Indonesia aims to export more cars to Australia

Indonesia hopes to increase exports of cars to Australia and overtake Thailand following the signing of a free trade agreement between the two countries.

With Australia not producing its own vehicles, there is an opportunity for Indonesia to increase their market share, particularly with Chinese and Indian manufacturers struggling to make significant inroads into the Australian market.

The new agreement could also boost Indonesian exports of electric and hybrid cars to Australia, with zero preferential tariffs.

Last year, just 10,500 vehicles from China were sold and only 4,458 from India. However, that is a much higher number than Indonesia’s current exports to Australia. VFACTS sales data shows just one Indonesian vehicle sold in Australia in 2018, illustrating the scale of the opportunity Indonesia has to increase sales.

Indonesia’s car makers mostly assemble Japanese and South Korean vehicles and then export them abroad. The Indonesian motor industry currently exports 300,000 units each year, more than it imports.

It also has the largest market in South East Asia with export sales up seven percent in 2018 to 1.15 million, a quarter of which are commercial vehicles.

The chairman of the Indonesian Automotive Manufacturers Association, Johannes Nangoi said that with Australia no longer producing cars he hoped Indonesian car-makers can benefit from exporting SUVs to Australia duty-free.

“We hope to start exporting to Australia after the agreement is signed,” Mr Nangoi told The Australian newspaper.

He said that with Indonesia “geographically closer” to Australia than Thailand, which currently exports 300,000 vehicles to Australia each year, he hoped the free trade agreement could mean Australia invests in Indonesia so the two countries “could work together to produce cars to be exported to a third country”.

The Indonesian market is dominated by Toyota who sold 350,000 vehicles in 2018, followed by Daihatsu with around 200,000, Honda 160,000 and Mitsubishi with 140,000 units sold.

Investment in the Indonesian motor industry is also growing. Toyota is putting $1.9 billion towards increasing its production capacity in Indonesia for exporting cars and Mitsubishi is also investing in production capacity.

Toyota is the most popular manufacturer of cars for Australia with a 17.5 percent share of the Australian automotive market, selling around 200,000 cars each year.