Indonesian Automotive

Aftermarket
Opportunities
Looking at potential Australian export opportunities in the
Automotive Aftermarket in Indonesia
Part 1 Part 2
1. Industry Background 1. Perception of the Indonesia
2. Population Aftermarket
3. GDP 2. Current Export Markets &
4. Income Statistics Capabilities
5. Demographics 3. 4x4, Retail & Service Market
6. Indonesian Car Market Data 4. Localisation Areas
7. Government Policies/Duties 5. Trade Shows
6. Importation & Distribution
Strategies
7. Opportunities & Challenges
8. Summary
9. Next Steps
10. Contact Information
Industry Background
The Indonesian motor industry has had a long and
often difficult history. The industry has never had an
indigenous car manufacturer. Rather it has relied on
either the importation of Completely Built Units
(CBU’s); Completely Knocked Down units (CKD’s) or
semi knocked down vehicles that had been designed
and engineered in other countries.

Throughout the 1950’s and up to the early 1970’s.

substantial volumes of Australian made cars
(Holdens and Fords) were exported to Indonesia.

There is still a small sector that values cars from

that era and spend money modifying their cars.

Since the 1970’s the predominant vehicles in the

markets have become Japanese brands, in
particular Toyota. The Kijang (a 2WD SUV-type
vehicle) has been the biggest seller in the
Indonesian market for over 20 years.

In the 1990’s the Government attempted to start an

indigenous car Company with the help of a number
Holden owners club gathering in Jakarta. of Australian companies. This proved
unsuccessful. Currently there are renewed efforts
in this regard.
 Population
The total Indonesian population is heavily
centered on the island of Java.

Approximately 115 million people (approx.

50% of the total population) live on Java.

Major cities include:

Jakarta 10 000 000

Surabaya 2 800 000
Bandung 2 400 000
Bekasi 2 400 000
Tangerang 2 000 000

Estimated Population (2011) 245 million

Estimated Labor Force 117 million

Estimated Urban Workforce 59 million

Source: Madison Cross
2012 Indonesian Study Market Analysis
GDP

GDP 2011 in USD billions

Source: World Bank

GDP 2011 in USD billions

Source: World Bank
 Indonesian Income Statistics
Income Distribution
The previous tables highlight the growth
of Indonesian GDP and the level of per
capita income. What is also important is
the distribution of income. The table
below indicates income per household
data:
The significant observation from the
table is the large number of households
estimated to be at the or above $5000
per annum income.
The $5000 income level is generally
considered to be the take off point for
car ownership.

2011 2012 2013 2014 In addition, households above $10 000

No. of Households
64 226 65 146 66 078 67 023
and above $50 000 income per annum is
(‘000)
also increasing at a significant rate. It is
No. of h’holds with
annual income 16 082 18 534 21 003 23 793
to expected that people in these income
>$USD5 000 (‘000) levels will be driving demand for after
% of Total Households 25% 28.5% 31.7% 35.5% market car parts and accessories in
order to differentiate their vehicles from
> $10 000 (‘000) 3 279 3 854 4 466 5 201 all the other similar vehicles on the
> $50 000 (‘000) 32 46 61 79 road.

Source: EIU Automotive Forecasts, 2010

Demographics
Of the total Indonesian population, the Indonesia is continuing to invest in
following are important: education. At 2010 the following table
highlights the numbers of people with
Age Group Total Urban % Urban respective levels of educational
attainment:
15-24 40 768 000 21 653 000 53%

25-35 41 208 000 23 992 000 58% Level Attained # (millions)

Source: Madison Cross Completed Secondary 18.82

2012 Indonesian Study Market Analysis
Completed Diploma 1.89
These figures indicate a large and mainly
Undergraduates 3.10
urban group that will drive demand for
motor vehicles in the next 10 years. Post Graduate 0.24

15-24 year old Literacy Level 98.57%

In addition, there are large numbers of Source: Madison Cross

children in the 5-10 years age grouping. 2012 Indonesian Study Market Analysis

These will further drive demand in the next

20 years.
Demographic Highlights
1. Indonesia is a large economy in terms of total GDP

