INDONESIA: Tire firm bullish after green car incentives

Catharina Widjaja, a director at Gajah Tunggal, told reporters that the impact of low-cost green car production "should be positive” for tire makers and will lead to capacity expansion within a few years.

"In the short term, its not going to be visible yet as a new industry will progress slowly, but eventually in the medium term I am sure its going to pick up [the demand for tires],” she said after the company's annual shareholders' meeting in Jakarta on Friday (14 June 2013).

Catharina did not reveal the time frames for her expectations.

To promote low-cost car production, the president recently signed a regulation that will cut the luxury tax paid by consumers on low-cost green cars by between 25 percent and 100 percent.

The current tax for new vehicles ranges from 10 percent to 75 percent depending on engine size. Only emergency vehicles, such as ambulances, are tax exempt.

Toyota Astra Motor and Astra Daihatsu Motor have announced plans to produce cheap and environmentally friendly models.

Catharina said Gajah Tunggal has signed memoranda of understanding with several undisclosed original equipment manufacturers, but the OEMs have not yet disclosed how many units they will require.

"The OEMs are not sure yet of consumer reaction to the product, but I can say that our production capacity is enough and we are ready to supply,” added Christopher Chan Siew Choong, the president director of Gajah Tunggal.

Catharina said the company has a production capacity of 45,000 radials, 14,000 bias tires and 95,000 motorcycle tires per day, but is not running at full capacity.

Last year the company produced a combined volume of 36.7 million units and expects production to increase this year by up to 8 percent, Catharina said.

Chan said that should the company need to build a new plant within three years, it has acquired 100 hectares of land in Karawang, West Java, that will also be used as a testing ground for products.

"At the moment we will focus on improving efficiency at our plant in Tangerang and removing bottlenecks,” he said.

Source: Daily "The Jakarta Globe", Jakarta; 14 June 2013
(Syed Rashid Ali, Karachi, Pakistan)