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Web-only Exclusives
November 30, 2000

From Our Correspondent: Hirohito and the War
A conversation with biographer Herbert Bix

From Our Correspondent: A Rough Road Ahead
Bad news for the Philippines - and some others

From Our Correspondent: Making Enemies
Indonesia needs friends. So why is it picking fights?

Asiaweek Time Asia Now Asiaweek story

Tremors from the Timor

The car is shaking up more than the market

By Ajay Singh and Keith Loveard Jakarta


INDONESIA'S NATIONAL CAR HAS arrived -- from South Korea. Called the Timor, the $15,971, five passengers-at-a- squeeze sedan is the product of a joint venture between Timor Putra Nasional, headed by President Suharto's youngest son Hutomo Mandala Putra (known as Tommy), and Korea's Kia Motors. When the first 2,084 cars arrived in Jakarta in late August, bystanders couldn't help but notice that the autos, from spark plugs to tires, were entirely made in Korea. Even the Timor nameplate, the only local contribution to the vehicle, was missing.

As the national car, the Timor will be free from import duties and luxury taxes as long as it has 20% local content after the first year of operation, 40% after the second and 60% after the third. Today's Timor clearly does not qualify. But Tommy can meet the guidelines by simply importing the all-Korean Timor until the very last day of the first year and then producing a 20%-local version. Even if he fails, the government is unlikely to strictly enforce the requirement.

That's because the national car plan is largely meant to boost Indonesia's auto industry in time to meet the 2003 deadline set by AFTA for free trade among ASEAN states. Giri Hadihardjono, deputy director of the Strategic Industries Development Board, admits Indonesia has lagged behind many other Asian nations in fostering a car industry. "It's no secret that we are the biggest market in Southeast Asia and everybody wants to be here," he says. "Yet our own ability is very low."

International players control 90% of Indonesia's auto market; Toyota alone accounts for 33%. And countries and competitors are not happy about the Timor. Tsutomu Makino, Japan's Junior Minister for Trade, said he would press to take Indonesia to the World Trade Organization for discriminatory trade practices. Japan is already holding bilateral talks with Indonesia over the national-car policy, and its Minister for Trade and Technology, Tsukahara Shunpei, said those talks would continue even if the matter goes to the WTO.

From its announcement in February, the Timor caused tremors. At first car sales stalled. Then some less popular makers, like Ford, dropped their prices. Dealers started requiring deposits as low as 10% to 20% and offering no-interest loans for the first year. After an initial slump, the market picked up, says Toyota salesman Wiwin Susanto, adding: "We are not afraid of losing buyers [to the Timor] because consumers know our quality."

As for Timor quality, Cholid, a driver whose wife works for a Jakarta securities firm, says he won't be swapping his Toyota for a Timor. "The body is just too thin. In three years of driving on Jakarta roads, it's likely to fall apart." Civil servant Roger Sutojo figures the Timor "may take some of the small van market, but no one who aspires to own something like the Toyota Corolla is going to want to buy this. It is not a prestige vehicle." Still, 8,000 customers have made down payments to be among the first of a targeted 45,000 to own a Timor in its initial year.

Meanwhile more competition is coming. Japan's Suzuki just introduced the Baleno and Honda is launching its Asia car, the City. And some of those rivals are domestic ones: Bakrie & Bros. is planning a British-designed eight-seat minivan for next year, and Research and Technology Minister B.J. Habibie is talking to Australian manufacturers about his ideas for a cheaper-than-the-Timor "people's car."

But Tommy's most aggressive competitor is his brother, Bambang Trihatmodjo, owner of the Bimantara Citra group which assembles the Korean Hyundai. To make the car more national (it cannot be an official national car), Bambang changed the name from Hyundai Elantra to Bimantara Cakra. To make it more competitive, he cut the price by $5,000. Bimantara wants to boost production to 100,000 units by 1998. Says finance director Kadir Assegaf: "We will keep developing our automotive component's ability to achieve 60% local content."

Will the national car better prepare Indonesia for free trade? Not necessarily, says University of Indonesia researcher Achmad Shauki. "Chances are when cars produced in Thailand come in under AFTA's low tariffs scheme, local producers will face drastic competition and many will not survive." In the meantime, Indonesians who can afford a car will have plenty of choice.

INDONESIA'S CAR WARS

Running with a 1,500-cc engine and without import and luxury taxes, the Timor compact sedan is cheaper than other cars in its class -- and only slightly more expensive than most of the small vans that are especially popular in Indonesia.

CARS

Timor (Kia) $15,971
Bimantara Cakra (Hyundai) $19,548
Daihatsu Classy $19,996
Suzuki Baleno $20,230
Toyota Starlet $21,039
Honda City $24,063

VANS

Suzuki Real Van $ 9,199
Daihatsu Espass 1300 $ 9,881
Toyota Kijang $12,883
Mazda Vantrend $14,693
Isuzu Panther $15,588


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