2. It is the 15th largest economy in the world with a per capita GDP greater than India

3. The economy is growing strongly and the country is undergoing significant change

4. The country has a high percentage of the population in the under-35 age category. It is
this group that will drive demand for consumer goods, including motor vehicles

5. Whilst still strongly rural, there is a large and growing urban class

6. Indonesia continues to value and invest in education

 Indonesian Car Market
Total Indonesian car sales are
presented in the table below:
Source: Madison Cross
2012 Indonesian Study Market Analysis
ASEAN Comparison
Source: Madison Cross
2012 Indonesian Study Market Analysis
It has been widely estimated that the Indonesian market will grow by up to 50% in the next 5
years indicating a total market of approximately 1.5 million per annum.
Future OEM expansion plans :
• GM will re-open an Indonesia plant to
build a new small MPV by March 2013.
• Nissan to double capacity of its plant in
Indonesia to produce its Juke SUV with a
capacity of up to 100,000 vehicles by 2013.
• Suzuki to invest US$440 million in
increased production capacity to 180,000
vehicles.
• Toyota to invest in a new plant by 2013
with a production capacity of 70,000
vehicles.
• A new Astra Daihatsu Motors (ADM)
facility under construction.
Car Population
The current Indonesian car parc is estimated at approximately 11.25 million. Current
vehicles per 1000 head of population is estimated at 32 per 1000.

The major concern in Indonesia relating to vehicle population growth is predominately

focused on infrastructure. The roads in many regions are well below acceptable
international standards, and traffic in cities like Jakarta is already at choking levels.

By comparison other markets are:

The data highlights the significant

potential growth in the market, on an “all
things being equal” basis.

Clearly income level; infrastructure;

availability of finance and other factors
will impact the total potential ownership
rates.

Source: Madison Cross

2012 Indonesian Study Market Analysis
The Indonesian Car Market
Observations:

1. MPV is the largest and fastest growing segment of the Indonesian market

2. MPVs are mostly 2WD, however 4WD variants are available

3. MPVs are favored because of:

a. Low price
b. Safety because larger
c. Able to accommodate larger Indonesian families
d. Can have a multi-use; e.g. larger enough to be used for transporting goods

4. Most MPVs are Japanese designed and engineered, with Toyota the predominant
supplier
Indonesian Car Market
Indonesian Car Sales by Type

Source: Madison Cross: 2012 Indonesian Study Market Analysis

The significant observation from the table above is the very high proportion of
vehicle sales accounted for by 4x2 MPV and SUV.

This category has always been predominant in the Indonesian market through
the ubiquitous Kijang. Over the last few years, however, most other
manufacturers have released vehicles in this segment and the segment has
continued to grow.
 Top Models: 2011 Source: Madison Cross
2012 Indonesian Study Market Analysis

Model Description
Description 2011 Volumes 2010 Volumes

The new Kijang. Sold

throughout SE Asia & the
Middle east
Government Policy/Duties
• Currently duty on imported parts ranges from 0% to 40% duty. The Government has
committed to working towards a 0% tariff on all auto parts imports by 2020.

• In addition, there is a VAT of 10%.

• Importation is quite easy, although a local partner is preferred.

• In order to minimise duties, it is quite common for parts to be transshipped through

Singapore. Duties between Singapore and Indonesia are currently zero. There is a
well established infrastructure that can facilitate these movements.

• Whilst not officially condoned, it is quite common to make facilitation payments at

the border in order to expedite the processing of all necessary paperwork.
The Indonesian Aftermarket
Discussions were held with various parties in the Indonesian auto sector. They were
asked to give their opinions on which areas people spend money on their vehicles
post-purchase.

In order of importance, these were:

1. In Car Entertainment
2. Wheels and, to a less extent, tires
3. Window tinting
4. Cleaning and polishing material
5. Oil, Lubes & Additives of various types: engine cleaning; engine performance;
others
6. Suspension and brakes – 4x4/SUV Focused – Growing fast
7. Various body parts: skirts; dams; wings; mirrors etc
8. Increased performance: including, filters; engine parts; tuning; etc.
9. There is a small but growing segment of the market that spends in serious
performance modifications
10. There is a developing car racing market. Preferred racing is: off road/rallying; drift;
drag and circuit
PART 2
Indonesian Automotive Aftermarket Opportunities
Current Perception of the Indonesia
Aftermarket by Victorian Manufacturers
AAAA interviewed 9 Victorian based Auto Aftermarket manufacturers about their
impressions of the Indonesian aftermarket. They saw the aftermarket in Indonesia as:

