Indonesia Narrows Auto Output Gap With Thailand, Set to Take Regional Crown

JANUARY 29, 2015

Kuala Lumpur/Jakarta. Indonesia narrowed the gap in car output with Thailand, Southeast Asia’s automaking hub, to its smallest ever margin last year in percentage terms and is expected to overtake the Thai industry within a decade.

Indonesian auto production grew 7 percent in 2014 to 1.30 million vehicles while Thai output, hit by political turmoil, shrank 23 percent to 1.88 million.

That put Indonesian output at 69 percent of the Thai total, versus only 43 percent in 2012, according to data compiled by ASEAN Auto Federation, Indonesia’s industry association Gaikindo and Federation of Thai Industries.

Indonesia, Southeast Asia’s largest economy, has already surpassed Thailand as the region’s largest auto market, and prospects for reform and stability, bolstered under the three-month-old government of President Joko Widodo, have lured General Motors Co, Tata Motors Ltd and others to build plants there.

That will help to push Indonesia past Thailand in output in the next seven to 10 years, says Chukiat Wongtaveerat, consulting manager at Ipsos Business Consulting’s Bangkok Office.

For now, Thai auto production is expected to rebound: a spokesman for the Federation of Thai Industries’ Auto Industry Club told Reuters last week that output would climb 17 percent this year to 2.2 million vehicles. And Chukiat said Thailand would remain a major auto industry player well into the future with its well-developed supply chain.

“Even when Indonesia overtakes Thailand’s automotive production output, Thailand will still be a dominant player, with its component manufacturers providing many of the parts required by the assemblers in Indonesia,” Chukiat said.

“The challenge for Indonesia is to raise the quality of its product to be suitable for the global market, and to develop its domestic supply chain to match the quality of Thailand.” Additional reporting by Pairat Temphairojana in Bangkok.