PRODUCT / MARKET STUDY 2020

ON
TYRE MARKET IN INDONESIA

Prepared by
ROBERT SIANTURI
2020
1. Overview of the Tyre Market in Indonesia

2. Product Classification

3. Imports of Tyre Products to Indonesia Market

4. Tyre Product Distribution in Indonesia

5. Tariffs, standards and regulations

6. Market Competition

7. Relevant Trade Fairs

8. Important Contacts

9. Preferences

PMS on Tyre Market in Indonesia Page 2

1. Overview of the Tyre Market in Indonesia
Indonesia has over 260 million of populations and characterized by having a rapidly
expanding middle class. Those factors create a powerful car consumer force. Robust
growth of automotive manufacturing industry owing to growing export and favorable
government policies are the key factors driving the demand for tyres in Indonesia over
the past few years. Increasing sales of passenger cars and motorcycle, expanding
automobile fleet size coupled with rising disposable income and growing automotive
exports in the country have increased the demand for tyre in Indonesia during the past
years. Not to mention, the availability of raw materials as Indonesia is a rubber
manufacturing nation and low labor cost are expected to strengthen tyre industry in
Indonesia over the next six years.

According to BPS (Statistics Indonesia) Data the number of land vehicles registered
until 2018 had 146,858,759 units of vehicles including 16,440,987 unit of cars,
2,538,182 unit of buses, 7.778,544 unit of commercial vehicles (truck, box, special
vehicles) and 120,101,047 units of motorbikes. Detail registered vehicle shown in
column below.

Table.1. Number of registered Vehicle in Indonesia

Vehicle Type Year
2015 2016 2017 2018
Passenger cars 13480973 14580666 15423968 16440987
Buses 2420917 2486898 2509258 2538182
Trucks 6611028 7063433 7289910 7778544
Motorcycles 98881267 105150082 111988683 120101047
Total 121 394 185 129 281 079 137 211 818 146 858 759
(Source BPS, Processed)

PMS on Tyre Market in Indonesia Page 3

Based on the data served above, Indonesia has a large volume of vehicles. This will
definitely drive the high demand for tires in the after-sales market.

Indonesia has abundant availability raw material of Natural Rubber since Indonesia
known as the second-largest rubber producer. Indonesia supplies a substantial amount
of rubber to the global market. Since the 1980s, the Indonesian rubber industry has
been experiencing steady production growth. Most of the country's rubber output -
approximately 80 percent - is produced by smallholder farmers. Government and private
estates thus play a minor role in the domestic rubber industry. Most of Indonesia's
rubber production stems from the provinces: South Sumatra, North Sumatra, Riau,
Jambi and West Kalimantan. Indonesian rubber production is expected to pose strong
growth of CAGR 7% in 2020.

Tyre production uses varies raw materials such as Natural rubber (19-34%), syntetic
polymers (11-24%), fillers (24-26%), steel (12-21%), etc. In contrast with natural rubber,
fillers or carbon black as raw material for tires are still imported currently. Domestic
fillers production can only covered 40% domestic tyre industries’ need, the rest is
coming from the import. This is suspected to be the cause of the price of Indonesian tire
products sometimes face difficulty to compete in the international market.

1.1 Domestic Tyres Player

As Indonesia offers easy and abundant availability of raw materials for manufacturing
tyres continuing government support and growing domestic automotive industry, most of
the leading tyre companies operate their respective domestic tyre manufacturing plants
in the country.

Some of the major players operating in Indonesia tire industry are PT Gajah Tunggal
Tbk, PT Bridgestone Tire Indonesia Tbk, PT Goodyear Indonesia Tbk, PT Multistrada
Arah Sarana, PT Suryaraya Rubberindo Industries, PT Sumi Rubber Indonesia, PT
Michelin Indonesia, PT YHI Indonesia, PT Hankook Tire Indonesia, and PT Elang
perdana Tyre Industry.

PMS on Tyre Market in Indonesia Page 4

Moreover, a number of global tyre majors plan to set up their tyre manufacturing
facilities in Indonesia in the coming years owing to emerging opportunities in the
country’s tyre industry.

