said. "Prior to the collapse of the Asian crisis, 80% of cars were bought with cash. ... Today, about 60% to 70% of cars are bought on credit."

There are dangers in the market, however. Jakarta's infrastructure is struggling to keep up with development. Roads are clogged with traffic, causing short trips to take hours.

History also shows that the Indonesia market, like many emerging markets, can be volatile. Consumers purchased 58,000 passenger cars in 1998 -- and 387,000 the year before. Nevertheless, J.D. Power is optimistic about Indonesia. "We expect sales to grow strongly in the next few months, thanks to the economy showing some stability and growth," a note to clients said in April.

A lot of the growth in the passenger car market is in the compact and midsize car segments, which were up 555% and 422%, respectively, in March alone, according to J.D. Power data.

So Ford thinks launching the small Fiesta this summer will help broaden its appeal.

The bulk of the Indonesian market for new passenger vehicles is for cars priced under 200 million Rupiahs, or about $20,000, Angove said. The Fiesta will be priced less than that.

"That's what we're excited about. We're getting into a much more value-for-money segment ... which allows us to build our market share," he said.

GM, too, is working to expand its product lineup, adding vehicles such as the Captiva and Cruze, which sells for about $33,000, appealing to young executives.

Chevy dealers told the Free Press that consumers were beginning to see more vehicles as being affordable to them.

link:

http://www.freep.com/apps/pbcs.dll/article?AID=/20100601/BUSINESS01/6010325/1331/business01/Indonesia-GMs-next-big-market&-Cruze-hot-here&template=fullarticle

Share this post


Link to post
Share on other sites

Your content will need to be approved by a moderator

Guest
You are commenting as a guest. If you have an account, please sign in.
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoticons maximum are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Sign in to follow this