Earlier this week, PT SAIC-General Motors-Wuling (SGMW) Motor Indonesia, also known as Wuling Motors, launched the operation of its first local production facility in Indonesia.
With a US$700 million investment, the facility, located in Cikarang, West Java, is designed to produce 8,000 units of the Wuling Confero S by year-end.
The low-cost car, with a price tag of between Rp 135 million (US$10,110) and Rp 165 million, will heat up competition in the low-end multipurpose vehicles (MPV) market against popular brands such as the Toyota Avanza, the Daihatsu Xenia and the Honda Mobilio.
Last year, another Chinese player, PT Sokonindo Automobile, a subsidiary of a joint venture between the Chinese Dongfeng Motor Group and the Chongqing Sokon Motor Group, entered the Indonesian market with the operation of a factory in Cikande, Banten.
The company produces pickup trucks under the Super Cab brand and has planned to market its sport utility vehicles (SUV) starting in 2018.
Meanwhile, PT Geely Mobil Indonesia, a subsidiary of Zhejiang Geely Holding Group Co. Ltd., and PT Chery Mobil Indonesia, a subsidiary of Cherry Automobile China, have been in the Indonesian market since 2009 and 2012, respectively.
Association of Indonesian Automotive Manufacturers (Gaikindo) chairman Yohanes Nangoi said the advent of non-Japanese players in the country's automotive industry was not new. He said China still has a chance to muscle in on traditional Japanese auto markets but Japan still has the upper hand in Indonesia.
"The market is open, but we know that Japanese automakers are so far the most aggressive players in the sector," he said.
Yohanes, a former executive with PT Isuzu Astra Motor Indonesia the sole distributor of cars made by Japan's Isuzu Motors in Indonesia said that the cheap image of Chinese products would not affect sales of Chinese cars in Indonesia.
"Learning from history, we have seen changes in car tastes among Indonesian consumers. American and European products were popular in the 1960s, before being overtaken by Japanese and Korean brands. And now it can be China's turn. We have to see the innovations and improvements from China," he added.
China and Japan have also been competing to secure major infrastructure projects in Indonesia. The former, in 2015, for example, defeated the latter in a bid to build a multi-billion-dollar high-speed railway connecting Jakarta and Bandung, West Java.
The Industry Ministry's director-general for metal, machinery, transportation equipment and electronic industries, I Gusti Putu Suryawirawan, said Chinese investors are interested in putting their money in Indonesia after having looked at the countrys potential markets.
He said that in order to compete with Japanese brands, other producers had to pay attention to the cars' qualitiy, prices and aftersale services.
Chinese business players have learned from their past mistakes, such as not preparing the aftersales, which hampers their situation. Now, they have facilitated customers with easier access to their services, he told the Post.
Amid a global economic slowdown, Indonesia, home to more than 250 million people, saw domestic car sales decline to 1.21 million units in 2014 after touching 1.23 million in 2013. The figure fell by another 16 percent to 1.03 million in 2015.
Last year, car sales gained momentum when they increased again by 4.7 percent, nearly reaching the sales performance of 2014.
BMI Research estimated that more than 90 percent of Indonesia's car market is currently dominated by Japanese brands.
Separately, Center of Reform on Economic Indonesia executive director Mohammad Faisal said China's investment in the automotive sector would influence Indonesia's bargaining position towards Japan, including in pushing for technology transfer schemes in the automotive industry. - Jakarta Post/Asia News Network