PT Gajah Tunggal Tbk (GT), the largest and Indonesia homegrown tire manufacturer
dominates the domestic tire market with a 50% market share for car tires and 47% for
motorcycle tires. Not only dominates the national tire market, the company became the
largest tire exporter from Indonesia with main export destination is the United States
(US) by 70%, then Asia Pacific, Europe and the Middle East. The best-selling brand in
the export market namely GT RADIAL which has a strong brand image. The company
also produces environmentally friendly tires, namely GT Radial Campiro Eco for cars
and IRC Enviro for motorcycles. The company's tires are made from Indonesian
original rubber by 60%, while the remaining synthetic rubber by 40%.

Meanwhile PT. Bridgestone Indonesia, a member of Bridgestone corporation Japan,

carved its achievements in the commercial vehicle market as an OEM (Original
Equipment Manufacturer) tire supplier and replacement tire market. In this commercial
vehicle market, Bridgestone tires are the choice of OEM tires for Truck and Bus brands.
Bridgestone was also chosen as a replacement tire by a leading passenger / bus
transportation company in Indonesia.

Besides that, PT Goodyear Indonesia Tbk (a company of Akron-USA Tire & Rubber
Company), distributes its products through 45 Tire Center authorized distributors spread
in major cities in Indonesia, the company is optimistic that its tire sales in the
commercial vehicle market segment domestic market will continue to grow strongly.

According to Direktur Kimia Hilir dan Farmasi Kementerian Perindustrian, Taufik

Bawazier, In 2018 domestic tire production reached 185.9 million for outside tires and
130 million inner tube. On exports side , Indonesia were only able to slice 2.28% of the
export market share, with a value of around US $ 1.61 billion. With this amount export
Indonesia is still ranked 14th in the list of world tire exporters.

PMS on Tyre Market in Indonesia Page 5

Techsciresearch.com reports that tire market is projected to grow at a CAGR of over
10% by 2023 in Indonesia, on the back of growing vehicle sales and developing
infrastructure across the country. Moreover, rising disposable income and expanding
automobile fleet are expected to further aid the growth of Indonesia tire market during
the forecast period.

2. Product Classification

The tyre products in this paper are focused on rubber tyre and Inner tube of land
vehicle; cars, motorcycle and bicycle imported to Indonesia during 2017 and 2018
according to BPS/Indonesia Statistic Bureau, with product HS codes as follows:

HS 40111000 New pneumatic tyres, of rubber of a kind used on motor cars

(including Wagons and Racing Cars)

HS 40112010 New pneumatic tyre,of rubber used on buses/lorries, of a width with

not exceeding 450mm

HS 40112090 New pneumatic tyre, of rubber, of a kind used on buses/lorries, of a

width not less than 450mm

HS 40114000 New pneumatic tyres, of rubber of a kind used on motorcycles

HS 40115000 New pneumatic tyres, of rubber of a kind used on bicycles

HS 40131011 Inner tubes, of rubber, a kind of used on motor cars, suitable for
fitting to tyres of a width <450mm

HS 40131019 Inner tubes, of rubber, aof a kind used on motor cars, suitable for
fitting to tyres of a width not exceeding 450mm

HS 40139019 Inner tubes, of rubber, of a kind used on machinery of head 84.29

or 84.30, suit for fitting to tyres of a width exceeding 450mm

HS 40131021 Inner tubes, of rubber, of a kind used on buses/lorries, suitable for

fitting to tyres a width exceeding 450mm

HS 40132000 Inner tubes,of rubber,a kind of used on bicycles

HS 40139011 Inner tubes, of rubber, a kind of used on machinery of head

84.29/84.30, suit for fitting to tyres of a width not exceed 450mm

PMS on Tyre Market in Indonesia Page 6

HS 40139020 Inner tube, of rubber, a kind of used on motorcycle

HS 40139031 Inner tubes, of rubber, a kind of used on other vehicle of chapter

87, suitable for fitting to tyres of a width <450mm

3. Import of Tyre Products to Indonesia Market.

Based on data from LMC International, the global tire market expanded by 2.9% in 2018
compared to the previous year.