• An immature market which is growing and evolving, and could potentially lead to a
substantial boost in sales (estimates ranging from 10% - 50% increase) if executed
correctly
• A very competitive and price conscious/driven market
• A new, up-and-coming region
• They see demand increasing due to the advent of online sales and market place
• Pick-up/4WD & SUV markets offering huge opportunities
• The emergence of for new niche market opportunities (i.e. High Performance &
Motorsport)
Current Victorian Manufacturers Export
Markets & Capabilities
Around 75% of companies interviewed Products currently exported include:
currently see The US as one of their primary
export markets. 62% mentioned Asia  Engine Cooling Systems
(Thailand, China, Laos, Malaysia, Korea,  Superchargers
Taiwan, Philippines, Vietnam, Cambodia), 58%  Dynamometers
said Europe (Germany, Belgium, UK, Italy,  Shocks absorbers and springs
France) and, and 42% said the Middle East as  Oils and lubes
one of their primary export markets.  Suspension bushings
 Roll control products
 Hose products (radiator/engine)
Companies perceived Asia (specifying China,  4WD parts and accessories
India and Thailand) as the area with the
greatest potential export growth markets, due
to the large population sizes and growing
aftermarket demand. Many companies
mentioned the opportunities within niche
markets within the Asian and ASEAN regions.
 Victorian exports into
Indonesia
• Of the Victorian manufacturers interviewed, there is currently limited regular exports
into Indonesia

• Manufacturers mentioned a few small ad-hoc, one off sales or sample orders on a
case by case basis, with customers contacting them directly via the website saying the
market was “very opportunistic”.

• There have been stories around the local industry of orders being sent, only to be
returned due to high duty rates. This is likely to be a rare scenario.

• Some also mentioned other regional customers sells their products into Indonesia
directly, hence it is difficult to quantify sales directly into this market.

• A number of companies have had mixed success in the Indonesian market, with one
of our major exporters previously had Indonesia as their largest export market, before
a variety of factors meant, now the market isn’t in their top 10.
Overview – Aftermarket in
Indonesia
• From a terminology perspective, in Indonesia, the Auto Aftermarket is called “imitation”.
This isn’t meant as a derogatory statement, mearly an English translation of equivalent
parts. Also interestingly from a terminology perspective, even modification parts like
suspension components, are classified as accessories. However, there is differentiation
between high performance and motorsport parts.

• The vast majority of cars in Indonesia are Japanese with 60% made in Indonesia. There is
still a strong (yet diminishing) European influence on the car parc in Indonesia, however
Korean vehicle sales are growing quickly. More so than in many other global markets,
Korean cars are perceived to be very low quality, however this perception is changing
rapidly. The influence of Chinese manufactured cars like Geely and Cherry is very limited
to date.

• The market is still evolving from a majority interior accessories focus (plus wheels, tyres
and tinting) to a more mature aftermarket as seen in Australia. The first big change has
been in Suspension products. 2011-12 has seen this segment grow quickly in
prominence. Lifts of 3”-5” are not uncommon, especially amongst the passionate 4x4
community. More on this segment later in the report.
Perception of the Aftermarket
in Indonesia
• The American muscle car market is growing slowly, yet has strong growth potential.
This is mainly due to the very strong American influence on the aftermarket in
Indonesia.

• Unlike in Australia where Repair and Service chains dominate the market, in
Indonesia there is currently no such group. There are a couple of major players, very
keen though to initiate a service chain.

• The supply chain is very fragmented across Indonesia with a the majority of
distributors that supply into the retail sector being regional based. There are
certainly exceptions to this, however currently smaller regional based distributors
dominate the market.

• Significant vehicle modifications (engine, brakes, suspension etc) to vehicles used

for ‘daily driving’ is not as common in Indonesia due to strong concerns it may
impact the resale value. There is a stronger focus on aesthetic modifications (wheels
and interiors) over engine modifications.
Perception of the Aftermarket
in Indonesia
• There is a very significant brand affinity with America in Indonesia leading to a strong
preference for American manufactured products, due to the perception that if it
comes from America it is high quality. This is most evident in the 4x4 and performance
markets.

