Pioneering market research by the Australian Automotive Aftermarket Association (AAAA) on the automotive aftermarket in Indonesia has identified export opportunities for Australian companies.
Australia’s northern neighbour has the fifteenth largest economy in the world with a gross domestic product expanding 6%+ annually and a growing middle class. These economic trends are expected to drive an increase in car sales of up to 50% in Indonesia in the next five years.
The AAAA was commissioned by the Victorian Government Department of Business and Innovation to undertake the research to accurately gauge the potential of the Indonesian automotive aftermarket for Australian supplied products and services.
AAAA seniormanager government relations and international, Ben Bartlett, says the Indonesian automotive aftermarket is growing rapidly and still evolving. “Indonesia is home to 245 million people and the car parc is about 11.25 million vehicles.
“This is about 32 vehicles per 1000 citizens, which is significantly lower than some near neighbours, such as Thailand (123), Malaysia (300) and Australia (700),” he says.
“While new car sales are approaching one million a year, there is still strong incentive to keep older vehicles serviceable and on the road. Transport hungry middle class Indonesian families are a growing market for aftermarket accessories, parts and repair and maintenance products and services.
“In addition, the high percentage of the population under 35 years old will ensure keen demand for aftermarket parts and accessories to differentiate for their vehicles,” said Ben Bartlett.
The AAAA research revealed that the Indonesian car parc is diverse, but the two main vehicle categories are:
• Multi purpose vehicles (MPVs) for families and small businesses in urban areas. The products most in demand included in-car entertainment, wheels, window tinting, cleaning and polishing products and oils and lubricants.
• 4-wheel-drive (4WD) and SUVs used extensively in rural Indonesia’s agriculture and mining industries. Among the popular products are suspension components, differential lockers, undercar protection and winches.
“With ample accessible terrain available, there is also a strong off road driving culture. There are 4WD clubs in most towns. This combined business and leisure use of 4WD vehicles make this segment the most dynamic across the wider aftermarket,” says Bartlett.
AAAA research, which included interviews with Australian manufacturers that are already successful exporters, and Indonesian businesses, found that this market is very price sensitive. Thus the high Australian dollar may challenge would-be exporters.
On average, the Indonesian government imposes a 30% tariff on aftermarket imports. Goods shipped through Singapore may avoid this impost.
Ben Bartlett said the automotive products distribution chain in Indonesia is fragmented and still evolving. “Most product moves through small independently owned retail outlets operating in ‘localisation areas’. There are very few franchised operations,” he says.
“To reach the estimated 12,000 retailers, Australian suppliers should work though distributors and wholesalers, which operate mainly within specific geographic regions. Our research found that it would be best to have a major distributor on each of the five main islands of Indonesia.
“Vehicle service and repair operators range from those doing basic repairs on the roadside to others working under cover with access to more tools and equipment. Supply of replacement parts to these operators is currently challenging.
The AAAA research identified a range of opportunities for Australian aftermarket companies. Immediate business exists in the 4WD segment, particularly servicing the agricultural and mining industries. There will also be good opportunities in the retail and repair and service sectors in coming years as these markets continue to develop.
“The next steps in opening the Indonesian market to Australian automotive aftermarket suppliers include seeking government support for in-market trade and inward buyer missions linked to major events in Australia, such as the Australian Formula 1 Grand Prix,” says Bartlett.
“Based on the positive findings in this report, the Victorian Government is considering initiating an export mission to Indonesia, should there be sufficient interest. At this early stage, it is suggested that the mission would run for 4-5 days during November 2012.”
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