During 2018, Indonesia recorded tire imports - both for bicycles, two-wheeled motor
vehicles and four-wheeled or more motorized vehicles - with a total value of US $ 97
million or around Rp 1.367 trillion.

Tires for four or more motorized vehicles were imported from five countries. The largest
portion of China is 34%, then Thailand (29%), India (14%); Japan (11%) and Korea
(3%). While two-wheeled vehicle tires, mostly imported from Thailand (50%), Vietnam
(14%), Japan (11%) and Germany (6%).

Indonesia’s imported land vehicle tyres during 2017-2018 details are show in table
below:

Table 2. Imported tire and inner tube by hs codes to Indonesia 2017-2018

No Product Import Source Year
Category By Country 2017 (in USD) 2018 (in USD)
by HS Code
1 HS 40112010 -China 20 383 471 29 983 933
-Thailand 22 744 303 25 207 543
- India 7 383 203 12 013 842
2 HS 40112010 - China 66 323 982 97 823 132
- Thailand 49 328 065 59 032 487
- India 21 969 623 40 757 994
3 HS 40112090 - China 154 674 37 287
- India 185 703 1 464
- Singapore 47 316 67 557
4 HS 40114000 - Thailand 4 845 740 4 873 500
- Vietnam 1 349 097 862 801
- Japan 978 713 1 052 267
5 HS 40115000 - China 2 166 775 2 719 445
- Vietnam 1 104 949 1 047 914
-Taiwan 449 318 756 555

PMS on Tyre Market in Indonesia Page 7

6 HS 40131011 - China 1 219 642 1 321 961
- India 959 493 1 218 337
- Korea 595 626 261 604
7 HS 40131019 China 25 452 4 299
8 HS 40131021 - China 1 879 760 3 072 248
- India 1 501 338 3 288 123
- Thailand 737 069 2 771 414
9 HS 40132000 - China 411 011 440 799
- Vietnam 345 303 287 507
- Taiwan 41 095 123 350
10 HS 40139011 - Korea 693 096 1 248 878
- Japan 129 839 119 083
- China 8 352 75 352

11 HS 40139019 - Korea 283 171 780 668

- China 17 932 157 801
- Japan 22 389 0
12 HS 40139020 - Thailand 13 747 7 317
- Vietnam 25 356 604
- China 18 580 0
13 HS 40139031 - China 73 491 552 061
- Korea 46 613 495 821
- India 112 495 196 837
Source : BPS- Bureau of Indonesia Statistic, processed

4. Tyre Product Distribution in Indonesia

According to LMC International, an independent market intelligence and analysis
company, the Indonesian passenger car and truck tire market posted a growth of 5.4%.
Total sales in the domestic market increased from 27.4 million tires in 2017 to 28.9
million tires in 2018. Both the Original Equipment (OE) and Replacement segments
recorded positive growth of 6.5% and 5.0% respectively.

PT. Gajah Tunggal, an important player in domestic tyres industry, produces both type
Radial and Bias Tyres reported that company sales in the passenger car radial tyres
segment remained the largest contributor in 2018, with a contribution of 37% to the
Company's total net sales. Demand in the domestic replacement market remained
healthy resulting in a sales growth of 5.4% while sales in the OEM segment benefited
from higher car sales and increased by 12.6%. On the other side sales of bias tires

PMS on Tyre Market in Indonesia Page 8

contributed 28% to the Company's total net sales in 2018. Sales volumes of bias tires
increased from 3.7 million tires in 2017 to 3.9 million tires in 2018 due to strong demand
from the OEM and export segments. Consequently, the Company's bias tire net sales
increased from Rp. 3,765 billion in 2017 to Rp. 4,238 billion in 2018.

The company’s market concentration is still large in Java, considering that GT tire users
are still the largest in Java (51%), followed by Sumatra (28%), Kalimantan (12%) and
Eastern Indonesia (9%).