• The general perception of the Indonesian market when it comes to price is that it is a
very price conscious market, however, price is not always an issue, particularly when
it comes to modification parts. The parts have been known to command a price
premium as this can at times be seen as a status symbol.

• There was an expectation entering this market that the high performance market
would be stronger than it turned out to be. The market in Indonesia is very hard to
judge as companies stocking these types of products are limited, but slowly growing.

• In Indonesia, cars generally stay within the dealer network for 2 years, in comparison
to Australia where cars usually stay for up to 3 years. This leads to a higher demand
for independent aftermarket parts and services for newer vehicles. In an effort to
restore sales for older vehicles back through the OE dealers, Toyota is launching OE
aftermarket products for the old Kijang, termed “second class”. This is not expected to
have a major influence.
4x4 Market
• This segment of the market is the most
dynamic segment across the wider aftermarket.
There is a strong culture for off-roading in
Indonesia, with almost every major town or
city having at least one 4x4 club. There is also
ample accessible terrain for off-roading.

• Toyota is a very strong player in the 4x4 market

FJ40 Landcruiser
in Indonesia. Parts for Landcruiser FJ40, FJ60 &
Prado are the most popular. Products including
suspension, diff lockers, undercar protection,
and winches seem to be most popular.

• There isn’t an established culture of bull bar

fitment in this market. Modifications to engines
for off-road purposes is very limited in
Indonesia.

Toyota Landcruiser
4x4 Market
• The USA sourced products still dominate the
market, however ARB do have a strong presence
in many outlets.

• The high number of coal and sulphur mines, as

well as coffee, tea, palm oil and forest
plantations increase demand for 4x4 and SUV
models due to the remoteness, diverse terrain Tea Plantation - Kerinci, Indonesia
and accessibility of the locations

• One of the newer off-road clubs in Jakarta is the

Jeep XJ Owners Club. They usually go to the
nearest dedicated off-road spots Pondok Cabe in
Tangerang, Ciheuni in Serpong or Sentul City in
West Java.

Members of a Jakarta off-road club.

Retail & Service Market
• Aftermarket products in Indonesia are normally sold through retail outlets that are
independently owned. These are usually family owned and small. There are a few smaller
chains, however franchised outlets are very few.

• The retail sector in Indonesia (particularly Jakarta) is vastly different to what we see in
Australia. The Government has created regions known as ‘Localisation Areas’ where the
vast majority of automotive parts and accessories are sold.

• Each localisation area has a slightly different focus compared to others. Some purely
focus on replacements parts, others have a 4x4, or performance influence. Replacement
parts though still dominate the vast majority of outlets in any localisation area.

• The localisation areas are not simply the domain of the aftermarket either. OE parts
distributors commonly use these areas to sell direct to local workshops.
Retail & Service Market
• The most efficient manner to access the market is through wholesalers and distributors.
These tend to focus on a specific geographic location, usually one of the larger cities.

• It is estimated that there are over 12 000 outlets in the greater Jakarta region alone.
Over 90% of these are estimated to be independently owned and single retail points.
Only a relatively small number of distributors service these outlets with more and more
of them beginning to work in a quasi franchise model with either the OE vehicle
manufacturers, or major players like Astra.

• It is not expected that Victorian exporters would sell direct to any stores inside these
localisation areas, as the vast majority do not import, they rely on local distributors.
Retail & Service Market
• Another interesting element of these
localisation areas, is the fact that many
repairs and some modifications are
actually done onsite my labour that is
freely available nearby. There are
always many ‘mechanics’ available
throughout any of the localisation areas
who are willing to do any job
Work being carried out by a technician on the side of
immediately onsite. the road in Jakarta

• Some simple repairs are undertaken on

the roadside. The more complex
modifications can sometimes be done
immediately, however these are
normally completed undercover with
access to a broader range of tools and
equipment.
Localisation Areas

Localisation Areas throughout Jakarta

Localisation Areas

Muzatec localisation area was one of the

original and largest of this type focusing
predominately on retail cash business, rather
than service work.
Trade Shows
• One of the largest trade shows in South East
Asia, INAPA, was run in Indonesia in late
March 2012. During the trip to Indonesia,
AAAA attended INAPA, and also met with
leading aftermarket retailers, workshops
and distributors.

