Automotive spare parts makers needs protection: Industry

The Jakarta Post, JAKARTA | Thu, 02/26/2009 9:17 AM 

The automotive parts industry, facing a major downturn during the current economic crisis, has asked the government to introduce a new import trade regulation to protect its domestic market share. 

“Limiting the import of auto parts will help increase the local industry’s share in the domestic market, which will eventually increase sales,” Hadi Suryadipradja, chairman of the Indonesian Automotive Parts and Components Manufacturers Association (GIAMM), said Wednesday. 

“The electronic industry’s domestic market share has increased since the government introduced import limitations for the commodity. I think the same can be done for the spare parts industry.” 

Hadi added that increasing demand would help the industry utilize its backlog of raw material inventories. 

A decline in vehicle sales has been followed by a drop in auto parts sales, while raw material has stacked up because the industry ordered them in significant amounts to anticipate increasing demands in the last quarter of 2008. 

However, the industry proved to have miscalculated its prediction, as markets crumbled due to the global crisis. 

“[Now] we predict that automotive spare parts sales will decrease by around 30 percent following the decline in vehicles sales,” Hadi said. 

The Indonesian Society of Automotive Engineers (IATO) recently predicted the impact of the crisis would see a 30 percent drop in vehicles sales in 2009. 

IATO president director Gunadi Sidhuwinata said the number of cars sold would only be around 400,000 units, while motorcycle sales would flag to around 4 million units this year. 

Last year, the industry managed to sell around 623,000 cars and 6.2 million motorcycles. 

A significant drop in sales could force industry players to start gradually dismissing employees, currently numbering around 400,000 people. 

The country’s spare parts industry recorded around US$30 billion from export sales last year, up by 19 percent from the 2007 figure. 

Another challenge for the industry in fighting for domestic market share is the stiff competition with Chinese-made fake parts and unlicensed spare part components that have flooded the market. 

“People prefer the Chinese products because they are much cheaper, even though the quality is questionable,” Hadi said. 

“These products are really ruining our domestic sales.” 

He added, “We have nothing against imports, as long as the imported products carry their own brands. But the fact is, there are a lot of fake branded products.” 

The government has accommodated GIAMM’s request in a recent proposal to limit imports for six commodities, including ceramics, energy-saving lamps, cell phones, shoes and bicycles. 

But the spare part association’s request for such protection will have to wait a little longer, after the Industry Ministry deemed the “urgency” level for protecting the automotive parts industry was not as high as for other industries. 

“The fact that imported spare parts usually target after-sales market makes [the protection of this industry] less significant compared to other industries such as the steel industry,” said Budi Darmadi, the ministry’s director of transportation and telecommunications industry. 

“So a trade regulation on spare parts will have less urgency. 

“The spare parts industry also has less circulation compared to the others.” 

The government recently introduced a new import regulation for steel products. 

“We will try our best to introduce an import regulation for the spare parts industry as soon as possible,” Budi said. (hdt)