The company operates 142 outlets “Tire Zone” and 63 outlets “Tire Xpress” and long
standing relationship with plenty distributors across Indonesia to increase the
company's brand equity tires.

5. Tariff, Standard and Regulation

Almost 91% of imported tires entering Indonesia come from countries that have trade
schemes with Indonesia, both ASEAN-FTA and the ASEAN-China FTA, so the
applicable import tariff is the 0-15% Tariff Preference. While Brazil and Germany, that
exported a view tyre to Indonesia, are subject to the MFN (Most Favored Nation) tariff,
which is the general tariff given to fellow World Trade Organization members by 15%.
Because both of them do not yet have a Free Trade Agreement (FTA) partnership with
Indonesia.

Tires exported to Indonesia must meet the standards imposed by the Indonesian
government with the aim of ensuring product safety and quality. The Government of
Indonesia itself has rules, namely the Indonesian National Standard (SNI). SNI is the
only standard that applies nationally in Indonesia. In the process, the LSPro-Pustan
Team / team appointed by the ministry of industry will visit to the production site and
take product samples for testing. This testing process is carried out in an accredited
testing laboratory or inspection body. If done in a manufacturer's laboratory, a witness is
required when testing. SNI costs listed in Government Regulation No. 63 of 2007 with
an estimated cost of around Rp 10-40 million. This fee does not include accommodation
and transportation costs from the LSPro-Pustan team and other costs that may arise.

PMS on Tyre Market in Indonesia Page 9

Besides SNI, tire importation also requires Import Approval (Persetujuan Impor-PI) from
the Ministry of Trade of the Republic of Indonesia. In this case, the tire importer must
be register to apply for a permit (import approval) and seek the Trade ministry's
recommendation and get a special importer's identification number (API) before
importing the tire. There is 2 (two) kinds of API, firstly Angka Pengenal Impor Produsen
(API-P) used by companies that import tires for production purposes and secondly,
Angka Pengenal Impor Umum (API-U) used by companies that import tires for the
trading purpose. Import approval is given in the form of import quota, which has a
validity period. for API-P companies the quota is valid for 12 months while the company
API-U quota is valid for 6 months.

Documents required for Importing Tyre for API-P:

 Deed of Company Establishment

 NIB (Business Identification Number)
 Import Identification Number (API-P)
 Taxpayer Registration Number/NPWP
 Goods' registration numbers (Nomor Pendaftaran Barang-NPB)
 Indonesian National Standard certificate (SPPT SNI)
 Appendix II

Documents required for Importing Tyre for General trade purpose( API-U) :

 Deed of Company Establishment

 NIB (Business Identification Number)
 Taxpayer Registration Number/NPWP
 Import Identification Number / API-U
 Appointment letter from Manufacturer/Sole agent verified by public notary and
local Trade attaché.
 Indonesian National Standard certificate (SPPT SNI)
 Appendix II

PMS on Tyre Market in Indonesia Page 10

Exporting rubber tyre to Indonesia can be conducted only through six ports, namely
Belawan Ports in North Sumatra Province, Tanjung Priok in Jakarta province, Tanjung
Perak in East Java province, Semayang port in East Kalimantan Province, Sukarno
Hatta port in south Sulawesi province and Sorong Port in Papua Province.

On 30 January 2019, Government of Indonesia has revised a regulation on tyre

imports through PERDAGANGAN REPUBLIK INDONESIA NOMOR 05 TAHUN 2019.
This revised regulation meant to “suppress the surge” in domestic tyre market and is a
kind of government effort to reduce trade deficit in Indonesia.

The new regulation stated that imports of tyres intended for general trade can only be
done through bonded logistic center. This regulation effectively authorizes imported
products, in this case tire products, to be checked outside of customs, as part of the
government’s broader effort to debottleneck lines of goods checked in customs areas in
a bid to improve efficiency.

