PT Indomobil Suzuki International (ISI), Suzuki’s Indonesian car manufacturing joint venture, last month launched the export campaign for its new APV compact minivan. The vehicle was jointly developed by ISI and Suzuki Motor Japan and went on sale in Indonesia in September 2004. Monthly domestic sales volumes since have averaged at around 2,400 units, writes Tony Pugliese.
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ISI hopes to double output of the model once the roll out to markets as far away as the Middle-East, Latin America, Africa and Oceania gathers momentum. “Our company’s export target for the APV is of 25,000 units annually, once the model has had time to establish itself in key overseas markets”, says Mr John Saragih, head of exports at ISI. This means that APV output in Indonesia should rise to at least 50,000 units annually, if targets are met.
Indonesia is by far Suzuki Motor’s largest four-wheeled vehicle market in Asia, after India and China. ISI sold 82,241 vehicles in this country last year, although its market share dipped to 17% from just under 20% in 2003. The best-selling model range is the Carry, which comes as a mini-bus and as a pick-up. A total of 57,567 units of these were sold domestically last year, while sales of the APV amounted to 8,998 units. Other key models include the Karimum small passenger vehicle, the Escudo SUV (also known as the Vitara), the Baleno passenger cars and the Aero hatch/estate car.
The APV is designed to meet the rising competitive threat from Toyota and Daihatsu, which have strengthened substantially in the region in the last two years. Toyota launched the Avanza and the Innova MPVs last year, while Daihatsu sells its version of the Avanza – the Xenia. These models, which have now been rolled out across the region and to other developing markets, combined were responsible for a large part of Indonesia’s 36% domestic sales growth last year.
The APV itself is a boxy, Japanese-style minivan, based on a tweaked Baleno platform. Around 60% of its content is Indonesian, including the gearbox. A further 15-20% comes from other ASEAN countries, according to an ISI spokesperson. The engine itself – a 1.5L petrol unit, comes from Japan but this too is likely to be localised in the near future.
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By GlobalData
Like Toyota for the Avanza and Daihatsu for the Xenia, Suzuki has made Indonesia its main regional production base for the APV. It has invested Y11.5bn in refurbishing and expanding its Tambun plant in Bekasi, east of Jakarta, to give the APV line an annual production capacity of 70,000 units on three shifts. The plant has the capacity to assemble a further 80,000 Carry minibuses, SUVs and other Suzuki vehicles. The plant currently operates on two shifts, but Indomobil Suzuki International (ISI) anticipates that a third shift will be needed once the international roll out of the APV gathers pace.
Together with Toyota’s Karawang plant which makes the newly-launched Kijang Innova, the Tambun plant is one of only two vehicle assembly facilities in Indonesia fitted with automated spot welding machines. In both cases, the robots were installed earlier this year in what represents real progress in the internationalisation of a once highly protected and domestically focused industry.
Despite the fierce competition and the somewhat radical design features of the product, ISI’s APV strategy has met with reasonable successful thus far. The company sold 7,819 APVs domestically in the first quarter of 2005, helping the company lift its domestic market share to almost 19%. Total Suzuki sales amounted to 27,145 units in this period, according to data compiled by Gaikindo – the Indonesian car makers’ associaton. ISI now looks well on its way to breach the 100,000-unit domestic sales threshold this year for the first time.
The company’s total investment in the dedicated APV production line stands at Y11.5bn. “Current production capacity is somewhere between 4-5,000 units per month”, says Mr Saragih. Other sources have suggested that the addition of a third shift would bring the capacity up to to 70,000 units per year, if it were required. Around 70% of the car’s content, including the gearbox, is made in Indonesia. ISI’s Tambun plant in Bekasi, east of Jakarta, has a separate line with annual production capacity of 80,000 vehicles. But the APV line is the most advanced – it is the only vehicle assembly line in Indonesia outside the Toyota group and Honda Motor that has welding robots.
Currently, ISI’s main export product is the Escudo, also known as the Vitara, which it mainly exports to Thailand. It also exports some parts for the Karimums that are assembled in Pakistan, Myanmar and Vietnam. The launch of the APV export campaign should help lift export volumes significantly, as well as help revise flagging market share in overseas market.
Suzuki’s sales have dropped sharply across the region in the last two years. The company’s Malaysian dealers sold 253 units in 2004, while in the Philiipines, volumes dropped to 639 units, from 1,032 in 2003. Sales in Singapore have remained strong, however, from 1,202 to 1,550 units. But Suzuki dealers across the region will no doubt be excited about getting an entirely the new product line.
“So far, the biggest orders have come from the Middle-East,” says Mr Saragih, “particularly from Saudi Arabia, Kuwait and the UAE. We have also starting sending CBUs to Malaysia, Thailand and the Philippines, and I expect Australia and New Zealand will also become strong markets for this model,” he added.
ISI’s export target for this year looks somewhat cautious, with Mr Saragih admitting “given that we only started exporting in April and that the product may take some to time establish itself in overseas markets, we are targeting CBU exports of 10,000 units in 2005.”
Notably, Taiwan, which is Suzuki’s fourth-largest market in the region after Indonesia, is not on the immediate list of export destinations for the APV. Suzuki’s domestic sales in the country, through the Prince Motors joint venture, amounted to 18,590 units last year. Mr Saragih confirmed that a couple of sample models had been sent to Taiwan for evaluation earlier in the year, but that so far a decision to sell the model in Taiwan has not been made.
Seperately, Just-Auto has heard from a company source in Taiwan that the vehicle would sell well on the island, but that some tweaking will be needed. The suspension/vehicle height is set high by Taiwanese standards and is more suitable for flood-prone countries in south-east Asia.
Although there in no official word on the APV coming to India or China, Mr Saragih admited that the vehicle would be “suitable for these markets, as they share the same charactieristics with Indonesia. There are large families that require low-cost family transportation.” The size of these markets, however, means that the APVs would likely tbe produced locally, with some key components being shared.
Tony Pugliese
