This chapter on Indonesia's auto parts industry, a medium-tech industry, assesses the past and present performance of this industry, including its export performance, and its prospects in the coming years. The reasons for its successful performance, or the lack of it, is investigated using qualitative interviews of 20 selected firms in the auto parts industry. The interviews were designed to elicit from the surveyed firms the nature and degree of competitive pressures, whether and how they were responding to these pressures, and how their own actions were affected by industry-wide and macroeconomic factors. The interviews were also expected to yield a forward-looking perspective on how these auto parts firms saw their advantage shifting relative to their perceived competitors, and how they intended to remain competitive in the future.

This study found that because of its largely domestic market orientation which caters largely to the domestic car assemblers and the important local aftermarket, it appears unlikely that the Indonesian auto parts industry will develop into a strong, export oriented, internationally competitive industry. However, those auto parts producers that are joint ventures with foreign auto parts producers, specifically Japanese producers, have better prospects of becoming internationally competitive, export oriented firms. These auto parts producers, particularly if they are among the most efficient parts producers in the region, can utilize the marketing channels of their foreign principals to export to other countries and may even become the major auto parts producers in the ASEAN region.

INTRODUCTION

This study on the auto parts industry aims at making an assessment of its performance, including its export performance, and its prospects in the coming years. The reasons for its successful performance, or the lack of it, would be investigated using qualitative interviews of 20 selected firms in the auto parts industry. The interviews would be designed to elicit from the surveyed firms the nature and degree of competitive pressures, whether and how they were responding to these pressures, and how their own actions were affected by industry-wide or macroeconomic factors. The interviews were also expected to yield a forward-looking perspective on how these auto parts firms saw their advantage shifting relative to their perceived competitors, and how they intended to remain competitive in the future (World Bank, 2003: 1–2).