• In 2011 INAPA attracted 602 exhibiting

companies from 21 countries, 37,100 trade
Australian companies exhibiting at INAPA 2012
attendees and occupied total area 33,000
sqm. These figures are up 40% from the
previous year. Whilst the data is yet to be
released, 2012 attendances figures are likely
to be down on 2011 due to some political
rallies that caused massive traffic disruption
around Jakarta.
Trade Shows
• The quality of exhibitors was high,
with a very broad range of parts and
accessories on display from many
countries. Certainly if there was
significant interest from local
Australian manufacturers, AAAA
would investigate the option of
launching an Australian National
Pavilion.

• INAPA Jakarta is the largest show in

the region, however INAPA Surabaya
will be held in October 2012, and
whilst it is smaller, still has an
important role to play in the market.
 Import Strategies
• There are mixed opinions relating to the best distribution strategy into and around
Indonesia. The general consensus is to import product initially into Singapore, then
ship it into Indonesia as this will virtually nullify import duties. This option though is
much slower, and can be a little more unreliable, so you have to ship through two
ports, rather than direct. For highly price sensitive products, this option may be more
suitable.

• Whilst speaking with distributors that import directly, they all seem to use some of
the smaller ports in Indonesia, as they have better control over the delivery times, and
they can also make sure that the duties and any ‘additional’ charges are kept to a
minimum. This option certainly suits those that have niche product opportunities and
have a tight delivery window.
Distribution Strategies
• In terms of distribution around the country, the general consensus was that companies
need a major customer in all 5 main islands to maximise sales. Business is commonly
done between the islands, but considering the opportunistic environment particularly
with modification parts and accessories, not having stock or support easily available may
be a significant disadvantage.

• Most of the Victorian manufacturers AAAA interviewed were looking for a major or
master distribution partner and this is still a viable option, however it is important to
confirm that they have good distribution particularly in Java and Sumatra.
Opportunities
• Proximity of Australia to Indonesia in regards
to operational logistics and shipping times
makes it seem like a logical import choice

• The growing middle class and affluent,

educated younger age groups in Indonesia
ensures the number of cars on the road will
increase by up to 50% in the next 5 years.
Therefore demand for quality auto
aftermarket products will increase significantly

• Car owners are less likely to turn cars over at

rate approximating those experienced in
developed countries. This will drive the
market for aftermarket parts, both
replacement and enhancement parts
 Opportunities
• The major opportunity in Indonesia is for 4x4
products, parts and accessories. This market has
certainly seen strong growth over the past 3-5 years
and major industry players are expecting this growth
to be maintained into 2014 and beyond.

• Mining, plantation and industrial sectors are certainly

a potential opportunity in Indonesia, due to their
often remote locations and demand for 4x4 parts.

• There is a slowly developing interest in performance

and motorsport products. Without the organised
motorsport scene in Indonesia that is evident in other
Asian countries, growth will continue to be slow.
There are initially plans to significantly upgrade a
number of facilities in and around Jakarta, but these
plans have been discussed for many years.

• With the immaturity seen in the market in terms of

retail and repair & service chains, there is surely an
opportunity for some of these Australian chains to
look to expand. It is known there are 1 or 2 local
Indonesian companies expanding into chains, however Mazars tree plantation - Indonesia
there is ample room in the market for many players.
Challenges

• On average a 30% Government tariff imposed on aftermarket imports

• Except if shipped from Singapore which currently has a 0% tariff

• The strong preference and brand affinity for US aftermarket products, means
Australian brands have to work much harder for strong brand equity. Some existing
Australian exporters are paving the way for new market entrants through.

• Distribution is currently fragmented in Indonesia – major distributors are hard to find

and not as commonly used as in countries like Australia. Until the supply chain
matures, having to deal with multiple in-market distributors is likely to be a necessity
for most companies.

• The low level of domestic income, in relative terms, means that car ownership is still
a major financial commitment. The reticence to modify your daily driving car is also a
concern.
Challenges

• High Australian dollar is making exports a challenge globally and obviously Indonesia
is no exception.

