Interview: Hiroyuki Fukui

What future role is there for Indonesia as an automotive export centre, and to what extent will developing markets shape this direction?

HIROYUKI FUKUI: We are optimistic about the country’s role and potential going forward, especially for exports to developing countries. For many years, we have exported our vehicles to countries across the ASEAN region and, recently, we have also increased exports to the Middle East. Other destinations for Indonesian exports include Latin America, Africa and Central Asia, all of which are showing a rapid increase in demand. The total demand for Toyota’s cars from developing countries now stands at 45% and we expect this figure to rise to 50% over the coming few years, and this is where Indonesian-manufactured exports can come into play. Given this potential, we are seeing more players enter the Indonesian market and establish manufacturing bases. I am thus confident that the country’s role as an automotive export hub will continue to grow in size and scope.

What competitive advantages does Indonesia hold in comparison to other nations in the region?

FUKUI: Firstly, manufacturing in Indonesia makes economic sense in terms of costs, which although rising, are still competitive when compared to other Asian countries. Furthermore, from a production viewpoint, the depth and breadth of Indonesia’s supplier base is becoming more and more robust.

Likewise, it is also important to consider the country’s huge domestic market. Automotive players choose the countries in which to set up manufacturing facilities not only to export, but also to fulfil domestic demand. When you look at the leading countries in South-east Asia for car manufacturing, Thailand still outpaces Indonesia by a large distance. However, the archipelago’s population is about three times larger than that of Thailand, with major potential here, given rising income and the likelihood for people to switch from riding motorcycles to buying cars. Automotive companies recognise this and, indeed, we are already seeing Indonesia close the gap on Thailand on the way to becoming the top manufacturer in the region.

How can the country attract more foreign investment to incentivise automotive companies to set up manufacturing facilities here?

FUKUI: If the government is able to improve the country’s infrastructure, global suppliers will come and invest here, creating an even stronger supplier base. One specific area where Toyota is looking for infrastructure improvement is seaports. We are cautiously optimistic that the new Cilamaya Port, which is being planned in collaboration by the Japanese and Indonesian governments, can become operational by 2020. This would alleviate the infrastructure problems that many automotive companies currently face, particularly when transporting vehicles to and around the country. Of course, this entails a lengthy development process, but these improvements are needed for Indonesia to maintain competitiveness and ensure future growth. Labour and energy costs should also rise in tandem with improvements in productivity. Firms will continue to manufacture in Indonesia if they can expect an increase in output to compensate for the higher input costs.

In what way can the Low Cost Green Car (LCGC) programme shape the automotive industry?

FUKUI: The success and impact of the LCGC will ultimately be determined by the customer. Again, we have to look at the country’s significant base of potential LCGC users. If owners of motorcycles – which is still the primary means of transport in Indonesia – decide to buy a car, the LCGC will be an affordable option. In addition, there are positive contributions to the industry in terms of safety, environmental friendliness and scalable fuel economy. Of course, there was a recently mandated review of the programme by the Ministry of Industry, but we are ready to work with regulators and respond to any changes in the regulatory environment to reach a viable plan and ensure the LCGC’s success.