JAKARTA (Bloomberg): Indonesia is halting an order for 105,000 trucks from India’s Tata Motors Ltd. and Mahindra & Mahindra Ltd. following pushback from policymakers.
Imports of the vehicles, a mix of 4x4s and six-wheeler trucks slated for use in President Prabowo Subianto’s drive to establish more than 80,000 community cooperatives across the archipelago nation, will be put on hold pending a meeting between the government and lawmakers, Cooperatives Minister Ferry Juliantono said in an interview with a local TV station.
Pausing is "the right step to avoid further controversy,” he said. "And when the time comes, we will be able to sit down together to find the best solution.”
The proposed imports have touched a nerve in Jakarta at a time when other foreign automakers with a large local manufacturing presence such as Toyota Motor Corp. are struggling to regain their pre-pandemic footing in Southeast Asia’s largest economy.
Car sales fell 7.2% last year to 803,687 units, according to data compiled by Bloomberg. Weak household spending and cautious lending have weighed on demand.
Juliantono said Prabowo had ordered trucks as part of his plan to serve thousands of cooperatives - village-level hubs envisaged as bases for basic goods, like cold storage and subsidized fertilizer.
The cooperatives could also provide loan services, letting the government bypass chains of regional administration to directly reach millions of rural residents.
Mumbai-based Mahindra said earlier this month the deal would have been its biggest export orders ever. It was to deliver 35,000 Scorpio Pik Ups this year to "enable village level commerce” and support Indonesia’s "national food security transformation.”
A local unit of Tata Motors said its order of some 35,000 Yodha pick-ups and 35,000 Ultra T.7 trucks was the company’s largest ever into Indonesia.
Representatives for Mahindra and Tata Motors didn’t immediately respond to requests for comment.
But local Indonesian business associations have pushed against the truck import plan, saying it flies in the face of government goals of encouraging industrialization and creating jobs.
The industry ministry earlier this month noted that Indonesia’s automotive industry has the ability to produce around 1 million pick-up trucks a year. Including Toyota, other foreign automakers with a manufacturing presence in the country include Suzuki Motor Corp. and Mitsubishi Motors Corp.
Industry Minister Agus Gumiwang Kartasasmita said in a statement that if around 70,000 pick-up trucks were instead made and assembled domestically, the benefit to the local economy would be about 27 trillion rupiah ($1.6 billion), including the creation of jobs.
Earlier this week, Parliament Deputy Speaker Sufmi Dasco Ahmad, who is also a high-ranking member of Prabowo’s Gerindra party, also called for a halt to the imports until the president returns from overseas travel. Prabowo returned early Friday.
The Indonesian procuring body was to be PT Agrinas Pangan Nusantara, a recently established, state-owned firm tasked with boosting food self-sufficiency, including by supporting large-scale agricultural projects.
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