But on the other hand, this regulation has caused difficulties for small-sized exporters
who are accustomed to exporting through importers with relatively small purchasing
power. This is because not all of importers who have been conducting importation have
PLB-bonded logistic center facilities. Finding importers with PLB facilities would be next
exporter’s difficulties.

6. Market Competition
Major factors that are expected to boost Indonesia’s tyre industry include abundant raw
material availability, Two-wheeler tyre segment is the most dominating tyre segment in
Indonesia in volume terms. Two-wheeler tyre segment is projected to continue
dominating Indonesia’s tyre market in the coming years owing to a large number of low
and middle income individuals opting for two wheelers as a preferred mode of
transportation. Large and increasing two-wheeler fleet size, improving transport
infrastructure in the country and favorable political environment are expected to fuel
future growth in Indonesia’s tyre market over the next five years.

PMS on Tyre Market in Indonesia Page 11

Java and Sumatra are the major contributors to the Indonesian tyre market. Being the
center of economic and commercial activities in the country, these regions cumulatively
account for majority of Indonesia’s automobile fleet and consequently, are the largest
tyre markets in the country. Both, Java and Sumatra, are expected to maintain their
dominance in the country’s tyre market during the forecast period.

Although the tire market in Indonesia is quite large, there are also a lot of tire suppliers,
so competition in the tire market is quite tight. For example Battlax, motorcycle tires
premium brand which is produced by IRC Japan (30% of IRC Japan share owned by
Bridgestone), are imported by PT. Bridgestone Tire Indonesia for OEM tyre to Harley
Davidson dan BMW Motorrad. While for the replacement tyre/retail tyre market is still
supplied by general importers.

Meanwhile Michelin also enlivened the competition in the OEM tire segment. The
French-tire manufacturer which has acquired PT. Multistarda Arah Sarana TBK,
released the Corsa Platinum V Series tire for the underbone and automatic motorcycle
OEM market in Indonesia.

To face the intense competition in the tire market in Indonesia, Hankook Tire Indonesia,
a tire manufacturer from South Korea, started a method of inter-corporation business or
commonly called Business to Business. One of the collaborations is with Go-Fleet and
Grab. GoFleet is Gojek's rental marketplace that provides vehicle solutions for driver-
partners. Hankook is the official supplier of tires for the Go-Fleet fleet which all consist
of Toyota Avanza.

Competition in the Indonesian tire market is indeed competitive, but there is no doubt
that opportunity is also wide open. so it takes toughness and a precise marketing
strategy to get the targeted market share.

PMS on Tyre Market in Indonesia Page 12

7. Relevant Trade Fairs

The 9th Indonesia International Tyre, Rubber &Auto Part Exhibition 2021
Citypark Business District (CBD), Mutiara Palem, Blok A No. 05 - 07,
Jl. Kamal Raya Outer Ring Road, Jakarta Barat.
Phone: +62-21-54358118
Fax: +62-21-54358119
https://www.tyre-indonesia.net

PMS on Tyre Market in Indonesia Page 13

8. Important Contacts

- MATRADE Jakarta
Embassy of Malaysia,
Trade Office,
12th Floor, Plaza Mutiara,
Jl. Lingkar Kuningan,
Kav. E.1.2. No. 1&2,
Kawasan Mega Kuningan,
Jakarta 12950, Indonesia.
T: 62-21-576 4297 / 4322
F: 62-21-576 4321
Website: www.matrade.gov.my
Email: jakarta@matrade.gov.my

- Ministry of Trade Indonesia

Gedung Utama Lt. 5
Jl. M. I. Ridwan Rais
No. 5 Jakarta Pusat 10110
Tel: +62 21 23528404, 3858171
Fax: +62 21 3846106
Website: www.kemendag.go.id

PMS on Tyre Market in Indonesia Page 14

9. Preferences

1. Statistics Department of Indonesia (BPS)

2. Ministry of Trade, Indonesia
3. Ministry of Industry, Indonesia
4. Indonesia.go.id
5. Indonesia-Investment
6. https://www.tyre-indonesia.net

PMS on Tyre Market in Indonesia Page 15