A HISTORY OF FAILED VENTURES
Mr Prabowo is not the only Indonesian president with dreams of building a local car brand.
Indonesia’s first president Sukarno, for example, established PT Industri Mobil Indonesia in 1962 with the goal of producing Indonesia’s first national car.
However, before production began, Indonesia descended into a widespread civil unrest in 1965 which saw the killing of more than 500,000 members and sympathisers of the Indonesian Communist Party.
Attempts to produce a national car were revived under Suharto, who in the 1990s offered tax exemptions for cars that were entirely built domestically.
The move was panned both at home and abroad as Indonesian car brands that enjoyed the exemption were found to be rebranded versions of popular models developed by foreign companies.
After Suharto stepped down in 1998, Indonesia made several attempts at producing a national car. Most stopped at the prototype stage.
After Suharto, there has been very little support given to Indonesian companies developing their own cars, said Mr Bebin Djuana, an automotive industry expert.
“These companies need the government’s support. If these companies are told to fend for themselves amid stiff competition from more established brands, they are done for,” said Mr Bebin, a retired car company executive who has written several books on Indonesia’s car industry.
He said other countries have been giving local players anything from fiscal incentives and better access to loans and subsidies, to fast-tracking permit issuance and certification. They also created demand for the products before they successfully developed their national car industry.
Malaysia, for example, provided RM13.9 billion (US$3.1 billion) in research and development grants, stimulus packages and tax incentives to Proton since its establishment between 1983 and 2017.
These benefits allowed Proton to develop new models at prices lower than its competitors, which had to pay import taxes for fully assembled units or parts shipped from overseas.
“Some countries give huge subsidies to first-time car owners if they buy local brands. Some governments buy the cars produced by local companies and use them as official cars and operational vehicles,” Mr Bebin told CNA.
These government incentives remain available through regime changes, something that is missing in Indonesia, where leaders tend to focus on their own policies instead of continuing their predecessors’ legacies.
“These countries remain consistent (in their support) particularly during the critical early stages of these local companies. Without (consistency) these companies would collapse and they would have to start from scratch,” Mr Bebin said.
The Malaysian government continued to provide grants and tax incentives after Malaysian sovereign wealth fund Khazanah Nasional divested its Proton stake to conglomerate DRB-HICOM for RM1.29 billion in 2012.
However, the benefits stopped after the latter sold its 49.9 per cent Proton stake to Chinese manufacturer Zhejiang Geely Automobile Holdings in 2017.
Dr Tauhid of INDEF believed that Pindad will enjoy similar support from the Indonesian government.
“As a state-owned company, it will have the full support of the government in terms of regulatory protection (from competition) and various incentives. It will have access to government funding or low interest loans from state-owned banks,” he said.
“This is what sets Pindad apart from private companies of the past which tried to develop their own car brands.”
It is still not clear what financial support Indonesia will provide to Pindad, which can currently only produce a small batch of several thousand cars a year, in order to become a well-established car brand.
“The government needs to formulate a long-term strategy to help Pindad grow. So far, we haven’t seen such a strategy,” Dr Tauhid said.
