To support the development of the automotive industry, the government believes that special steel imports are still needed.
President Joko Widodo signed Presidential Decree No. 74/2022 concerning National Industrial Policy for 2020-2024. One of the considerations for issuing this regulation is that the automotive industry still has to import steel to produce motor vehicles.
“The problem in the motor vehicle production process is that special steel is still needed to be imported. This is because products from domestic steel factories are still focused on construction steel," the presidential decree was quoted as saying by The Newbie Tuesday (24/5/2022).
Meanwhile, to support the development of product substitutes for components or imported raw materials, the government is still required.
In fact, Indonesia's market share is very large. Still referring to the Presidential Regulation, the low ratio of motor vehicle ownership in Indonesia opens up opportunities for motorized vehicle production.
This is illustrated in 2019. Production of four-wheeled motorized vehicles or more was 1.29 million units. Exports completely built up (CBU) reached 332,000 units, up 25.5 percent from the previous year.
On the other hand, motorcycle production in 2019 was 7.29 million units, an increase of 284,000 units compared to the previous year (4.04 percent growth).
The trade balance for motorcycle products recorded a surplus with a total export value of 810,000 units, up 28.5 percent from 2018.
The number of assembly industries is 17 companies with 701 supporting industries that produce components. Overall, in 2019 the export value of the motor vehicle, trailer and semi-trailer sector rose 1.98 percent or US$ 6,154.06 million.
At the same time, investment in the industrial sector of four-wheeled motor vehicles or more reached Rp93.22 trillion, while investment in the motorcycle industry sector reached Rp10.22 trillion. The number of assembly industries in 2019 reached 22 companies with 300 supporting industries.
The trend in the production of environmentally friendly motor vehicles, especially electric vehicles or electric fied vehicles (EV), has received special attention from the government.
This is because Indonesia is targeted to become a major player in the production of Internal Combustion Engine (ICE) and EV motor vehicles for the domestic and export markets by 2030.
The automotive sector is projected to experience an increase in production volume of up to 3 million units at that time. Of this total, 25 percent of them are electric-based vehicles and with an export target of 9OO thousand units.
Various supporting regulations were issued, including the acceleration of the battery-based electric motor vehicle (KBL) program for road transportation to energy conservation that supports the development of the low-carbon vehicle industry.
"One of the challenges in the motor vehicle industry is the availability of raw materials for the domestic upstream industry which has not been able to support the needs of the automotive assembly industry or tier I industry," said Presidential Decree 74/2022.
Another challenge is import duties for the raw material, component, and incompletely knocked down (IKD) and completely knocked down (CKD) industries which are still not harmonious.
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