• Indonesian Government has a focus on supporting locally manufactured products to

maximise the return for the local economy.

• Price sensitivity can not be underestimated as a challenge particularly in mainstream

aftermarket products. Whilst higher prices can be seen as a benefit in some products,
mostly this is not the case.

• Political unrest must also be acknowledged as challenge in Indonesia. Even during

INAPA 2012, political protests caused traffic havoc in greater Jakarta, forcing visitor
numbers down significantly.
 Summary
• In general, the market has tremendous aftermarket opportunities. The rapidly growing
middle class, combined with a vehicle fleet experiencing unprecedented growth are strong
indicators of market potential. Bringing this opportunity to fruition due to a wide range of
market challenging market dynamics is the issue.

• When weighing up the market in terms of future Australian export potential there is little
doubt that the initial major opportunity in Indonesia is in the 4WD and 4x4 sector. The
willingness for enthusiasts to modify 4x4 vehicles is a major positive, as is our relative
expertise in this sector.

• Unfortunately the other strong segment for Australian manufacturers, ‘High

Performance/Motorsport’, is still largely under developed and is only gradually beginning to
emerge. Should the plans for greater motorsport precincts materialise, this market has the
potential to grow rapidly.
 Summary
• The supply of replacement parts is a limited opportunity in Indonesia, however, this has the
ability to change and/or grow if the repair and service sector grows. It will be essential that
Australian manufacturers watch carefully the repair sector to attempt to partner with any
franchise models that seem to growing. It is expected that 1 or 2 major players will emerge in
the next couple of years.

• Distribution is currently fragmented in Indonesia – major distributors are hard to find and not
as commonly used as in countries like Australia. Until the supply chain matures, having to
deal with multiple in-market distributors is likely to be a necessity for most companies.

• One major challenge facing Australian manufacturers is the current demand and brand affinity
with US branded and manufactured products. Some existing Australian exporters are paving
the way for new market entrants through. Only an increase in market activity, together with
positive product experiences will start to change these perceptions.
Next steps . . .
• It is clear that further work is required between industry and Government to help
develop this market. Already there are potential trade missions in the planning
phase, however these can only run if the industry support them through strong
participation.

• Further study to highlight key distributors for recreational, mining and plantation
parts distributors would be very beneficial for this market. Whilst some were found
during the construction of this report, further work is certainly required.

• Following the highlighting of the key buyers, an inward mission where we are able to
bring this people to Australia would be VERY valuable. Linking the visit around major
activities (Formula One GP etc) would be most useful to maximise attendance.

• Trade shows in general are a very common market entry tool globally and Indonesia is
no exception. The INAPA trade show in Jakarta, whilst small, is the dominant player
and a visit, if not a display should be considered for those interested in the market.
There is a possibility of a small Australian National Pavilion at INAPA 2013. The AAAA
will keep members aware of any plans for this event.

• Austrade in Jakarta do have a team with some Automotive Aftermarket expertise, and
making contact with that in-market team may be very valuable particularly for those
with currently on regular Indonesian exports.
Contact Information
Victorian Government
Linny Thom
Department of Business &
Innovation
Position: Project Manager
121 Exhibition Street
Melbourne, VIC 3000
GPO Box 4509, Melbourne, 3001
Australian Automotive Aftermarket Association
Ben Bartlett
Position: Senior Manager – Government
Relations & International
Suite 16, Building 3, 195 Wellington Rd, Clayton,
VIC 3168
Phone: +61 3 9545 3333
Fax: +61 3 9545 3355
Email: ben@aaaa.com.au
Website: www.aaaa.com.au
Contact Information
Austrade Jakarta
Irsa Suhatam
Position: Business Development
Manager
Mobile: +62 811 894 261
Direct telephone: +62 21 299 45422
Fax: +62 21 299 45401
Email: irsa.suhatam@austrade.gov.au
Austrade Jakarta
Ms Rebecca Ball
Position: Trade Commissioner
Mobile: + 62 812 1007 005
Direct telephone: +62 21 299 45407
Fax: +62 21 299 45401
Email: rebecca.ball@austrade.gov.au
ADDITIONAL INFORMATION

Appendix 1 - Primary Sources

Below are the companies that were contacted during the
course of this research