Global Business Guide Indonesia

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Joint Ventures | Export
Gajah Tunggal Tbk | Mr Christopher S.C. Chan
Mr Christopher S.C. Chan

For the future we see a very competitive market place and will grow our passenger car tyre market coverage as well as develop new products that reflect the infrastructure developments in Indonesia such as truck and bus radial tyres

Mr Christopher S.C. Chan, President Director

Gajah Tunggal Tbk was established in 1951 and is one of the leading tyre manufacturers in Indonesia. What can you tell us about the company's current market position and strategies in place for future expansion?

We are a leading tyre manufacturer in Indonesia and have been leading the sector for more than 10 years, particularly in motorcycle tyres and commercial vehicle tyres for which we have a majority market share. Of course we also have passenger car tyres, over our 60 years history we have grown in line with the Indonesian economy beginning with bicycle tyres and moving into motorcycle tyres in the 1970s and then cross ply tyres in the 1980s followed by passenger car radials in the 1990s. We have always pursued a strategy of upstream integration with subsidiaries in areas such as the production of synthetic rubber.

Today, we are the market leader for motorcycle tyres and commercial vehicle tyres. For passenger cars we only began in the 1990s so we are only ranked number 3 as the top two companies are more OEM focused. We hope this will change for the better in the future as we develop further.

We have exported our products internationally; more than 80% of our passenger car tyres and 20% of our commercial tyres are being exported whereas for motorcycle tyres we are 100% domestic.

For the future we see a very competitive market place and will grow our passenger car tyre market coverage as well as develop new products that reflect the infrastructure developments in Indonesia such as truck and bus radial tyres (TBR).

What is your outlook for the tyre sector in terms of both the domestic and international market place?

I think domestically we are riding the wave of South East Asia's growth, specifically Indonesia which is becoming one of the fastest growing economies in Asia. For the global market, there is an inherent weakness due to the crisis but this affects us less than others as we are a budget tyre producer. In Europe, as consumers feel the pinch of the economic downturn, they are becoming more inclined to 'step down’ and purchase tyres from the lower range of products available which is exactly what we provide.

The company already exports internationally to markets across Europe, North America and Asia.

What will be your next key target markets for further exports and what do you perceive as the main challenges?

We have been exporting across all the continents including North America, Asia and Europe; excluding China. Africa is a continent in which we have a smaller presence and we would like to develop this further. Today, we are present in Northern Africa and the Middle East but Southern Africa is a potential area of growth for our exports. Latin America is also another interesting market for tyre export and we would like to expand our presence as currently we are limited in our coverage and primarily present only in Brazil.

All manufacturers from this part of the world [South East Asia] face the challenge of gaining brand recognition in international export markets. To overcome this we must focus on our processes and operations. In Europe, for example, the tyre industry has a unique way of protecting themselves by enforcing high quality tyre standards in the market and imported tyres must comply and reach those standards of quality before they are allowed to enter. Even though we cannot compete with the top tier brands, we have found the right market niche for our products. Globally we are still small with around 1% of the international tyre market so we must ensure our quality and cost efficiency to compete. Building brand equity is also important and Indonesian brand tyres have gained a decent reputation in terms of tyre quality and performance so we will leverage off that to build our brand for greater consumer acceptance.

How is the company positioned towards working with international partners and investors coming into Indonesia within the tyre sector?

Right now we would be interested in collaboration for the efficient supply of our key materials for reliability and cost efficiency. As we are trying to compete in the global market, partnerships for the supply of quality products at a competitive price are always interesting for us.

In terms of distribution, we work with distributors and partners in each country so they must have extensive knowledge of the market and can contribute to building the brand to create a sustainable network in their respective countries.

For companies entering Indonesia looking for a partner; if they can fit into our supply chain process then we are very open. The Indonesian economy is growing so working with partners to enhance the sustainability of our business model is always of interest.

What further plans do you have within environmentally friendly products?

The company has been recognised for producing the first ecologically produced tyre in Indonesia.

We are moving in the direction of applying more environmentally sustainable practices as this is also a requirement for the European market such as using non aromatic chemicals. We are working on new products that have lower carbon emissions as our main objective. Some products are not suited to this method such as heavy duty products but the long term objective is to be more ‘green’ than before.

What would be your final message regarding Indonesia to potential partners and investors?

I think Indonesia has very real economic potential given the strong rise in GDP growth and youthful demographic. Yet, infrastructure is still in its infancy. With the government's commitment to develop infrastructure in a more serious way through regulations such as the land acquisition law and given the size of the consumer base; the country has a lot more years of growth ahead of it.

Global Business Guide Indonesia - 2013

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