Indonesia to Build $116.5m Vehicle Test Site to Capture ASEAN Market

Indonesia to build $116.5m vehicle test site to capture ASEAN market. The Transportation Ministry aims to finish building a Rp1.64 trillion (US$116.5 million), international standard motor vehicle “proving ground” within the next four years to help Indonesian automakers capture the Southeast Asian market. 

Transportation Minister Budi Karya Sumadi showed a project road map whereby the proving ground – a racetrack-like site to be built in Bekasi, West Java – was slated to begin development in 2022 and be finished by 2024. 

Capture ASEAN Market

The proving ground will test Indonesia-made motorcycles, three-wheelers, cars, buses and trucks in accordance with the international benchmark United Nations Regulation (UNR) on vehicles, to make them more compliant with other markets’ standards, particularly the ASEAN market. 

“[Indonesia] produces a lot [of cars], we use a lot of cars but we don’t export as much,” said the minister during a Jakpost Spotlight webinar titled Improving vehicle safety in Indonesia through proving ground, held on Thursday. 

Indonesian automakers exported 180,903 completely built up (CBU) vehicles this year as of October, which represented a third of total vehicle production as of that month, according to Association of Indonesian Automotive Manufacturers (Gaikindo) data.  

However, Gaikindo aims to push exports up to 1 million units and domestic sales to 2 million units by 2025 against the backdrop of a cooling Indonesian auto market as big cities, including Jakarta, choke up with private vehicles. 

For the government, raising vehicle exports is a means of strengthening Indonesia’s trade surplus, which hit $17.07 billion from January to October this year, according to Statistics Indonesia (BPS). The surplus supports the rupiah exchange rate and boosts the country’s economic recovery. 

Indonesia’s main competitor for the Southeast Asian auto market is Thailand, but Vietnam, the region’s rising economic star, recently signaled plans to go global after Vietnamese automaker VinFast acquired a proving ground in Australia, which Gaikindo expects will tighten regional competition going forward. 

The ministry’s land transportation director general, Budi Setiyadi, explained that the planned proving ground would add 19 new testing facilities to the ministry’s existing vehicle testing site (BPLJSKB) in Bekasi. 

The new facilities will test, among other aspects, vehicle emissions, noise levels, crash safety and mirror view in accordance with the UNR, a standard universally recognized by Southeast Asian countries through the ASEAN Mutual Recognition Arrangements (MRA). 

“At the least there will be trust from other countries over products made in Indonesia,” said Budi. 

He added that “there are other [proving grounds] in ASEAN but ours will be the biggest” at 90 hectares. The second biggest in the region will be that in Thailand, according to ministry data. 

He added that the proving ground would also feature facilities to test electric vehicles. The government issued last year a presidential regulation on developing a domestic EV industry. 

The proving ground is one of five multi-billion rupiah government-to-business cooperation (KPBU) projects forwarded by the Transportation Ministry in 2018. The five serve as pilots in cutting state budget (APBN) spending on big transport infrastructure projects. 

The Finance Ministry, through state-owned lender PT Penjaminan Infrastruktur Indonesia (PT PII), is helping the Transportation Ministry secure funding for the test site. 

PT PII president director Muhammad Wahid Sutopo said during the discussion that his company was awaiting the ministries’ nod to finalize a “final business case” document that would be presented to interested investors. 

The project was valued at Rp1.64 trillion when announced in 2018 but Wahid said the new capital expenditure was estimated at Rp2.09 trillion and foreign investors’ ownership would be capped at 49 percent as per existing regulations. The government, through an availability payment scheme, planned to pay for and take over the proving ground after a 15-year period from when operations begin. 

He hinted that interested investors hailed from countries “that are the principle holders of auto producers in Indonesia.

” According to Gaikindo data from October, the Indonesian market is over 80 percent dominated by Japanese brands. 

Industry Ministry metals, machinery, transport equipment and electronics industry (ILMATE) director general Taufiek Bawazier emphasized the proving ground’s ability to test higher safety standards for Indonesian-made vehicles. 

“It’s like a miniature of the hurdles in the real world,” he said in the webinar. “This is very important to test because our aim is improving safety.

” For Indonesian automakers, the proving ground promises to save “billions of rupiah” from testing Indonesian-made vehicles or vehicle components, such as large truck engines, as far away as Germany, said Gaikindo chairman Yohannes Nangoi. 

“Every year, over 400 models need to be tested,” he said during the webinar, describing how automakers also often had to bring government officials with them, abroad, to witness such tests first hand. 

The planned proving ground, he continued, would also be needed for automakers to retest hundreds of older vehicle models as the government plans to phase out dirty Euro 2 fuels starting 2021 as per Environment and Forestry Ministry regulations. 

“The queue will be incredibly long,” he said. Indonesia to build $116.5m vehicle test site to capture ASEAN market (Norman Harsono,  The Jakarta Post)