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The economic crisis seems to have driven the car-tyre industry to switching to the export market. This is reflected by the growth in the volume of Indonesia's tyre exports. In 1994, the volume of such exports reached 2.5 million units. In 1998, it rose to 10.9 million units worth US$ 167.5 million. To boost the volume of such exports further, Indonesia has to deal with multinational tyre producers.

On the export market, Indonesia has to face new tyre-producing countries such as China, India, Taiwan, Malaysia, and Turkey, which have traditionally been the markets for Indonesian tyres. The emergence of tyre producers in these countries is likely to narrow down the opportunities for Indonesia to market its tyre products to them.

According to data from the Central Bureau of Statistics, the volume of Indonesia's tyre exports for the first seven months (January-July) of 1999 reached 15.3 million units, up 41.3% from the corresponding period of 1998. However, the value of such exports declined by 34.8% to only US$ 109.2 million due to the fact that the price of tyres on the global market had dropped as a result of an oversupply.

Imported tyres

Despite the slack domestic market for tyres, unsound competition often takes place. The growth in supply has been much faster than that in demand. The annual growth in demand has been less than 6% because the growth of the OE (Original Equipment) segment is highly affected by the automotive industry while the growth of the replacement segment has continued to be undermined by the use of retreaded tyres and imported second-hand tyres. The depreciation of the rupiah drove up the price of locally produced tyres, causing consumers' purchasing power to weaken.

Decree of the Minister of Industry and Trade No. 230 of 1997 provides that only producer-importers are allowed to import second-hand tyres. In addition to imported second-hand tyres, the domestic market is currently also filled with branded tyres of second-class quality which are offered at cheap prices, in defiance of the rule that such tyres can be sold only after the brands have been deleted. The producer is not responsible for any accidents which may occur as a result of tyre ruptures.

On the domestic market, imported tyres have continued to undermine the market shares of local products. Although tyre consumers' purchasing power has declined, their potential demand remains. Sharp-minded tyre importers seem to have taken this opportunity by importing tyres in considerable quantities. However, although the activity of importing tyres has been going on since the end of last year, the volume of such imports has remained insignificantly small compared to domestic output.

According to data from the Central Bureau of Statistics, the volume of Indonesia's tyre imports for the first seven months (January-July) of 1999 reached 795,303 units, with China as the largest supplier, from which Indonesia imported 126,319 units (worth US$ 752 thousand) or 15.9% of the total. The other more important suppliers were Japan and the United States, from both of which Indonesia imported 84,597 units (worth US$ 2.2 million) or 10.6% of the total. The share of imported products in the domestic market for tyres is likely to shrink as domestic economy continues to recover.

Output down 13.9% in 1998

Until 1997, Indonesia's tyre industry still showed good prospects for growth as reflected in the fact that domestic tyre output continued to increase. Indonesia's car-tyre production rose from 11.9 million units in 1994 to 19.4 million units in 1997. Shortly into 1998, the tyre industry began to feel the impact of the monetary crisis. In the same year, domestic tyre production plunged by 13.9% to 16.7 million units.

Bridgestone launches its latest type of tyres

Now that Indonesian economy has started to recover, PT Bridgestone Tyre Indonesia (BTI) is making a plan on increasing its domestic sales by 25% this year. According to BTI's marketing manager, the recent launching of the company's latest type --"Potenza 711" -- is expected to help drive up its domestic sales. During the crisis, BTI saw its overall domestic sales drop by 40%.

The market segment for radial tyres in Indonesia absorbs about 2 million tyres per annum, of which some 30% (660,000 units) are supplied by BTI with the following breakdown: 60,000 units of Type 50 and 600,000 units of Type 60. BTI's latest type, Potenza 711, is a development from the previous Potenza version, and it has higher durability and a stronger grip.

In 1999, domestic tyre sales have shown some significant growth although they have remained lower than those in 1997 and in the previous years. In 1997, domestic tyre sales reached 8.5 million units. In 1998, they dropped by 35.3 % to only 5.5 million units. In 1999, they will reach an estimated 7 million units.
Table - 1
Indonesia's car-tyre exports, 1994 - 1999

Year Volume Value
 (000 'units) (US$ '000)

1994 2,502 56,537
1995 4,875 116,692
1996 7,675 173,883
1997 6,325 139,869
1998 10,857 167,470
1999(*) 15,343 109,189

(*) January - July

Source: CBS/Data Consult
Table - 2
Indonesia's car-tyre imports for January - July 1999,
by country of origin

Year Volume Value
 (units) (US$ '000)

China 126,319 752
Japan 51,484 1,003
USA 33,113 1,150
Singapore 8,674 2,427
South Korea 8,248 323
Taiwan 2,563 31
Others 564,902 1,648

Total 795,303 7,334

Source: CBS/Data Consult
Table - 3
Developments in Indonesia's car tyre production, 1994 - 1998

Year Production Growth
 (million' units) (%)

1994 11.9 -
1995 14.9 24.9
1996 18.0 21.1
1997 19.4 7.4
1998 16.7 -13.9

Average growth 9.8

Source: APBI/Data Consult
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Publication:Indonesian Commercial Newsletter
Geographic Code:9INDO
Date:Dec 21, 1999

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